The market will react negatively, but really, there is...

The market will react negatively, but really, there is absolutely nothing new in this. I kind of hope the share price tanks to <$10 so I can buy more, but it seems too resilient! The good ol' times of September/October 2020 are definitely behind us.

My reading of the trading update is that we are locked in to ~3% organic growth with the current disruptions. The problem however is that if you throw into any DCF a 3% growth on ~$350m FCF, you get a valuation around ~$6-7bn depending on your set of assumptions for IRR and discount rate. The current enterprise value is just south of $10bn. So that means the share price is 30% overpriced! Time to sell everyone!

But we know that's not the story. There are multiple catalysts for TWE to unlock shareholder value. My reckoning is that merely the 'reopening trade', hoping that the cash flow and margins return to pre-Covid ex China, is still not enough. That may enable TWE to grow into its current valuation, but won't be a catalyst for good shareholder returns at today's share price.

The other catalysts I am keeping an eye on is the asset play. Put simply, will they start divesting their land? re-valuing their Grange in the cellars? Cop a takeover bid at multiples similar to other global premium brands? The restructure takes us part of the way, so let's see.