The 4.5c July 2021 share price target is based solely on expected growth in the Australian market. I don't believe that Wine Depot will launch into China between now and the end of Q4-FY21. However, if they do this will present even further upside.
Entry into China will no doubt drive growth beyond Q4-FY21. Australia is ultimately a small part of the wine ecosystem. The global wine market is expected to reach over $400 billion by the end of 2023. It is a rapidly growing market globally. The platform Wine Depot is developing certainly has the potential to be deployed in other markets.
Interestingly, Wine Depot has already invested significant capital into China. They have developed the corporate, legal, financial and IT structures to be able to operate in mainland China. Dean has said that they could literally open doors there tomorrow if they wanted. In fact, they already have a small office in Shanghai. The Australia Post partnership can also be leveraged to assist a Chinese entry, as Aus Post have 15 distribution centres in mainland China in tier 1 and tier 2 cities. Wine Depot could use these Australia Post distribution centres in China to expand their depot network.
The next opportunity for Wine Depot outside of Australia will, without doubt, be China.
T.E.P.
P.S. My only regret is not getting to the bottom of this due diligence process more quickly. Ideally, I would have accumulated more at lower levels although I am grateful to have a sizeable position, which likely puts me in the Top 50 alongside @Keyhole. I will accumulate progressively as I see the thesis play out and the business becomes increasingly de-risked with each quarter. For the time being, I expect to see the share price continue around 1c to 1.2c levels, but I expect the share price could take off quickly once Q4-FY20 results confirm the growth trajectory.
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