That certain tingling sensation in the share portfolio

D.The plan was quite simple at the beginning: A (partial) lockdown or lockdown “light” should be imposed in order to bring the corona infection numbers down so far that at least a halfway normal Christmas and New Year’s Eve would be possible. As we now know, nothing came of this project. Instead, a Germany-wide, significantly tightened lockdown has been in effect since December 16. At Christmas, the regulations on meeting restrictions are relaxed a little, while New Year’s Eve falls into the water, so to speak. Not good news for companies whose main business revolves around the holidays. Schloss Wachenheim AG is one of them.

Wachenheim Castle is one of the most important producers of sparkling wine and semi-sparkling wine in the whole world. Other product ranges of the group of companies are wine, dealcoholized sparklings and wines, vermouth, cider, spirits and other beverages containing wine. The company can only be described as a corona profiteer to a limited extent – if an investor is under the assumption that people are content with more alcohol out of pandemic frustration. That’s not the case.

Solid business figures despite Corona

Schloss Wachenheim AG recorded solid sales growth in the 2019/20 financial year (end of June), even if there were major differences between the individual regions. The home business, for example, compensated for the unsatisfactory business in France. In the end, the group of companies achieved sales totaling 338.2 million euros and thus at the level of the previous year (337.2 million euros). At 13.0 million euros, the consolidated annual surplus was around 19 percent below the level of the previous financial year (16.0 million euros).

The current financial year is unlikely to be any less exciting than the last. In the first quarter, which ended at the end of September, a positive development in business in Germany was able to compensate for corona-related weaknesses in France and other important markets. While sales of around 51 million bottles were roughly on par with the previous year, sales even climbed slightly by 2.6 percent to EUR 82.1 million. On the earnings side, Schloss Wachenheim benefited from the fact that advertising expenditure fell year-on-year.

In the second quarter (end of December), however, travel restrictions, event bans, contact restrictions, restrictions on offers from retailers and services through to curfews again had a negative impact. This was particularly evident with customers in the hotel and catering industry. These are primarily affected by the current closure orders, so that the boardroom of Schloss Wachenheim AG expects noticeable declines in this area in the second quarter of 2020/21. But the corona crisis is also expected to have dampening effects for the rest of the current financial year.

Nevertheless, Schloss Wachenheim, and thus also its shareholders, can hope for a few positive corona effects: On the one hand, it is very easy to order sparkling wine and wine online. In addition, the corona vaccination should also start soon in this country. This ensures the prospect of overcoming COVID-19 and a return to normality, in which festivals such as Easter 2021 can be celebrated again in the future.

Exciting chart technique

The majority of analysts are currently in a positive mood for the sparkling wine share. Price targets of 19 euros and higher are given. The share itself can currently be classified as exciting from the point of view of chart technology: After the share had reached a 20-year high at 22.88 euros in November 2017, it plummeted to prices of 10.70 euros by March of this year. At its peak, the course lost more than 50 percent. This was followed by a catch-up movement to the EUR 16 mark by autumn and then another setback to at times EUR 14.10 by mid-December. The Schloss Wachenheim share is currently trading around the 200-day line and is about to make a decision:


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To the detailed view

If the 200-day line is regained, prices above 16 euros are possible again. If, on the other hand, the downward trend of the past few weeks continues, the next correction targets will be around the 12 euro mark and the March low of 10.70 could come into focus again.

Favorable valuation and continuous dividend

Ultimately, however, the chart technique is only one of many factors for a long-term investor that speaks for a position in the portfolio. The share is currently valued at a price-earnings ratio of just over 13 for 2021. At first glance, this appears to be cheap – also in view of the fact that, in the further course of the financial year, Schloss Wachenheim is likely to gain operational profitability again, according to various analysis houses.

The long-established company is also a continuous dividend payer. A dividend of 0.40 euros per share is also planned for the weaker past financial year. This corresponds to a decrease of 20 percent compared to the previous year – but at least there should be a distribution. This is anything but natural for a business year influenced by corona. The Schloss Wachenheim share is therefore something for small caps fans who want to calmly have a long-term share position in their portfolio that has had an average annual price development of 5.5 percent over the past ten years.


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