Australian based Treasury Wine Estates (TSRYY, Financial)(TSRYF, Financial) has had a great run over the last few years. The stock is expensive, but should be on your radar if shares ever pull back.
The dividend for 2016 is 20 Australian cents and the dividend yield is 1.79%. Earnings per share were AU 25.1 cents and the price to earnings ratio is 44.6. There are 720 million diluted shares and the market cap is 8 billion Australian dollars ($6.1 billion). It takes 76 cents to buy one Australian dollar.
The balance sheet is extremely strong with AU$256.1 million in cash and AU$611.4 million in accounts receivables. This is to AU$725.4 million in accounts payables and AU$630.9 million in debt. Sales increased by 13.2% for 2016 to AU$2.2326 billion. Volumes increased by 11.5% to 33.1 million nine liter cases.
Last October, Treasury purchased Diageo's (DEO, Financial) British and U.S. wine operations for $552 million. Two major assets in the purchase include Beaulieu Vineyards, Sterling Vineyards and Blossom Hill. Treasury also assumed $48 million in capital leases. Management estimates that cash "synergies" will be U.S. $35 million by 2020.
Treasury was spun-off from Foster's back in 2011. The new company has stumbled several times. Treasury struggled with the strong Australian dollar (it has since weakened) and poor sales for its low-end Beringer. The company literally had to pour wine down the drain in 2013 as demand was weak and supply too high. Shares outstanding grew from 650 million to 720 million, with an offering to fund the acquisition.
Capital expenditures have been high with the Diageo acquisition and other investments. Capex was AU$90.8 million in 2015 and AU$133.8 million in 2016. It is expected to be no more than AU$110 million in 2017 before it decreases to the AU$80 million range in subsequent years.
Other major brands include: Penfold's, Acacia and Lindemans. Australia and New Zealand account for 26.4% of sales, Asia 13.1%, U.S. 44.4% and Europe 16%. Management stated that the growing conditions in Australia, New Zealand and the U.S. were very favorable in 2016.
I don't see any outstanding stock ownership by U.S. based institutional managers. Just the usual suspects: Black Rock, Artisan, DFA, Vanguard and American Funds.
So is the stock a buy? Not in my opinion. It's doubled in the past year and tripled in the past few years. The price to sales ratio is 3.6. I'm not going to get into other ratios until the Diageo unit is fully integrated. I'd buy Treasury at the right price, but it at this point, all the good news is already factored in.
Disclosure: Author does not hold stock in Treasury.
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