Tag: ASX:TWE

Treasury Wine Estates is under Algo Engine sell conditions following a lower high formation at $17.50.

Earnings continue to grow at 15 – 20%, although there is evidence that the growth rate is slowing.  If we assume total revenue in FY20 of $3bn on EBIT of $765mn, 15% earnings per share growth, we can support a 3% dividend yield.

On the above basis, we consider TWE fair value, but see little in the way of a catalyst to drive the share price higher. We therefore, recommend selling a covered call option to enhance the income return.

TWE 1H19 earnings met market consensus at $339m. 

Earnings from American markets exceeded expectations, whilst Asia was slightly below the elevated guidance.

Overall the result looks okay with continued EPS growth in the 20 – 25% range.

Based on EPS growth into 2020, we have TWE on a 2.8% forward yield.

Shares of TWE have extended yesterday’s gains and are 3% higher at $14.70 in early trade today.

The catalyst for the sudden rally has been the Chinese government’s clarification of on-line sales regulations for offshore companies.

Prior to yesterday’s announcement, TWE and other online vendors were uncertain of the on-line sales protocol past December of this year.

So far this year, TWE has registered over $500 million in sales from the Asian region, led by sales to China, which make up over 20% of its total group sales.

The next chart resistance level is at $15.60 with a longer-term target near $17.90.

Treasury Wine Estates

Since posting an all-time high close at $19.85 on September 3rd, the share price of TWE has dropped over 30% reaching a 12-month low of $13.40 in early trade today.

This selloff has come despite the fact that the company has maintained their guidance for EBITS growth of 25% going into 2019.

Technically, the momentum indicators have reached an oversold level last seen in January of this year, which preceded a 23% rally over the following 2 months.

Treasury Wine Estates

TWE held their AGM last Thursday which was co-located in Hong Kong and Melbourne.

Chief executive ­Michael Clarke said earnings for 2019 would be bolstered by its new distribution model in the US, which was gaining traction with industry players, and its ability to deliver more luxury wine to its consumers.

He also reiterated his guidance for 25% EBITS growth in 2019 and noted that 1Q results were in line with internal plans for every revenue location.

In August, TWE reported a 34% jump in full-year net profit to $360 million as revenue fell by 1.5 per cent to about $2.5 billion.

Despite this upbeat news, TWE share price has been unable to hold above $17.00.

We consider this more a transitory function of the overall re-balancing of the ASX 200 Index, than a specific valuation issue with TWE.

As such, we suggest accumulating shares at current levels with an initial upside target of $19.40 and then $21.60.  Treasury Wine Estates

Our ALGO engine triggered an initial buy signal for TWE on September 20th at $17.45. Another buy signal was generated into yesterday’s close at $17.15.

The share price has open sharply lower today and has reached a 4-month low of $16.40 in early trade.

We see the recent price action as technically oversold and see good upside potential to the $20.00 area over the medium-term.

It’s worth noting that TWE posted a 33% increase in NPAT in its last report, and has given guidance of 20% growth in volume and a 12% increase in sales for calendar 2018.

Treasury Wine Estates