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O:Tu winemaker Marlborough Wine Estates trades on NXT; eyes Asia, US expansion

Thursday 30th June 2016

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Marlborough Wine Estates Group, the Chinese-owned winemaker, rose 35 percent in its NZX debut after a compliance listing on the NXT market.

The Auckland-based maker of O:Tu and Music Bay branded wines first traded at 27 cents and recorded a second trade at 28 cents after listing at 20 cents. The company, which has 293.3 million shares listed on the NXT, is controlled by executive chairman Min (James) Jia, who directly owns 91 percent and a further 8.6 percent through MPMB Trustee Ltd. Some 15,000 shares had traded by early afternoon. 

In its listing document, the company said it had $2.4 million in revenue for the year ended June 30, 2015, with $1.6 million of that coming from bulk grape sales to third party wine makers within New Zealand. Bottled wine sales, its most profitable commodity, were dominated by China, which delivered $509,000 in revenue, while it made $104,000 in New Zealand and $171,000 in other locations. 

Marlborough Wine Estates said prospective bottled wine sales would more than double to $1.7 million in the year through June 2016, and would jump again to $3.4 million by 2017, with that growth driven by international sales. It predicted bulk grape sales would increase 25 percent to 1,190 tonnes in 2016 before falling back to 1,144 tonnes in 2017, though it did not give a revenue estimate for bulk grape sales. 

The company is looking to expand its bottled wine sales into the US, Japan and South Korea, and will increase its production by reducing bulk grape sales and converting more of its land holdings to vineyards, it said.

"As further export markets develop and a broader range of currencies are dealt in, MWE may also develop natural hedging mitigating concentrated exposure to individual currencies," it said. 

Marlborough Wine Estates noted risks in its listing document including a dispute with the Ministry for Primary Industries over its former contracted wine processor, which no longer has approval to release $1.2 million of bottled wine for sale as MPI says there were insufficient records kept. The stock will be destroyed if MPI wins the dispute, and Marlborough Wine Estates says it doesn't know whether the cost will be partly or fully covered by insurance.

The company is also waiting for retrospective consent from the Overseas Investment Office after its subsidiary, which got OIO approval to buy vineyards in Marlborough in 2013, restructured and in doing so breached the Overseas Investment Act.

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