Perennial Feb 2022 commentary:"Investors in Lark Distilling...

Perennial Feb 2022 commentary:

"Investors in Lark Distilling (down 25.7%) were distracted given the
news around the resignation of its CEO to face personal issues
(extensively covered in the media). We viewed the weaker share price
as an opportunity to add to what is a unique asset in the Australian
market, a growing luxury brand trading below hard asset value.
We believe investors overlooked several items in this 30yr old
company which had already begun a search for a new CEO back in
December. The strong fundamentals were reinforced in the full result
release at the end of the month:
- There is $432m of whisky inventory value at maturation using
FY21 selling prices, the new information provided in the month
was the expectation this value will rise by 15-25% in FY22 based
on current sales trends – compared to a market cap of $253m
- 1H sales grew 78% despite the impact of COVID on many
hospitability clients as well as Lark’s own locations in Tasmania
- The Pontville acquisition which provides the scale needed to
access export markets and high quality inventory
- Directors invested $6.4m as part of the raising for Pontville late
last year
Such fundamental news being ignored, while potentially frustrating, is
ultimately what enables us to acquire assets at well below our
perceived true value – providing good prospects for returns going
forward as growth prospects are delivered."


Loving their rational. They are 3-5 yr investors, and this is the start of their Lark Journey (They would hope like most of us that it is given time to grow sales and inventory before an acquirer gets interested...