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21/04/22

16:19

Post #: 60954017
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Originally posted by HungryHawk: ↑

I won't make any predictions around how many bags in how much time etc, but I do expect this to be a solid performer in a defensive industry with additional growth opportunities. It also should throw off good amounts of cash and dividends.

Re your comment "liquor retail is a very competitive thin margin sector. I'm not seeing a moat other than (maybe) bulk ordering. There are multiple wholesalers in this sector."

I would point out that EDV owns the two largest and highly regarded liquor retail brands in Dan Murphy's and BWS in Australia. I'm going from memory and not sure if this is 100% accurate but I thought this constituted approx 60% of the market share, making it the gorilla in the room..

It also is Australia's largest hotel operator and has the most poker machine licenses in Aus. It's Pinnacle Drinks arm own's a whole bunch of wineries, beer brands, RTD and spirit labels and is the largest product supplier to Endeavour, providing the opportunity for increased margins and vertical integration. It also means that their sales and marketing also grows brand awareness around their own brands. They have also invested heavily in the online retail sales side. Online sales have grown rapidly with targeted rewards programs and customer purchase data driven sales offers to customers.

Despite owning the category killer brand of Dan Murphy's, there are a number of states with low store presence and opportunities for store growth e.g 18 in SA and only 2 in Tas. I like to invert this process and think about if I was a rival, what chance would I have to pinch market share off Dan's? They shoot the lights out in terms of customer satisfaction and experience. Can't see them being beaten on price given their size, supply chain and the number of in house products (in fact that's their policy to not be beaten on price). Maybe I could provide a smaller footprint convenience option to take them on? Oh hang on BWS does that and they are the largest player. BWS also have great locations often linked to Woolworths stores.

With all the above elements, I believe there is a sustainable moat. The most likely interruption I could see is an international liquor behemoth acquiring them and maybe spinning off the hotel arm of the business. I'd be disappointed to see this as I think this will be a great compounder over time, but if it were to happen, I'd imagine we will be well compensated with the acquisition multiple.

Biggest negative I see is that WOW saddled it with a large amount of debt before spinning it out. It's my hope / expectation that management will continue paying this down to more conservative levels in the next couple of years. Covid has been a double edge sword. Obviously has been a big handbrake on the hotel side of the business, but this has been largely balanced by an increase in retail sales.
Not out to change your mind Deetoy but I am of the belief that Env has a moat and competitive advantage. DYOR GLTAH.

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And fully franked dividends.

EDV Price at posting: $7.61 Sentiment: Hold Disclosure: Held
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And fully franked dividends. :)

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And fully franked dividends. :)

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