Treasury Wine Estates has entered into a long-term licensing agreement with The Wine Group under which the latter can source and sell selected Beringer brands in the Americas for circa $100m.
UBS is of the view the agreement marks a key step in Treasury Wine’s $300m wine divesture plans over 2021(almost $157m of which stand completed), with an aim of circa $197m in operating income as a baseline with margins of almost 25%.
The deal is consistent with Treasury Wine’s intentions and increases UBS’s confidence in the company’s ability to pivot to a lower volume/higher-margin business.
UBS retains a Neutral rating, which remains under review with a target of $10.60.
Sector: Food, Beverage & Tobacco.
Target price is $10.60.Current Price is $11.42. Difference: ($0.82) – (brackets indicate current price is over target). If TWE meets the UBS target it will return approximately -8% (excluding dividends, fees and charges – negative figures indicate an expected loss).
