Delegat’s Group will probably remain largely unscathed by the
wine glut, price cutting, the global recessions and the credit crunch, says
Goldman Sachs JB Were analyst Adrian Allbon.
He estimates the New Zealand wine industry dumped 53% more volume on the British
market and 78% more volume on the Australian market in January and February
than a year earlier, pushing underlying pricing in these markets down by 31%
and 56% respectively.
But he thinks most of that volume will have been bulk wine shipments. "Our
analysis of the latest UK off-premise data suggests continued out-performance
for the New Zealand category and Oyster Bay (Delegats flagship brand)."
"We maintain our ‘buy’ recommendation, based on our confidence
in Delegat’s growth profile, business model and execution to date,"
Allbon says. He also says the stock is cheap both on fundamentals and relative
to its global peers.
Nevertheless, he says there is some risk to earnings from continued pressure
on consumers, particularly in Britain and Australia, and some refinancing risk
with $30 million in debt due to be rolled over in July and $35 million in December.
He values the stock at $2.90 and has a $2.60 12-month price target compared
with the $1.95 pre-Easter close.
BROKER
CALL:
Goldman Sachs JB Were rates DGL
as a BUY.
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