SHARES

Australian Vintage earnings set to increase

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This week Money asks Fat Prophets for a hot stock pick - Australian Vintage (ASX:AVG)

Key statistics:

19/04/16 closing share price: 0.580

australian-vintage

52 week high: 0.595 52 week low: 0.300 Most recent dividend: - Annual dividend yield: - Franking: -

Australian Vintage Limited is an Australian wine company, championing a fully-integrated wine business model. The breadth of Australian Vintage Limited extends to vineyards, boutique and bulk wine production, packaging, marketing and distribution.

We expect Australian Vintage's share price to undergo a period of consolidation following the recent strong gains, however remain of the view that the shares still offer material upside over the medium-term. This is based on our belief that Australian Vintage's earnings are set to increase significantly over the next several years in response to a combination of management's optimisation (i.e. productivity) and growth (i.e. new markets) initiatives and the lower Australian dollar.

With Australian Vintage's shares currently trading at 16.6 times the mid-point of management's earnings guidance for FY16, and with the company's mid-cycle earnings likely to be materially higher than the current run rate, we continue to rate the stock as a high risk Buy.

James Lennon is a senior analyst at investment research and funds management house Fat Prophets.

Australian Vintage

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James Lennon is a senior analyst at investment research and funds management house Fat Prophets. Receive a recent Fat Prophets Report.
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