Treasury Wines – Sellers are in Control

Treasury Wine Estates is under Algo Engine sell conditions and we highlight the recent softness in US sales data as a concern.

Sales within Asia continue to offset the US related weakness, however, we expect the TWE share price to remain under pressure.

Based on FY20 & FY21 EPS growth remaining in the 10 – 15% range, we have TWE EBIT growing from $660mn in FY19 to $850mn in FY21. This supports a forward yield of 3%.

We’re not holding TWE in our portfolio at present and we prepared today’s post on TWE as a reminder of the opportunity that lies ahead when the stock switches to buy conditions. We expect to see this in the first quarter of the New Year.

Downside target $15.50 – $16.50


Treasury Wines – Valuation Review

Treasury Wine Estates is under Algo Engine sell conditions following a lower high formation at $17.50.

Earnings continue to grow at 15 – 20%, although there is evidence that the growth rate is slowing.  If we assume total revenue in FY20 of $3bn on EBIT of $765mn, 15% earnings per share growth, we can support a 3% dividend yield.

On the above basis, we consider TWE fair value, but see little in the way of a catalyst to drive the share price higher. We therefore, recommend selling a covered call option to enhance the income return.


Treasury Wine – 1H19 Earnings

TWE 1H19 earnings met market consensus at $339m. 

Earnings from American markets exceeded expectations, whilst Asia was slightly below the elevated guidance.

Overall the result looks okay with continued EPS growth in the 20 – 25% range.

Based on EPS growth into 2020, we have TWE on a 2.8% forward yield.

TWE Surges Higher After Chinese On-Line Sales Decision

Shares of TWE have extended yesterday’s gains and are 3% higher at $14.70 in early trade today.

The catalyst for the sudden rally has been the Chinese government’s clarification of on-line sales regulations for offshore companies.

Prior to yesterday’s announcement, TWE and other online vendors were uncertain of the on-line sales protocol past December of this year.

So far this year, TWE has registered over $500 million in sales from the Asian region, led by sales to China, which make up over 20% of its total group sales.

The next chart resistance level is at $15.60 with a longer-term target near $17.90.

Treasury Wine Estates – Technical Bounce

CAR is one of the “GARP” (growth at a reasonable price), names that we’ve been tracking.

With the stock bouncing off the $11.00 price level, we suggest running a tight stop-loss below the recent “pivot low” and giving the upside momentum a chance to develop.

Within the back drop of market volatility, it is difficult to know how this trade plays out in the short-term. Therefore, we highlight the need to run a stop loss.

We consider ALL & TWE as similar technical opportunities.

TWE Has Reached Oversold Territory

Since posting an all-time high close at $19.85 on September 3rd, the share price of TWE has dropped over 30% reaching a 12-month low of $13.40 in early trade today.

This selloff has come despite the fact that the company has maintained their guidance for EBITS growth of 25% going into 2019.

Technically, the momentum indicators have reached an oversold level last seen in January of this year, which preceded a 23% rally over the following 2 months.

Treasury Wine Estates


TWE, SEK & CAR – Above Trend EPS Growth

TWE, SEK and CAR are all displaying current Algo Engine buy signals and are  therefore a holdings within our ASX100 model portfolio.

We recommend accumulating TWE stock within the $14.50 – $15.50 price range.

Seek is another name where above average EPS growth is likely to be achieved in FY19 & FY20.  We recommend accumulating the stock within the $17 – $18 price range.

CAR delivered a disappointing earnings update earlier this month, however, with the stock price correcting 25%, we now see value emerging.