Financial Analysis of Treasury Wine Estates Ltd

INVESTMENT SECURITIES

TREASURY WINE ESTATES LTD: 1
Contents
Introduction............................................................................................................... 2
Industry overview....................................................................................................... 2
Analysis of external factors............................................................................................ 3
Competitive analysis.................................................................................................... 5
Financial analysis........................................................................................................ 7
Valuation............................................................................................................... 8
Investment risk...................................................................................................... 9
Conclusion................................................................................................................ 9
References.............................................................................................................. 11
Appendix................................................................................................................ 13

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Introduction
Treasury wine estates is the largest wine corporation as listed on ASX enabled with global
distribution headquartered in Australia founded in 2011 with the revenue of 2.5 billion dollars
in 2017 and $2.3 billion of net income in 2016. The company is formerly as wine division of
brewing organisation as “Foster`s Group”. The company operates in 70 countries in four
main regions including Europe, Asia, New Zealand, and Australia (Treasury wine estates
limited, 2017). The company employs more than 3400 people with 13000-planted hectares of
vineyards in the wine making regions. The report brings out a discussion on treasury wine
estates and its financial analysis Creditriskmonitor, 2019). This analysis includes dividend
discount model, P/E ratio, external situational factors, ratio analysis based on its historical
data for 2018 and 2019. Further, there is a projection made which is based on certain
assumption and appropriate to the data of the annual reports of 2019. To analyse the valuation
of company, the report has used P/E ratio and EV/EBITDA ratio (Chua, DE Lisle, Feng, &
Lee, 2015).
Industry overview
Domestic consumption of wine keeps increasing with the increase in the Australian per capita
income that shows upside in the current consumption level. Exports have become important
for critically increasing the Australian wine industry (macquarie.com, 2015). For the last 25
years of growth in the Australian wine industry, it is seen that it is directly related to the
demand of the export. The exports has been increased from 16 percent to 60 percent of total
wine sales of Australians (macquarie.com, 2015). The global industry of wine was primarily
engaged in the manufacturing wines, and brandy spirits that has crossed 300 USD millions
until 2017. Asian markets have been fighting to catch up to market leader “North America” in
terms of market share and regional markets. It is seen that demand for wine continues to

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increase due to changing lifestyles and flavour of wine as availed as alcoholic beverages
(Creditriskmonitor, 2019).
(Source: Macquarie, 2015)
Analysis of external factors
Political factors-
There is high political stable and friendly environment with expected market growth trends.
Treasury Wine Estate limited is present in different countries where it possess political
tensions. Increasing tensions and the instabilities in global environment can affect the
industrial limitations. Frequent changes can affect business performance with increase in
environmental uncertainties. This will study current trends in political scenario because
change in government will alter government priorities in the development of different
industries. Further, bureaucracy can affect the business environment (Market watch, 2019).
While operating with high level of corruption and weak law enforcement creating the
business environment by increasing risk for treasury Wine estate limited. Due to clashing
public trust in regards to the economic and political restructuring, corruption can affect
business operations, fraud dealings, licensing, and contracting leads to continuous lawsuits.
The company`s operations are threatened by the instability of rule of law, and harming of the
justice system.
Economic factors-