Treasury Wine Estates Ltd

TWE Details
· Strong interim 2017 results: Treasury Wine Estates Ltd (ASX: TWE) stock fell over 4.7% on February 14, 2017 after rising over 13.5% in the last four weeks (as at February 13, 2017) while BlackRock Group ceases to be a substantial holder. Further, investors might be booking profits in the stock after the group posted decent 1H17 results. The group’s reported Net Profit After Tax (NPAT) and Earnings Per Share (EPS) more than doubled as compared to the prior corresponding period (pcp). Earnings Before Interest, Tax, SGARA and material items (EBITS) surged 58.8% year on year (yoy) to $226.8 million while EBITS margin was up 4.3ppts to 17.5% in 1H17 driven by Diageo Wine acquisition contribution. TWE’s core Australia & New Zealand (ANZ) division delivered a 13.2% EBITS rise to $53.1m boosted by above-category volume growth in Australia (despite reallocating Luxury Australian wine to Asia), customer partnerships and a cost control. Europe performance was even better which delivered a 34.3% EBITS growth to $23.1m. Asia generated an outstanding 75.6% EBITS growth to $79.0m. Management gave a positive outlook with the group’s ongoing efforts of transitioning from an agricultural to a brand-led, high performance organization. Therefore, Chief Executive Officer, Mr Michael Clarke, would be temporarily colocated between TWE’s offices in Melbourne, Australia and the Napa Valley in the United States between March and December this year. The group has also appointed Gunther Burghardt as the CFO.

· Recommendation: Despite solid results, the stock of TWE is trading at unreasonable levels. Currency fluctuations might also hurt the stock performance. Accordingly, we maintain an “Expensive” recommendation on the stock at the current price of – $ 11.33

Regional performance (Source: Company Reports) 

Sealink Travel Group Ltd

SLK Details
· Weak outlook dragged the stock lower: Sealink Travel Group Ltd (ASX: SLK) stock fell over 4.3% on February 14, 2017 as the group now expects a lower south East Queensland/ Gladstone segment’s EBIT for fiscal year of 2017, upon completion of LNG plant construction phase. This slip may be about $2 million from FY16 result. For the first half of 2017, the group reported a revenue rise of 42% yoy to $105.8 million, while NPAT rose 52% yoy to $13.1 million. Underlying EBIT (before acquisition related expenses) surged 48% yoy to $20.7 million during the period.

· Recommendation: Despite a weak guidance, the group reported that their second half of 2017 performance is in line with the expectation, driven by Kangaroo Island ferry sales after adverse weather conditions in the first half. The performance is better than expectation in their North Stradbroke operations. SLK stock rose over 12.1% in the last three months (as of February 13, 2017) while we give a “Hold” recommendation on the stock at the current price of - $ 4.44

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