ANDREW PELLER LTD. ADW.A $28 and ADW.B $30

ANDREW PELLER LTD. (Toronto symbols ADW.A $28 and ADW.B $30; Income Portfolio, Consumer sector; Shares outstanding: 14.3 million; Market cap: $406.4 million; Price-to-sales ratio: 1.2; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.andrewpeller.com) is Canada’s second-largest wine producer, after Constellation Brands. It accounts for 14.2% of the country’s wine sales, and 37.1% of wines produced in Canada. Peller continues to benefit from strong sales of its premium-priced brands. These include its 2011 deal with hockey star Wayne Gretzky to make and distribute wines under his name. This brand is now one of the best-selling wines in Canada. To keep up with strong demand for Gretzky wines, the company is building a new winery next to its existing operation in the Niagara region of Southern Ontario. This new facility will open in the spring of 2017. In the third quarter of its 2016 fiscal year, which ended December 31, 2015, sales rose 8.4%, to $91.8 million from $84.6 million a year earlier. Earnings jumped 24.4%, to $0.51 a share from $0.41. Without unusual items—mainly gains on foreign exchange hedging contracts—earnings rose 20.1%. The third quarter of its fiscal year is usually the best performing because it includes greater consumer spending during the holiday season. The stock trades at a reasonable 17.5 times the $1.60 a share that Peller should earn for all of fiscal 2016. As well, the company’s real estate, mainly in Ontario and British Columbia, is an overlooked asset. The $0.45 dividend yields 1.6%. The class A non-voting shares are more liquid than the closely held class B voting shares. Andrew Peller class A stock is a buy.

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