Last Day to Buy Before Q1 Numbers (Steal under 0.30/share)….Love the setup into Q1 number Thursday before the bell. Here’s why;
Seasonality
Q1 and Q2 are the two strongest seasonal trends for Wine Sales and the big kicker is the Asia export business which buyers overseas front load orders so revenues will come through in this quarter from the export side of the business.
Expanded Distribution and Supply Chain
They finally have a real footprint in the Niagara wine trail with their new tasting room opening this spring. Direct sales are associated with higher margin! The amount of foreign tourist (Especially Asia based) tour busses that flow through Niagara fits right into the product line with an award winning ice wine and strong stable of table reds. Throw on top of that the first Q of the consolidated agency business should be a tailwind behind gross margin.
Secular Volume Growth
Beer sales are flat to down all the growth is in wine and spirits growing at close to 10% YoY for wine volume growth.
What to Look for in Q1
Revenue of 10M with Gross Margins 40%+ and EBITDA expanding YoY to the 1.25-1.5M range. Look for any discussion how direct sales business is progressing and future plans to expand reach and efficiency of agency business. (This was on of the key drivers that turned the BRB.TO story around as well, a lot of similarities between the two names)
On Valuation: Given the strategic value/scarcity of the asset a significant valuation should be placed on it especially since there needs to be significant consolidation in the industry and this is one of the few public players out there. Putting a 12-14x EBITDA multiple on my 4M EBITDA target for this fiscal year gets me to a share price of 0.38-0.44/share or 0.41/share or close to 50% upside.
I have to top up my position ahead of earnings tomorrow.
GET LONG