Growth Focus: Treasury Wine Estates Ltd (TWE)

by Patrick Taylor

Date of Data Capture: 16/4/2019
Classification: Distillers & Wineries
Current Price: $16.16
Market Capitalisation: $11.62B
Forecast EBITDA Growth: 21.97%
Yield Estimate: 2.47%
Consensus Price Target: $18.65
# Covering Analysts: 12
Discount at Current Price: 15.41%
Price Target Trend (3-Month): Flat -0.16%
Signal Timeframe: Monthly-Weekly-Daily
TrendBias: Up-Down / Long-Short

Short-term: Positive
Medium-term: Positive-Neutral

Focus: (Dividend Income &) Capital Growth
Set up Notes:
·    After increasing 4-fold in 4 years, from 2014 to 2018, TWE fell into consolidation until early-2019 when it broke out of linear resistance and began the current recovery we see continuing higher.
·    Performance has been very good for years with stronger sales consistently lifting earnings and profits while the company increased dividend yield and EPS, backed by stronger margins.
·    Pricing shows a strong linear uptrend running from late-2014 to mid-2018, rallying higher by more than 300%, then falling 30% in downtrend,  before recovering off a $14 support base early in 2019, and we expect further gains from here.
§Support ($): 16.00, 15.00, & 14.00.
§Resistance ($): 17.00, 18.00, 19.00 & 20.00.


Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

Sometimes it makes sense to reach for top-shelf growth stocks when you are looking for quality and don’t mind spending the money, better yet is when these stocks go on discount. Here we believe we may have just that with Treasury Wine Estates as the winemaker looks to open up a new uptrend backed by strong performance and forecasts that could see investors uncorking a bargain after the recent share price spill.

With key markets stretching across Australia and New Zealand, North America, Europe and Asia - reaching more than 100 countries - Treasury makes and distributes well-known brands such as Penfolds, Beringer, Lindemans and Wolf Blass among many others. The company has been expanding its product range along with its geographical reach and this is set to continue with a renewed focus in adding spirits to their stable as well as pushing further into key Asian, European and American markets.

The winemaker maintains a competitive business model of direct distribution and has been pressing ahead on excellent fundamental performance with a solid history of growth across sales, margins, earnings and profits since 2014 and forecasting sees this continuing through to 2021, with particularly strong expectations for next year. This is expected to continue with the company looking to keep its strong Asian focus, expanding further into China as the group looks to expand its range with more exposure to luxury wines and spirits. Targeted aggressive geographical distribution expansion is not limited to China as TWE looks to take advantage of its competitive edge and make similar moves into the more fractured US and Euro markets.

First listing on to the ASX in mid-2011, the wine maker and distributer has gone through patches of poor performance before more recently becoming the toast of the town with a 300% rally beginning in 2014 and ending in 2018. Here we find them beginning to emerge from a recovery base above $15 and looking like they are ready to make another run at recent highs after falling by almost a third by early 2019. Analyst coverage is broad and majority positive, and despite the current recovery being underway since the start of 2019, it remains trading at significant discount to consensus targets.

Here we see excellent signal correlation and a strong setup as shorter-termed signalling matches up well with longer-term positive momentum and should we see $17 break in the short-term we could very well see the market begin to factor in new strength on top of strong projections that could leave investors in high spirits.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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