DGL

[Robomo]

2006:

I'm just getting interested in this stock - and not solely because I heard about the very tasty wine-tasting at the agm recently. (Memories of CIL/Montana in the good old days, when we all walked away with gift bottles in our hands!)
Were any STers at the agm? I'd be interested in anyone's thoughts/comments on DGL as a medium/long term hold. I note the div yield is negligible and the P/E abnormally high.

12 years ago, the comments about the PE were just the same as today! SP then (2006) was about $2.25. There was a comment in the NZ Herald about 7 years ago that DGL "consistently under promise and over deliver" and this continues to have been the case ever since. Wonderful growth stock that I've held since listing in 2004 plus a modest dividend. I've sold a few along the way but still have 50K worth that only cost about 7K. 34% increase in SP in the past 12 months sees it as one of the best performers on the NZX. The fall in the NZ$ can only help DGL, particularly as the USA is their biggest export market. Very well run company.

[BlackPeter]

Hey BP,


i had a quick check on reuters and their 5 year eps growth is 9.82. Unless theres obvious reasons as to why it might be lower in future a forward CAGR of 5 seems very conservative. Reuters mean estimate of future long term growth rate % is 14.33

NZ has a strong comparative advantage in wine. Aus exports far more by volume but NZ much higher by value. Only a few countries in the world can be or are currently great wine producers (e.g argentina, italy, france)

As to DGL’s share price often times theres no rhyme nor reason. Mr market is prone to depression and over exuberance. Reuters notes the 5yr PE low was 9.73 so quite a difference to the PE of today !

https://www.reuters.com/finance/stoc...hlights/DGL.NZ



i do not know much at all about DGL though I do own a reasonable amount of one of their smaller competitors, Invivo. They’ve tripled revenues in the last 3 years and have been extremely happy with them thus far.

Cheers for that, Panda.

Re PE and CAGR I never use published numbers from any database unless I know exactly how they generate it. I hold it with Churchill: "I only believe in statistics that I doctored myself ;

For forward EPS CAGR I use 4 years back and (if I've got them) 3 years forward (sort of conservative version of Jim Slater's recommendation). This is 43 cents in 2014 up to 56 cents in 2020 (4-trader consensus). Makes a CAGR of 4.9% - and no, if I modify the time window than the change is not significant - i.e. not sure how Reuters make up their numbers. Maybe they took 2012 (a particularly bad year as start year - only 25 cents EPS, worse both than 2011 and 2013) and 2017 ... this might make up the nearly 10 CAGR, but would be highly unrepresentative. Who knows.

So yes, it is always possible to generate nearly any CAGR if you pick the most suitable time window for the desired value ; Does not mean it is representative, though.

[Patient Panda]

Good point I was being a bit lazy on this one. Should certainly double check more often on companies I’m researching.

[jg8512]

like robomo I'm a long term holder (and CIL/Montana before that)

analysis of DGL is made hard by the long lead times between buying land, planting grapes, making wine, holding inventory and finally selling wine. As a result, I suspect there is quite a bit of non-earning (and under-earning) assets at any point in time. So think you really need to build a good model which tries to link the existing earnings with the part of the expense and investments that is mature and treats separately the bits that are under or not yet full earning. the latter only (or largely) show as expenses or assets, and clearly have considerable value not yet reflected in current profit results.

Also, as noted above, there are some really attractive features of investing in the NZ wine industry.

the hard question is whether both those aspects of DGL are now fully reflected in the share price. GLAH

[BlackPeter]

like robomo I'm a long term holder (and CIL/Montana before that)

analysis of DGL is made hard by the long lead times between buying land, planting grapes, making wine, holding inventory and finally selling wine. As a result, I suspect there is quite a bit of non-earning (and under-earning) assets at any point in time. So think you really need to build a good model which tries to link the existing earnings with the part of the expense and investments that is mature and treats separately the bits that are under or not yet full earning. the latter only (or largely) show as expenses or assets, and clearly have considerable value not yet reflected in current profit results.

Also, as noted above, there are some really attractive features of investing in the NZ wine industry.

the hard question is whether both those aspects of DGL are now fully reflected in the share price. GLAH

Good answer - cheers.

I guess these currently unproductive (or less productive) assets would be highly relevant if they are not "business as usual" - i.e. if DGL is moving from a growth company to a stagnating company. Is this the case?

Other things which spring to mind are obviously:

do they intend to turn at some stage into a real estate developer subdividing their prime estate into life style blocks? Many farmers made millions that way, but current limit on immigration is bad.

What is the future of the wine industry? Given that we soon reach the milestone for smoke free NZ - is booze free next?

How will climate change impact on the wine industry and will we be able to compete against this premium white from Siberia?
https://www.calvertjournal.com/news/...iberias-finest

So many risks and opportunities ...

[MauroNZ]

like robomo I'm a long term holder (and CIL/Montana before that)

analysis of DGL is made hard by the long lead times between buying land, planting grapes, making wine, holding inventory and finally selling wine. As a result, I suspect there is quite a bit of non-earning (and under-earning) assets at any point in time. So think you really need to build a good model which tries to link the existing earnings with the part of the expense and investments that is mature and treats separately the bits that are under or not yet full earning. the latter only (or largely) show as expenses or assets, and clearly have considerable value not yet reflected in current profit results.

Also, as noted above, there are some really attractive features of investing in the NZ wine industry.

the hard question is whether both those aspects of DGL are now fully reflected in the share price. GLAH

Hi thanks for your post, I like the idea of investing in the NZ wine industry but unfortunately I know a little so could you please elaborate more in regards of this?. Thanks.

[jg8512]

MauroNZ

where would one start. As per my post, I reckon its not the easiest sector to analyse. so why start with it, as opposed to some other easier sector?

However, if you are interested in wine specifically, the annual reports are a good place to start. For NZ listed companies see:
http://www.nzmwe.com/
http://www.nzwineco.co.nz/
https://www.delegatwines.com/

PS. If you happen to live in Marlborough - you're already a wine shareholder through your local community-owned electricity lines company (which owns yealands wines).

[Biscuit]

Another year of steady progress... operating NPAT up 10%.... always a tasty holding

[Biscuit]

Bit of free advertising for DGL (but perhaps not such good taste):

At first glance it may seem that coronavirus, Hong Kong protesters and New Zealand wine have very little in common.
But after a police officer in Hong Kong was infected with COVID-19 - the official name for coronavirus - a bottle of New Zealand bubbly has played a surprising role in a controversy that has split the internet.
The 48-year-old officer was confirmed to have been infected with the virus on Thursday last week. His wife and mother were also showing symptoms and 59 other police officers who had been at a large dinner party with the man were placed in quarantine.
After news of the officer's infection was made public, protesters were seen celebrating - in one case with a bottle of Oyster Bay sparkling wine.

[Biscuit]

Share price up 4.5% yesterday, so all good, no doom and gloom on this thread!