Premium brands cut Peller’s risk

Article Excerpt

ANDREW PELLER LTD. (Toronto symbols ADW.A $13 and ADW.B $13; Income Portfolio, Consumer sector; Shares outstanding: 44.2 million; Market cap: $574.6 million; Price-to-sales ratio: 1.5; Dividend yield: 1.6%; www.andrewpeller.com) began operating in 1961, and is now Canada’s second-largest producer of wines, after Arterra Wines (formerly the Canadian division of Constellation Brands.) Peller’s wineries in Ontario, British Columbia, and Nova Scotia account of 14% of Canada’s wine market. The company’s main brands include Peller Estates, Thirty Bench, Grey Monk Estates and Wayne Gretzky Estates. In October 2017, Peller acquired three wineries in B.C.: Black Hills Estate, Gray Monk Estate, and Tinhorn Creek. It paid $94.8 million. That price consists of $77.6 million in cash, plus $17.2 million worth of class A common shares. The new wineries will add between $30 million and $35 million to annual sales over the next five years. As well, they expand the company’s portfolio of premium brands, which currently generate higher profits per litre than regular wines. Meantime, in the fiscal 2019 third quarter,…