Andrew Peller Ltd T.ADW.A

Ward of the State

[TheCount11]

Peller is a ward of the state.  Wine sector support program this quarter was $4,071 and year to date was $8,721.  Without government support Peller would be losing money YTD.  Was expecting 5% revenue increase YoY instead declining sales.  In an inflationary environment no less.

Company has $206M in debt.  At 6% interest thats roughly $12M per year.  Thats 3% Revenues.  Dividends are roughly 2.6% after tax while wine sector support is 4.3%

John Peller is retiring along with many board members.  He has done a great job considering the cards delt.  With above 5% on goverment bonds with full principal repaid I expect continued selling pressure on the stock given the tremendous risk involved.

[johnathamilton]

Brief look at report:  1) SG&A has improved by $1.6MM QoQ 2) Increased margins 3) Inspite of price increases, Sales are down 2% - not good. Attributed to loss of collecting the excise tax... but in an inflationary environment, with price increases, either overall wine sales are down or they are being out competed. With France destroying wine, one can see that the world is awash in wine

[TheCount11]

That was the most optimistic winery CC that I have ever heard!  I like the fact that the Feds are committed to supporting the industry!  Ontario needs to step up.  6 - 12 Port Moody monitization is also great news although management has been talking about it for years!  

[johnathamilton]

Is that to be interpreted that you are now more optimistic about the company prospects or that the management is more optimistic?  Thanks for the highlights - I missed the call this morning due to work. 

[TheCount11]

I am more optimistic while management is very optimistic.  Knowing that there is future Federal government support makes all the difference in my opinion. I would like to see more investments in the Niagara Experience.  Gretzky is a success.  Example: Rather than selling excess Vinyard acreage how about a No Boats On Sunday Beach Club geared towards young crowd with a resort like

[johnathamilton]

Good points - and Niagara has two markets - 1) is the Toronto / GTHA  and 2) is the New York state market for folks wanting to come across the border where their money goes further. 

[Jonathan9]

All of this is true but what is already reflected in the severely depressed share price?  If the bleeding has stopped, the market will react accordingly. This is a company that has issues and risks but it appears a slow turn around may be starting.  If this happens the share price will react accordingly to the upside.

[johnathamilton]

Understood that there is some optimism at the moment, but let's have an open discussion - what are the vectors for growth and what impact will they have on the company profitability? 

[TheCount11]

Share prices bounce around. At $4.30 a share market value is roughly $200M .  Debt is roughly $200M.  Revenue is roughly $400M. If we normalize profit margin to 5% thats $20M which is a PE of 10.  In comparison 2019 the operating margin was 10.34%, interest expense was 1.8% and profit margin was 5.75%