Treasury Wine Estates’ Profitability Continues to Improve in 1H17, but Shares Remain Overvalued
We increase our fair value estimate for Treasury Wine Estates to AUD 6.60 from AUD 6.00 following further profitability improvement in first-half 2017 results, but still view shares as overvalued. While we appreciate management’s efforts in turning the company around (particularly regarding cost control and portfolio premiumisation), the current market price leaves little margin for error. We remain concerned about the competitive nature of the wine industry (which buoys our no-moat rating) and ...Treasury Wine Estates is engaged in viticulture and winemaking, and the marketing, sale and distribution of wine. Co.'s wine portfolio includes wine brands such as Penfolds, Beringer, Lindeman's, Wolf Blass, Stags' Leap, Chateau St Jean, Beaulieu Vineyard and Sterling Vineyards. Co. also distributes beer and cider under license in New Zealand and provides contract bottling services to third parties. Co. maintains its operations in four regions: Australia and New Zealand, Asia, Europe, and Americas.
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