Daily ShareChat: Delegat's
By Jenny Ruth
Wine company Delegat's Group delivered a "respectable" annual result, given its difficult trading conditions and the strength of the New Zealand dollar, says Adrian Allbon, an analyst at Goldman Sachs JB Were.
Delegat's normalised net profit fell 17% to $18.9 million for the year ended June, above Allbon's $18.2 million forecast.
"Despite lower profitability, Delegat's generated strong operating cash flow due to its lower harvest volume (down 10% year-on-year) and a 30% reduction in grape prices lowering its inventory investment," Allbon says.
"Critically, the strong cash flow generation has enabled Delegat's to reduce its net debt 7% to $129 million."
Allbon has lowered his forecast for 2011 to $22.6 million from $24.4 million, which is below the company's $23 million to $30 million guidance range. That reflects his expectation the New Zealand dollar will be higher than the company expects, especially against the Australian dollar, and the prices the company realises will also be lower than its forecasts.
In the year ended June, its average price per case fell to $113 compared with $125 the previous year.
Allbon values the shares at $2.15 and has a $1.70 12-month target. "If we see evidence that Delegat's is outperforming industry issues, its attractive valuation metrics may prompt a more positive recommendation."
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