Daily ShareChat: Delegat's Group Limited

By Jenny Ruth

Pricing of New Zealand wines has come under pressure as they shift larger volumes in a global recession but Delegat's Oyster Bay brand continues to outperform the industry, says Adrian Allbon at Goldman Sachs JB Were.

He estimates underlying New Zealand wine pricing between January and May was down 18% while volumes were up 42% on the same period a year earlier.

"From a Delegat's perspective, we take comfort from the AC Neilsen data that management continues to execute well in a difficult environment," Allbon says.

He is forecasting the company's volumes were up in the six months ended June with average case pricing flat compared with the same six months a year earlier and down 4% on the six months ended December 2008.

"The key uncertainty is still how much marketing and promotional investment (captured in operating costs per case) Delegat's had had to make to maintain its pricing," Allbon says.

He says the stock remains cheap on a price-to-earnings ratio of about eight times forecast 2009 earnings and at a discount of about 29% to his valuation.

Still, "we acknowledge the risk to our positive investment case is negative earnings revisions for 2010 as analysts factor in a higher New Zealand dollar track and/or potentially higher operating costs per case."

BROKER CALL:  Goldman Sachs JB Were rate Delegat's (NZX: DGL ) as BUY.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Printable version

Related News

Delegat's expects $20m to $24m annual operating profit
Delegat's profits and sales up
Daily ShareChat: Delegat Group
Daily ShareChat: Delegat
Delegat's launches bid for Oyster Bay minorities
Daily ShareChat: Delegat's
Daily ShareChat: Delegat's Group
Wine lake sinks Delegat's share price as major write-downs loom
Daily ShareChat: Delegat's Group
Daily ShareChat: Delegat's Group

Get quotes for Delegat's Group Limited Ordinary Shares (DGL)