should you buy AVG

http://www.********.au/2015/02/18/s...ge-limiteds-big-profit-growth-should-you-buy/

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Shareholders toast Australian Vintage Limited’s big profit growth: Should you buy?


By Tim McArthur - February 18, 2015 | More on: AVG^XJO

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Wine producer Australian Vintage Limited (ASX: AVG) which owns well-known brands McGuigan, Tempus Two and Nepenthe has reported a 72% jump in profit for the half year.
There were a number of positive takeaways from the results including:

• Revenue increased 16% to $121.7 million thanks to strong sales growth in the key division of branded sales into UK/Europe and Australasia/North America
• Net profit after tax but before one-off items improved by 72% to $1.998 million
• Cash flow from operations increased to $8.4 million versus $0.6 million in the prior corresponding period thanks to improved sales and lower interest costs
• Net debt was reduced by $16.2 million to $95.6 million

Are beverage companies enjoying a comeback?
Australian Vintage’s closest listed peer is wine giant Treasury Wine Estate Ltd (ASX: TWE) whose share price is up 38% over the past 12 months thanks at least in part to a takeover approach from a private equity acquirer. In contrast, Australian Vintage’s share price is up 8% over the year – a result which is lower than the 13% return from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) but better than Coca-Cola Amatil Ltd (ASX: CCL) which is still down 10% over the past year despite rallying on Tuesday after releasing its full year results.
It could be that the sector is set to enjoy better times ahead, however, perhaps the biggest attraction for investors considering Australian Vintage is the massive discount to net tangible assets (NTA) which the stock trades at. The net tangible asset backing per security is 85 cents, up from 81 cents in the prior period. Meanwhile, the share price is currently at 48 cents thereby offering 77% upside to stated NTA. Arguably, this could make the company’s stock attractive to an acquirer.
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