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Daily ShareChat: Delegat's Group

By Jenny Ruth

Thursday 18th March 2010

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 Jenny Ruth

Delegat's Group has a "corked" macro outlook as a result of the high New Zealand dollar and the current wine glut, says Adrian Allbon at Goldman Sachs JB Were.

"We are still believers that Oyster Bay is a high quality global wine brand and operationally Delegat's continues to execute well on its growth plans," Allbon says.

However, the macro and industry risks remain skewed to the downside and, on his earnings estimates, Delegat's has limited balance sheet flexibility, he says.

Delegat's reported a 12% fall to $13.8 million in first-half net profit and expects the full-year result to be down between 30% and 40% on last year's record $30 million. In December, the company said it expected to match last year's result.

Allbon has cut his valuation of the stock by 8% to $2.30 a share but has a $1.85 12-month target.

Key catalysts critical to his ongoing assessment of Delegat's fortunes are the New Zealand dollar versus the British pound, currently at a post-float high, and the New Zealand industry harvest announcement in mid-June, Allbon says.

"If the industry harvest is flat to modestly down year-on-year, as NZ Wine is currently predicting, then the industry bulk wine surplus should start to normalise in 2011 and improve future prospects."


BROKER CALL:  Goldman Sachs JB Were rate Delegat's as sell (down from buy).


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