Gall & Eke Corporate Partners

Pointing out that soft commodities have become the new boom market, Gall & Eke Corporate Partners believes that investors may wish to revisit English Wines Group (EWG), the producer and marketer of a range of still and sparkling wines made in the UK’s south-east corner.

‘A clear advantage for EWG may come from further soft commodity inflation as grapes are increasingly being used in biofuel production, which reduces the oversupply of wine,’ Gall & Eke writes, adding, ‘EWG’s agricultural land could potentially see further valuation uplifts with any further soft-commodity boom’.

The grape escape
The PLUS-quoted group is also well placed to benefit from a number of other global trends. Poor weather hit worldwide grape harvests in 2007, reducing global grape volume by 20 to 50 per cent in some areas, yet ‘EWG escaped relatively unscathed’.

In addition, as the euro strengthens against the pound, ‘Prices of our favourite Chablis look set to increase, making EWG’s products relatively more attractive’.

EWG, which Gall & Eke notes has received recognition for the quality of its wines, currently has a market capitalisation of £8.8 million, and its June interims revealed sales and gross profits increased by 11 per cent and 41 per cent respectively. The broker feels that ‘with an EV/EBITDA (enterprise value to earnings before interest, taxation, depreciation and amortisation ratio) of 9.6, compared with Cosentino Signature Wines’ multiple of ten times, EWG could be a great play on soft commodity inflation and the devaluation of the pound’.