Post by
Jonathan9 on Dec 08, 2024 10:08pm
Andrew Peller - Value play
Management clearly got a few things wrong over the last few years. At the peak in 2018, company was valued at around $800 million. Optimism everywhere and they just finished BC acquisitions. Reading old annual reports they paid 3, 4, and 5 times sales for the 3 wineries. Interest rates at historical low levels. This was peak optimism. They did not forsee COVID, inflation, and interest rates spike. We are just coming out of peak pessimism. Share price is at multi-decade lows. Inverse.
Is this fixable? I think Yes.
Let's compare valuations on a Prices to Sales metric
Vincor - purchased 2-2.5x sales?
Duckhorn - 3.4x
Crimson Wine Group -1.9x
Corby - 1.5x
Constellation - 4.3x
Pernod Ricard - 2.4x
Treasury Wine Estates - 3.3x
Andrew Peller - 0.37x
What about the debt? Last earnings report, long term debt dropped from $208 million to $180 million. Most peers also have higher debt.
Debt arrangement is fixed + CORRA. Interest rates are now falling fast with more cuts expected from Bank of Canada. This will lower interest expense. Port Moody sale will also cut significant debt without dropping sales and earnings. 5 acres valued at $50 million.
Just getting back to a multiple of 1x sales doubles the stock price. There is significant margin of safety.
Company is buying back stock. Insiders are buying. Large insider ownership. EBITA returning to historic levels. Increased distribution and sales channels.
A double in 5 years is a 15% annual return. Add in the dividend and it is >20%.
Continue to believe the company is worth $8-$12 per share. Continuing to add at these levels.
Comment by
Jonathan9 on Dec 11, 2024 10:34pm
Interest rates coming down is good for Andrew Peller. Another 0.5% cut today with more coming.