Daily ShareChat: Delegat's Group

By Jenny Ruth

Monday 27th July 2009

Winemaker Delegat's Group's new guidance of a net profit between $30 million and $31 million for the year ended June 30 is about 20% ahead of its previous guidance and reflects significantly lower interest charges, says ABN Amro Craigs analyst David Oxley.

He estimates net debt has fallen about $20 million to less than $140 million. Delegat's has also renegotiated its existing banking facilities, bringing the average maturity profile to two years.

Operating earnings between $64 million and $65 million are in line with his estimate, "implying an impressive second half trading performance, albeit at a lower level than the stellar first half, as we expected," Oxley says.

"Encouragingly though, the group commented on a strong fourth quarter."

While Oxley hasn't changed his operating profit forecasts at this stage, the lower debt and interest charges boosts his estimate of 2010 and 2011 earnings by 10%.

"The stock offers a rare combination of positive earnings momentum and a lowly valuation, trading as it does on just seven times prospective earnings and at a significant discount to our revised DCF (discounted cashflow)-derived estimate of fair value at $3.29," Oxley says.

Delegat shares ended last week at $2.17. He saees substantial further opportunities for the company as it leads the growth of super-premium New Zealand wine in various markets around the world.

BROKER CALL: ABN Amro Craigs rate Delegat's Group (NZX: DGL ) as BUY.

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