Diversified Product Offerings to Drive Growth: Andrew Peller Limited (ADW.A) is a leading producer and seller of quality wines and craft beverage alcohol products in Canada. The Company has wineries across British Columbia, Ontario and Nova Scotia etc.

The Group paid a quarterly dividend of CAD 0.0538 per share, higher than CAD 0.0513 in the previous corresponding quarter. Meanwhile, for the nine months of FY19, ADW.A distributed total dividend of CAD 6.85 million, as compared to CAD 6.36 million during the previous corresponding period. The Group would disclose its fourth-quarter FY20 results on June 10, 2020.

Q3FY19 Financial Highlights: Andrew Peller Limited reported a mix set of numbers, wherein the company reported its quarterly sales of CAD 101.59 million, as compared to CAD 103.15 million in pcp. The decrease was majorly driven by a slump in the personal winemaking market, rise in competition from subsidized low-priced imported wines, followed by a lower duty-free export sale due to trade dispute with China. Earnings before income taxes soared to CAD 10.96 million, from CAD 7.82 million in the previous corresponding period. The rise was driven by lower selling and administration expense, gain from derivative financial instruments, and lower interest expense partially offset by higher amortization expense. The quarter was marked by a reduction in lease expenses and lower advertising and promotion cost, which resulted in improved profitability. Adjusted EBITA stood at CAD 16.43 million, as compared to CAD 15.59 million in Q3FY18. Net earnings for the period stood significantly higher at CAD 8.056 million, significantly higher than CAD 5.43 million in the previous corresponding period. Meanwhile, adjusted earnings came in at CAD 7.82 million, up from CAD 7.76 million.

Q3FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The ADW.A stock corrected ~32% in the last one year and currently trading at CAD 8.71 with a market capitalization of ~CAD 380.11 million as on 27 April 2020 market close. The Company offers a wide range of products starting from high-end premium wine to low-end budget wine and caters to a larger consumer base. Traditionally, alcoholic beverage products have performed better than other discretionary items amid a weak economic environment. We expect the ADW.A’s low-end offerings to support the company’s business in the near-term, as consumers tend to avoid high end beverages during a weak economic environment. The company has a decent market share across Canada, and we expect the demand to pick up as the economy recovers. The stock is trading above its 20 days and 50 days moving average of CAD 8.20 and CAD 8.29, respectively. At current market price, the stock is offering a dividend yield of 2.471%, which is attractive considering the current low interest rate scenario. The recent decline in its stock price presents a good entry point. Hence, we recommend a ‘Speculative Buy’ on the stock at the closing market price of CAD 8.71 as on April 27, 2020.

ADW.A One Year Price Performance (Source: Thomson Reuters)

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