Daily ShareChat: Delegat's Group

Craigs Investment Partners analyst David Oxley says he has pulled back his forecasts for Delegat's Group in line with guidance, that guidance appears conservative and, in any case, he still thinks the stock offers good value.

The wine company's 57% rise in net profit was driven by strong underlying volume growth and material price and mix improvements, despite much-publicised increases in bulk wine exports from New Zealand over the last year.

"Impressive cash generation resulted in a marked reduction in net debt," Oxley says. "Given clearly challenging economic conditions, this outcome should provide investors with substantial reassurance as to the robustness of the Delegat's business model."

Net debt fell to $139 million from $162 million a year earlier, cutting net debt to earnings before interest, tax, depreciation and amortisation to 2.1 times and interest cover to 4.8 times.

Even though management's guidance appears conservative, that's "probably prudent" in light of current economic uncertainty and volatile and unhelpful exchange rate movements, he says.

Even so, volume growth assumptions are still at double-digit levels and the company intends to continue to invest in developing its global distribution capabilities. This will increase marketing and promotion costs, at least in the near term.

"Delegat's remains open to significant medium-term growth opportunities."

BROKER CALL:  Craigs Investment Partners rate Delegat's Group (NZX: DGL ) as buy.

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