TWE
Treasury wines are acquiring the Frank family vineyards. We take a closer look at some of the financials.
Revenues have been flat for some time. Wine is a tough business. Add to that China’s imposition of exorbitant tariffs, rendering Australian wine effectively uneconomic (priced out of the market) and you’ve had a problem.
Equally, they’ve done a good job shifting volumes to other regions, which you can see in the graph above.
COVID also wrought havoc with revenues and margins, as restaurants closed, and people couldn’t have friends over (and hence less need for the fancy bottle when there’s no-one to impress).
Still, TWE didn’t get stuck with enormous amounts of inventory that they couldn’t move…
…and margins appear to have been maintained, on an adjusted basis.
On a reported basis, they still appear decent, at plausible “mid cycle” levels, post COVID and tariff impacts, which one can (somewhat) assume to be non-permanent.
Cashflows are strong, with good earnings quality.
The deterioration in quality back in 2017-2018 (amidst allegations of “channel stuffing”) saw the share price fall from $20 to $14.
Those issues appear to be behind them now.
It doesn’t stand out as raging value, indeed simply reasonably priced.
…but the expectations are not unduly high.
It does screen as a QGARP stock, which are thin on the ground, at present.
24x forward earnings is stretching the “reasonable price” part, but not break-ably so, particularly if funded from other high PE stocks (like CSL, within the sector, or other defensives, like COL, which now trades at a similar multiple).
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.