It's clear that they need to unleash some of the value from the Penfolds / premium brand. They're strategy of the spinoff would probably create value via Penfolds and kill TWE's long term future at the same time. Management definitely need to pivot their thinking on that - and the timing, as doing it now would be suicide for shareholders value and managements future remuneration packages!
But.. something still needs to be done. Case in point: TWE's PE is currently around 25-27, which is perhaps not far from it's historical average at least since 2013. And yet, when you look at other global premium brands, they're PE is significantly higher: Louis Vuitton / Moet Hennesy around 60; Remy Cointreau around 95; Estee Lauder around 110; etc. Even Diageo which is similar to TWE (alcoholic beverages, mixing premium and basics) is at 62. So if the value of Penfolds (intangible assets, branding names and licenses) is $952m, then splitting that off would make it at least $2bn when conservatively comparing it with it's global peers.
My guess is that they an acquirer is more likely than management working out how to preserve the value / earnings of Penfolds in a different operating model.
TWE Price at posting:
$10.00 Sentiment: Buy Disclosure: Held
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