Citi asserts scale is important in wine and Treasury Wine may need to spend more in order to sustain above-market growth in the US. The broker notes the company’s cost to sales ratio is more like that of Constellation Brands which is four times its size.
Citi values the Americas segment at $2.4bn and believes there is upside risk if the company can create another 19 Crimes brand. The Americas accounts for 29% of valuation and the broker requires more brand investment to apply a higher multiple.
The key event is the strategy briefing on May 13. Sell/High Risk rating and $9.30 target.
Sector: Food, Beverage & Tobacco.
Target price is $9.30.Current Price is $10.31. Difference: ($1.01) – (brackets indicate current price is over target). If TWE meets the Citi target it will return approximately -11% (excluding dividends, fees and charges – negative figures indicate an expected loss).
