Author: therawinformant

The S&P/ASX 200 Index (ASX:XJO) fell by 0.2% today to 6,398 points.

Here are some of the highlights from the ASX today:

Ramsay Health Care Limited (ASX: RHC)

Private hospital operator Ramsay gave an update to investors today.

The update related to the first quarter of FY21. Ramsay wanted to give investors an update in advance of its AGM on 24 November 2020.

Ramsay said that its Australian division had reported a 1.5% increase in total revenue. Excluding Victoria, total Australian revenue was up 6.6%. This reflected a 1.7% increase in surgical admissions (excluding Victoria there was growth of 8%) and lower non-surgical activity.

Ramsay reported that its Australian earnings before interest, tax, depreciation, amortisation and restructuring or rent costs (EBITDAR) declined compared to the prior corresponding period because of the impact of restrictions on activity in Victoria during the second lockdown, and the increase in costs and impact on the case mix as a result of the COVID-19 environment.

Ramsay Sante reported an increase in surgical volumes of approximately 5.4% on the prior corresponding period, combined with lower non-surgical activity.

Meanwhile, Ramsay UK reported a total revenue decline of 9.9%, in local currency terms, compared to the prior corresponding period with volumes picking up near the end of the quarter.

Both the UK and France continue to operate under the government support arrangements which currently both run until 31 December 2020.

The ASX 200 hospital company said that given near-term uncertainties in the market stemming from the COVID-19 pandemic, Ramsay is not in a position to provide guidance for FY21.

Ramsay managing director and CEO Craig McNally said: “Ramsay’s operating results continued to be impacted by the COVID-19 pandemic in the first quarter of FY21. Surgical restrictions, regional outbreaks and lower demand for some services, combined with higher costs associated with operating in the current environment have all impacted results.

“There were a number of operational lessons learned in the first wave of the virus that our hospitals have been implementing to better manage safety and capacity and where appropriate this has allowed us to continue treating private patients and public wait lists where requested.”

The Ramsay share price fell by 1.6% today. Ramsay will release its FY21 interim result on 25 February 2021.

Lovisa Holdings Ltd (ASX: LOV)

The jewellery store business announced a European acquisition today.

It announced that it would be acquiring the European retail store network of German wholesaler ‘beeline GmbH’, which is expected to add more than 80 stores to the Lovisa global store network across six European countries – Germany, Switzerland, the Netherlands, Belgium, Austria and Luxembourg with all continuing stores to be branded to trade as Lovisa stores.

The shares in the six beeline entities will be acquired for a total purchase price of sixty Euros, with beeline GmbH ensuring a cash level of the entities of €9.87 million in total. No financial debt will be taken on as a result of this transaction.

Lovisa has also entered into a put option agreement in relation to the acquisition of beeline France, including a store network of 30 stores.

The acquisition of each country’s operations is to be completed progressively from 1 March 2021 through to the end of May 2021. The combined cash requirement for fitout and inventory for the conversion of stores to Lovisa is expected to be less than €5 million.

Lovisa managing director Shane Fallscheer said: “We are very excited that this transaction gives us the opportunity to add six new countries to our global store network, and provides us with a strong base and quality team to grow the Lovisa brand further in these markets into the future as part of our ongoing global strategy.

It couldn’t provide earnings guidance for the acquisition due to COVID-19 impacts.

In terms of a trading update, 24 stores in France and 39 stores are shut because of lockdowns. For the remaining stores, comparable store sales for the first 19 weeks of FY21 were down 9.2%. Australia and New Zealand have been the best performing regions.  

The Lovisa share price went up 14.5% today. 

More reading

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• ASX gold stocks could rebound as experts tip high highs for gold in 2021
• ASX 200 down 0.35%: Ramsay Q1 update, NEXTDC’s international expansion, gold miners surge
• Lovisa (ASX:LOV) share price rockets higher on European acquisition news

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The MedAdvisor Ltd (ASX: MDR) share price was a strong performer on Friday.

The medication management platform provider’s shares were up as much as 9% to 42.5 cents at one stage.

The MedAdvisor share price ultimately ended the day 6.5% higher at 41.5 cents.

Why did the MedAdvisor share price shoot higher?

Investors were buying MedAdvisor’s shares on Friday after the release of a positive announcement relating to its US activities.

According to the release, the company has extended its US digital secure messaging pilot with a major top 10 global pharmaceutical company. It will now continue through until the end of calendar year 2021.

Management advised that the program, which is a partnership with its newly acquired Adheris business, is worth US$800K (A$1.1 million) based on estimates of patient reach. Though, this is incremental to any revenue earned in 2020 from the previously announced pilot.

The partnership between Adheris and MedAdvisor was designed to bring secure digital health programs to a subset of the Adheris network. This network extends to 25,000 pharmacies and can reach 1 in 2 Americans on an opt-out basis. The company expects the program to run through up to 25% of the Adheris network.

The product, which is marketed by Adheris in the US as inMotion, sends a text message to patients on a specific and targeted drug to allow a patient to then access a secure website with important information about their medication.

The pharmaceutical company undertaking the pilot originally went live with five products and has since added a sixth product.

Adheris President and incoming MedAdvisor US President & CEO, John Ciccio, commented “We’ve set up a strong pipeline with a range of top tier pharmaceutical companies this quarter. Our integrated, digital product which was developed between Adheris and MedAdvisor is receiving positive feedback in the market with this pilot program renewing for increased scale year on year.”

More reading

• MedAdvisor Ltd (ASX:MDR) share price halted ahead of transformational $49 million acquisition

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MedAdvisor. The Motley Fool Australia has recommended MedAdvisor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Since the Reserve Bank of Australia (RBA) cut interest rates again last week to another record low of just 0.1%, the importance of owning dividend shares for income purposes has only increased. With rates at such low levels, there are simply no real ‘safe’ alternatives anymore to a dividend if you want meaningful cash flow from your investments.

Sure, you could try a Commonwealth Bank of Australia (ASX: CBA) term deposit, but those are now going for, at most, 0.6% per annum these days. But there are some ASX dividend shares out there today that run miles around those kinds of numbers. Here are 2 such shares, both offering fully franked dividend yields of more than 5% today.

3 ASX dividend shares with a yield over 5% today

JB Hi-Fi Ltd (ASX: JBH)

You might know JB from its large yellow store banners, but this electronics and white goods retailer offers far more than that to shareholders today. JB has long moved away from its traditional product range of hi-fi equipment, DVDs, CDs and records. Today, it sells everything from televisions, phones and computers to fridges, microwave ovens and washing machines. And it’s quite good at it too, if the company’s performance numbers are anything to go by. In it’s FY2020 annual report, JB told investors that sales were up more than 11% from FY19’s numbers (including 56.6% growth in online sales) and that profits were up by more than 42%.

Those profits flowed through to a 76.5% increase in the company’s final dividend to 90 cents a share. Since JB  Hi-Fi is currently trading around $45.97 a share, that gives JB shares a trailing dividend yield of 4.11%, or 5.87% grossed-up with full franking.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is not often regarded as a top ASX dividend share. It’s instead more well-known for its fast-growing funds management business. Magellan runs a wide portfolio of managed funds, exchange-traded funds (ETFs) and Listed Investment Trusts (LITs). Some of the more popular options are the unlisted Magellan Global Fund and the Magellan High Conviction Fund, as well as the listed Magellan Global Trust (ASX: MGG). As of 30 October, Magellan has more than $103 billion in assets under management.

However, Magellan also pays a decent dividend, which has been increasing rapidly over the past few years. In 2020, the company has paid out $2.15 in dividends per share, which gives the Magellan share price a trailing dividend yield of 3.53% on current prices, or 5.04% grossed-up with the company’s full franking.

More reading

• 3 shares that have reacted adversely to vaccine news
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• JB Hi-Fi (ASX:JBH) share price sinks lower on broker downgrade
• Why Bingo, Evolution, JB Hi-Fi, & Super Retail shares are dropping lower
• ASX 200 up 1.3%: CBA Q1 update, tech shares rebound, JB Hi-Fi sinks

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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One group of shares that are popular with investors are blue chips.

Blue chip shares tend to be companies that are well-known, long-established, and have strong financial positions. In other words, they are not going anywhere any time soon, which makes them safer than the average share.

Though, it is worth remembering that not all blue chip ASX shares are equal and some are better than others.

Two blue chips that are on form in FY 2021 are listed below. Here’s what you need to know about them:

Goodman Group (ASX: GMG)

Goodman Group is an integrated commercial and industrial property group. It has been growing at a strong rate in recent years thanks to management’s focus on high-quality properties in key locations that it believes will deliver sustainable returns for investors. These include logistics and warehouse facilities which have exposure to the growing ecommerce market through relationships with Amazon, DHL, and Walmart.

At the end of the first quarter of FY 2021, the company reported 2.9% like-for-like net property income growth across its managed partnerships. It also revealed 97.8% occupancy across its partnerships and $7.3 billion of development work in progress. The latter was ahead of its guidance.

This update went down well with analysts at Morgan Stanley. They have retained their overweight rating and $20.90 price target on the company’s shares. It notes that Goodman is expecting more developments over the remainder of FY 2021, with higher yields.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare is a blue chip share in form. It recently released its first quarter update and revealed very strong revenue and earnings growth. For the three months ended 30 September, the company delivered a 29% increase in revenue to $2,144 million and a massive 71% lift in EBITDA to $580 million. The majority of this strong growth was driven by increasing demand for COVID-19 testing services globally. Though, it is worth noting that the rest of the business performed positively as well.

This was another update that went down well with Morgan Stanley. In response to the update, it retained its overweight rating and lifted its price target to $40.00. The broker believes that its earnings from COVID-19 testing could remain stronger for longer. It suspects this could lead to a sustained re-rating of its shares.

More reading

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• With interest rates near zero these ASX income shares are in focus

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch next week when the gaming technology company releases its full year results on Wednesday.

Ahead of the release, I thought I would take a look to see what the market was expecting from Aristocrat Leisure in FY 2020.

What is the market expecting?

Aristocrat Leisure is widely expected to report a sharp decline in revenue and profits in FY 2020 due to the impact of COVID-19.

According to a note out of Goldman Sachs, its analysts are forecasting revenue of $3.94 billion and net profit after tax before amortisation of $471 million. This represents a 10% and 47% decline, respectively, over the prior corresponding period.

What about its different segments?

The broker expects the company’s Digital business to have performed exceptionally well in FY 2020. It is forecasting a 27% increase in revenue to $2,273 million.

Goldman commented: “SensorTower continues to point to a solid 2H20E performance across the digital front, and to this end we forecast digital revenue growth of 27% on pcp in 2H/FY20E. We also highlight recent solid trends reported across the Sep quarter by peers such as ZYNGA. Through the half, we note that digital revenues (in USD) were up 36% on pcp on a 6mo rolling basis, driven by Product Madness up 45% and Plarium up 41%.”

The key drag on its performance is expected to be its Land based business. Goldman Sachs is forecasting a 36% decline in revenue to $1,667 million due to COVID-19 casino closures and social distancing initiatives.

While this is disappointing, the broker believes Aristocrat Leisure is well-placed to win market share post-pandemic.

The broker explained: ”While land based revenues will clearly be heavily impacted in 2H20E given the pandemic, we remain of the view that ALL is well-placed to take further share noting its solid balance sheet and recent industry surveys suggesting that it holds 2/3 of the top 5 performing cabinets across key categories.”

What else should you be watching?

The broker revealed that it remains bullish on its Digital business and will be looking out for commentary on the performance of its RAID game and its outlook into FY 2021.

It is also looking for comments around the growth trajectory of its new game, EverMerge. It notes that this has been the second most downloaded game in October.

Goldman will also be focused on the company’s expectations around outright sales and product development into FY 2021 and the shape of land based recovery.

Outlook.

Goldman Sachs isn’t expecting management to provide any real guidance for FY 2021, but there are a few points it is hoping will be clarified.

The broker concluded: “While we believe management will unlikely be able to provide any quantified FY21E group guidance given the fluid nature of the COVID-19 impacts, we will be particularly interested in i) commentary around the speed at which land based revenues can recover in N/A, ii) cost and D&D outlook noting that recently management reiterated their focus on continuing to invest in D&D over the medium term, and iii) any incremental snippets around M&A and desire to step into iGaming.”

Goldman Sachs has a buy rating and $34.00 price target on the company’s shares.

More reading

• Why the Aristocrat (ASX:ALL) share price could jump next week
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• 3 quality ASX growth shares to buy in November
• The 10 ASX stocks worst hit by a Biden US presidential election win

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The 3P Learning Ltd (ASX: 3PL) share price is rocketing today, up 13.28% at the time of writing to $1.36 a share. 3PL shares closed at $1.20 yesterday, but opened at $1.38 this morning and climbed as high as $1.42, before trending lower to the current share price over the day.

But today’s moves are just another good piece of news for 3P Learning shareholders. The share price was already up 42% year to date before today’s jump and is now up 60% year to date, and up more than 100% since the lows, we saw in March. However, it’s worth noting that 3P only hit the ASX boards back in 2014, and, as of today’s share price, remains more than 40% below the company’s IPO price.

So what is this learning company? And why has the 3P share price rocketed more than 12% today?

What is 3P Learning?

3P Learning describes itself as a “global leader in online education”. The company offers a suite of learning resources “designed for schools and families”, which cover spelling, literacy and numeracy. 3P Learning was founded back in 2005 and boasts some high-profile partners, including Microsoft Corporation (NASDAQ: MSFT), the British Educational Suppliers Association and Unicef.

The company offers a range of software programs that aim to assist students with reading, writing, spelling and mathematics. These include the flagship Mathletics program, as well as Readiwriter, Reading Eggs and WordFlyers.

The company is a truly global player. In its earnings report for the 2020 financial year, the company advised that it received 51% of its revenue from the Asia Pacific region, with 20% hailing from the Americas and 29% from Europe, the Middle East and Africa. In the same financial year, the company derived 69% of its revenue from ‘mathematics’ programs, and 31% from literacy programs.

Why are 3P shares rocketing today?

The company made an announcement to the markets this morning before open. This news was the ‘receipt of a non-binding’ acquisition proposal for 3P, launched by a private Indian tech company called Think and Learn Private Ltd (which apparently operates under the name BYJU). Think and Learn Private operates in a similar sphere to 3P Learning and “provides programs in the K-12 segment”.

The proposal is for Think and Learn Private to acquire 100% of 3P Learning’s shares for a price of $1.45 a share, to be paid in cash.

The board has yet to review or recommend the proposal to shareholders and notes that the proposal, “is subject to a number of conditions, including completion of satisfactory confirmatory due diligence within a 4-week period, a unanimous recommendation from the 3PL Board and entry into a scheme implementation agreement”. Think and Learn Private will also have to obtain approval from the Foreign Investment and Review Board.

This isn’t the first time 3P Learning has had a suitor at its door. Back in August, the company received another takeover bid, this time from private US company IXL Learning. That bid involved a $1.35 per share offer, (which has now been approved by the Foreign Investment and Review Board) which the board subsequently recommended, “in the absence of a superior proposal”.

It seems 3P Learning shareholders now have just that. 

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• Costa (ASX:CGC) share price lower despite appointing new CEO
• Temple & Webster (ASX:TPW) share price can double in 3 years, says fundie
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Costa Group Holdings Ltd (ASX: CGC) share price is dropping lower today despite a big announcement.

In afternoon trade the horticulture company’s shares are down almost 1% to $3.90.

What did Costa announce?

This afternoon Costa announced that it has found its new Chief Executive Officer.

According to the release, the company has promoted its current Chief Operating Officer, Sean Hallahan, to the role of Chief Executive Officer and Managing Director with effect from 31 March 2021.

Prior to joining Costa, Mr Hallahan was Managing Director of Tata Global Beverages – ANZ and Indonesia for 7 years. He has also held a number of senior sales and marketing roles with major companies including George Weston Foods, Simplot, and SC Johnson.

Rigorous global search.

Costa’s Chairman, Neil Chatfield, commented: “Sean’s appointment is the culmination of a rigorous global executive recruitment search which included both internal and external candidates, following the notification by current CEO Harry Debney of his intention to retire from a full-time executive role.”

“Sean has been Costa’s Chief Operating Officer since October 2017 and we are delighted to have a person of Sean’s calibre and experience who brings a deep passion for our industry as well as over 20 years senior management and CEO experience in FMCG, including a background with growth oriented organisations with an emphasis on delivering high quality product categories with strong customer focus,” he added.

The company notes that it has a proud history of growing and marketing industry leading products with a focus on investing in sustainable commercial farming and innovation to support growth in superior genetics-based product categories.

The Costa board believes that Sean Hallahan is ideally placed to build on this, continue the solid performance of the business, and develop exciting growth opportunities for the company into the future.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Online furniture retailer Temple & Webster Group Ltd (ASX: TPW) shares can double over the next 3 years, according to Regal Funds Management’s Todd Guyot.

The fund manager shared this opinion at the Sohn Hearts and Minds virtual investment conference hosted today. At the time of writing, the Temple & Webster share price has slipped in afternoon trade, dipping 0.8% to $10.02.

What did the fund manager say

Mr Guyot told the conference COVID-19 had accelerated Temple & Webster’s revenue growth this year by more than 74%. Strong growth also continued in the months after lockdown restrictions were lifted, with 160% sales increase in August, followed by a 100% increase in September. He said this demonstrated “the impact of repeat customers, which is a direct correlation with the customer experience”.

Mr Guyot said he believed the online retailer had now reached scale, evidenced by the fact that earnings generated in the first quarter of 2021 were higher than all of 2020, a trend which he believes will continue.

In addition, the company had an “attractive” negative working capital – a cashflow model where it received customer payments upfront, and suppliers were paid at a later date. As sales increase, this model generates a lot of cash up front, and the more cash it’s able to generate, the faster its sales can grow – giving it a snowball effect. 

Mr Guyot compared Temple & Webster’s growth profile to that of US online home retailer Wayfair (NYSE: W), where the market has consistently underpriced its growth potential. He says this underpricing might be happening to Temple & Webster as well.

In conclusion, he advised investors to ignore short term periods of market volatility.  The Temple & Webster share price “we think can double over the next three years”, Mr Guyot said.

Quick take on Temple & Webster

Temple & Webster was first floated on the ASX in 2016, and at the time was widely regarded as the worst float of 2016. In that first year of public trading, the company suffered bottom-line losses of $44 million. It also lost $14.8 million in earnings before interest, tax, depreciation and amortisation (EBITDA). This number was almost twice the $8.5 million loss forecast in its December 2015 prospectus.

Fast forward to 2019, the company was doing much better – reporting its first full year profit of $1.1 million. That result proved to be a drop in the ocean compared to its first quarter FY21 profit of $8.6 million– a figure which is 7 times the 2019 result, and more than what the company made for all of fiscal 2020.

The Temple & Webster share price vs its competitors in 2020

The Temple & Webster share price, like many e-commerce shares, has rocketed in 2020. At today’s trading, the Temple & Webster’s share price has shot up up by 280% on a year-to-date basis. In comparison to other e-commerce players, the Kogan.com Ltd (ASX: KGN) share price is up 160% this year, and Redbubble Ltd (ASX: RBL) is up by 310% in 2020.

More reading

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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price has been a strong performer this week.

Despite experiencing a couple of days of declines, the banking giant’s shares are up 5% for the week.

Why is the ANZ share price charging higher this week?

There have been a couple of catalysts for the positive performance by the ANZ share price this week.

The first is of course Monday’s news that a potential COVID-19 vaccine has performed exceptionally well in phase three trials.

The early data from Pfizer’s vaccine showed that it was 90% effective against COVID-19, which was better than even the most optimistic experts were hoping for.

This news caused an almighty rotation from large investors, who dumped COVID-winners like tech stocks and snapped up beaten down COVID-losers such as travel and bank shares.

Given how far the ANZ share price has fallen during the pandemic, it wasn’t at all surprising to see investors piling in on the news.

What else is driving it higher?

Also giving the bank’s shares a boost was a better than expected set of results from the big four over the last couple of weeks.

For example, for the 12 months ended 30 September, ANZ reported a 42% decline in cash profit from continuing operations to $3.76 billion. While this was a sizeable decline, some analysts were expecting an even greater decline.

It is also worth noting that ANZ’s profit decline was driven primarily by full year credit impairment charges of $2.74 billion, which increased almost $2 billion year on year. This was due largely to the impact of COVID-19 and a first half impairment of Asian associates of $815 million, also related to the pandemic.

One broker that was particularly pleased with the result was Credit Suisse. It put an outperform rating and $26.20 price target on ANZ’s shares in response to it.

Based on the current ANZ share price, this price target implies potential upside of over 26%.

The broker believes the tail risk relating to COVID-19 bad debts is diminishing and notes that its deferred loan repayments are better than feared. It also likes the bank for its robust capital position and the prospect of a strong recovery in its earnings over the coming years.

In light of this, the 5% gain by the ANZ share price could only be the beginning as far as this broker is concerned.

More reading

• Vaccine hopes cause ASX 200 to rise on Tuesday
• Afterpay (ASX:APT) share price up 4% in today’s trading
• Why the ANZ (ASX:ANZ) share price is underperforming on Monday
• ASX 200 jumps 1.7%: REA Group surges to record high, bank shares push higher
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The embattled Treasury Wine Estates Ltd (ASX: TWE) share price is finding support among some experts as one fund manager called it far too cheap.

The comment came from Tribeca Investment Partners lead portfolio manager Jun Bei Liu, reported the Australian Financial Review.

Shares in the alcoholic beverages group came under pressure recently when China launched an anti-dumping investigation on Aussie wines.

TWE share price supported by asset value

China has been targeting a range of Australian imports into that country as diplomatic relations between the two nations worsened.

But the stock appears cheap given the strong demand for premium wine in China, said Liu at the 2020 Sohn Hearts & Minds Conference.

She explained that the TWE share price valuation can be fully supported by its inventory and property assets.

Too much bad news in the TWE share price

This means even if the Chinese market is totally cut off to the group, the stock shouldn’t need to fall any further.

“We estimate Treasury has $4 billion of premium label wine sitting in the basement and that’s 70 per cent of its market value at the moment,” the AFR quoted her as saying.

“The rest consists pretty much of its premium farmland out of Napa Valley and South Australia.”

Positive outlook for Treasury Wines

A shift in consumer taste also bodes well for the Treasury Wine share price. While Chinese market demand was once dominated by beers and spirits, millennials favour wines and this group accounts for 30% of China’s population.

It is predicted that China will spend US$430 billion ($595 billion) on alcoholic beverages over the next 10 years, with wine the main driver of consumption.

Against this positive backdrop, Liu think the TWE share price should be trading ahead of its tangible asset base.

This broker likes the TWE share price too

She isn’t the first to highlight this abnormally. As I reported last week, Citigroup upgraded the TWE share price to “buy” from “neutral”.

The broker thinks that the Chinese dumping investigation is focusing on lower priced wine when Treasury Wines is more exposed to the premium end of the market.

Even if China finds Australian importers guilty, Treasury Wine should largely escape any punitive action that the Chinese authorities is expected to impose.

In any case, Citi believes that the loss of the Chinese market is already reflected in the TWE share price.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Fund manager says Treasury Wine (ASX:TWE) share price is too cheap appeared first on Motley Fool Australia.

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