CHAMPing at the bit
CHAMP Private Equity and Accolade Wines continue to generate press interest. The latest news is that CHAMP has appointed Citigroup and Morgan Stanley investment banks to manage the initial public offering of Accolade Wines. Reports are also circulating that CHAMP is meeting various Asian companies/investors to take stakes in the listed Accolade. Not much has been said about the reported interest from Paris-based PAI Partners. Is it still in the game?
An article by James Mickleboro in the Motley Fool on September 19 compares Treasury Wine Estates (TWE) and Australian Vintage (AV). The article starts with a short round-up of TWE:
“In FY 2016 Treasury Wine Estate’s grew its revenue by a solid 18.9 per cent to $2343.3 million. On the bottom line the global wine company posted an even more impressive 131 per cent rise in full year statutory net profit after tax of $179 million. Because of this its shares are changing hands at 54x full year earnings. Although the market has forecast for a strong FY 2017 which is likely to bring its shares to a more reasonable 34x earnings according to CommSec.”
Mickleboro continues with advice to his readers that should also be a delight to Australian Vintage:
“Although the company produced a loss this year, if you exclude one-off items relating to the termination of the Del Rios vineyard lease then it paints a very different picture. According to my calculations excluding one-off items would have resulted in net profit after tax close to $8.8 million, up around 10 per cent on last year.”
There is some emphasis on AV having emulated the success TWE has had in China. TKR is not so sure about this. AV ignored China for some time before setting up a distribution deal in 2014 with COFCO Wine & Spirits Co Ltd. COFCO is huge and the deal looked good at the time, but two years down the track there has been little sign of a huge increase in exports. The only section of China in AV’s latest year-end was, “we continue to grow our business in China”.
If AV were going as well as it suggested when the deal was done, more information would be forthcoming.
To our knowledge it’s been some time since anyone suggested buying AV stock. Mickleboro says getting out of the Del Rios vineyard lease was costly but a great move by management. The news didn’t have a great impact on the share price, which was 55 cents at time of writing, down on the year high of 66 but way above the year low of 31.5.
WET and wild
The McLaren Vale Grape Wine Tourism Association is holding a Q&A session for its members on Friday, September 30. Those giving the answers will be Senator Anne Ruston (Liberal), Assistant Minister for Agriculture and Water Resources. With the Senator will be Rebekha Sharkie MP (Nick Xenophon Team), seat of Mayo, South Australia.
The questions are to be based on the government paper, Wine Equalisation Tax Rebate: Tightened Eligibility Criteria.
Anticipating the meeting, TKR can see Corrina Wright of Oliver’s Taranga asking about this statement from the paper:
“Once it is established that a place is a winery, the second stage involves determining whether an entity owns or holds a long term lease over the winery. This requirement is intended to ensure that those that claim the WET rebate have a tangible investment in the wine industry.”
The Oliver’s have large vineyard holdings but no winery. We would also put money on there being several mentions of Corrina being sixth generation.
We are sure Inkwell’s Dudley Brown will be there asking many questions, and a lengthy epistle will follow on his blog The Wine Rules
Time will be wasted on a member moaning about Coles and Woolworths getting any WET rebate. They do, it’s above board and legal, so don’t waste valuable time.
Someone else will whittle on about New Zealand producers getting the rebate. Again, don’t waste time.
TKR is sure there will be some whining about Wei long Grape Wine Company buying Australian vineyards in the Murray Valley. Reports say they have spent $13.4 million on 484 hectares vineyards plus 605 hectares of land that could be planted and plan on building a winery bringing the total investment to $120 million.
The whine will be about the Chinese buying Australian vineyards and profits going overseas. TKR suggests it’s more of a concern them buying esensual infrastructure such as the Port of Melbourne
One of the properties is said to be Nyah Vineyards about 200k south of Mildura around Swan Hill. The winery is likely to be the application that was lodged earlier this year with Mildura Rural City Council. The proposal is for a winery of ultimately up to 84,000 tonnes capacity to be constructed at Red Cliffs on Treviso Way.
If as report indicate all the wine produced will be exported to China. This may have an effect on other exporters of sound Australian wine to China but TKR thinks not. It’s a huge market and everyone exporting there will need to find their niche. Also it will remove that wine from the domestic market leaving room for others.
The Wei Long Grape Wine Co Ltd was incorporated in 2007 and listed on the Shanghai Stock Exchange 16 May this year. Latest figures show it has revenue of CNY 753.26 million ($148.98 million) with a net income of CNY51.87 million. Last week they raised CNY600 million via a share placement to fund investment in Australia. The company’s main brand is Grand Dragon an organic wine.
Matt Kramer, writing in Wine Spectator on September 20, says this is a golden age for wine. He acknowledges the great and famous but also looks at other regions around the world that have presented, in his opinion, great wines. He points out that many are new regions. On Australia, he says:
“The kicker is how many of these wines are new to the universe. Take Australia’s Margaret River region, which in my opinion is creating some of the world’s finest cabernet blends as well as stunning chardonnay. The founding winery in Margaret River (Vasse Felix) emerged only in 1967.
“Try to find sparkling wines from Australia’s Tasmania Island. You’ll be impressed, I promise. Maybe even astonished at the degree of refinement and sheer—dare I say it?—Champagne-like elegance of Tasmania sparkling wine.”