One of the world's largest wine company, Treasury Wine Estates Limited (ASX: TWE) received strong results in FY 2018 and declared a final dividend of 17 cents per share, fully franked, bringing the total dividend for FY 2018 18 to 32 cents per share.
In a recent announcement (dated 10 January 2019), the company informed that the management of the company is happy with the trading performance of the company across all operating regions. The company also informed that the first half results of 2019 will reflect a performance above consensus EBITS (Earnings before interest, tax, SGARA, and material items) of A$332 million and will be within the range of AUD$335m to AUD$340m. The company also announced that it is expecting the EBITS growth of 25 percent in FY 2019.
After the company confirmed the full-year guidance of 25% growth in EBITS, many analysts are agreeing that the company’s stock is undervalued, and it is trading below its worth which is why analysts have positive view on the stock.
The company is focusing on its operations in Asia, particularly in China, where it believes that it has only scratched the surface of the distribution reach and there is plenty of opportunity in China. In China, the company is driving a ‘consumer-pull’ strategy, rather than a ‘customer-push’ strategy.
In Australia, the company has a balanced portfolio mix of Commercial, Luxury and Masstige wines and it is trying to replicate this model in the US also. In Australia, Asia, and Europe, the company is considered a category-value-driver, not a volume driver due to the strength of the company’s brand portfolio.
In the financial year 2019, the company is more focusing on its portfolio of Luxury wine and it is progressing with its disciplined approach to allocating Luxury wine which can return a higher profit margin to the company. Recently the company expanded its country-of-origin portfolio by introducing its new Italian wine brand, Cavaliere d’Oro.
In FY 2018, the company reported an EBITS of $530.2 million which was 17 percent higher than the previous corresponding year. Further, the company recorded a Group EBITS margin of 21.8 percent in FY 2018 which is 2.8ppts higher than the previous corresponding year.
Recently, the company established a new US$350 million syndicated debt facility which is consists of a US$120 million, 5-year tranche which will mature in November 2023 and a US$230 million, 7-year tranche which will mature in November 2025. This new debt facility will be used for working capital and capital investment purposes to support the continued growth of the company global business. Further, this debt facility also provides the opportunity to build stronger relationships with lenders in Asia which is a strategically important region for the company.
In the last six months, the share price of the company decreased by 18.27 percent as on 14 January 2019. TWE’s shares traded at $14.560 (+1.111% intraday) with a market capitalization of circa $10.35 billion as on 15 January 2019 (AEST 4:00 PM).
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