CWT has very little breathing space on its LVRs and given the poor outlook within the wine sector I would imagine that there will be more asset writedowns in the near future (maybe partially offset by increases in value of water rights).
The move to continue to pay high dividends but have a fully underwritten DRP, using the cash to pay down debt is good.
Given that the dividend is ridiculously high >22% and the SP is still languishing it is the negative sector sentiment and little breathing space on the LVR that is holding the SP back IMO.
Thus, get more room into the LVR and this will help.
CWT has high occupancy to good tenants and very long average weighted lease expiries, thus they will ride this out okay provided they don't break their LVRs and get caned by their bankers.
They are negotiating better terms with tenants too in exchange for ST rent relief also (eg Aussie vintage).
SP rerating will take time, however, for the macro sentiment to turn around for wine (oversupply solved by reduction in ha under production). Smaller, less well resourced vineyards (ie not CWTs tenants) will be the ones to fold and thus 'solve' the problem for CWTs tenants.
One given however - people will always drink wine :)
Cheers John
CWT Price at posting:
29.5¢ Sentiment: Buy Disclosure: Held
