Following on from our earlier comments around the Chinese regulatory backdrop potentially “topping out” TWE came to mind as its been weighed down by painful wine tariffs following an anti-dumping investigation i.e. a 175% duty would hinder anybody’s sales! The basically closed door to China understandably hammered TWE’s earnings and focused its attention very much on the US which was illustrated by its purchase of Frank Family Vineyards.
We feel the stocks fair value around $12 and unless Australia – China relations improve we see no reason to price in a reduction of tariffs, perhaps worth watching after the next election if ScoMo finds himself looking for a new job.
MM is neutral TWE around $12
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