Gage Roads Brewing Co Ltd (GRB)

Western Force Partnership

Key Points

  • 2-Year partnership agreement announced: GRB has been appointed as the Official Beer and Cider Partner of the Andrew Forrest backed Western Force. The sponsorship will prominently feature GRB’s two WA Alby lagers which aligns well with the Western Force, Andrew Forrest and their strong ties to Western Australia.

  • World Series Rugby competition started this month: Andrew Forrest’s newly created competition kicked off to a sell-out crowd of over 19,000 people at Perth’s NIB stadium. The tournament features against teams from around the Asia Pacific with seven games held in WA and will conclude in August. The tournament will be televised across Australia on Channel 7 and Fox Sports, providing good national exposure for GRB’s brand. Next year the tournament is expected to evolve into a six-team Indo-Pacific Rugby Championship.

  • Good fit with GRB’s “brand-in-hand” marketing strategy: The partnership agreement will also allow GRB access to supply its beer and cider to the 32 community Rugby WA clubs based in Western Australia. This will provide a significant opportunity for GRB to increase its consumer awareness of its brands in line with its “brand-in-hand” strategy, where consumers can to try their products while enjoying events.

  • Ongoing marketing is key for brand awareness: In September 2017, GRB announced that it had won a tender allowing the exclusive pouring rights at the Optus (Perth) Stadium which will be important in driving brand recognition, essentially providing free marketing of its products. In January, GRB signed a two-year partnership with Rugby Australia to be one of the official beer partners at the HSBC Sydney 7s three-day annual event. GRB is continuing to look for marketing opportunities across Australia where its sponsorship fees are expected to be recouped through sales at venues and should have only a minor net financial impact.

Valuation and Recommendation

We value GRB at $0.12 per share using DCF methodology and maintain a Speculative Buy recommendation. We believe that the Optus (Perth) Stadium tender win along with other key partnerships will provide the marketing platforms to assist GRB with its five-year strategy of increasing volumes of its higher margin, craft-brewed products while stepping down production of its lower margin contract brewed beer.

The shift in production profile should see a lift in margins and translate into strong earnings growth over the next few years. We believe that GRB is well placed to take advantage of the growing craft beer market which is currently experiencing strong tailwinds.

Disclosure Disclaimer


This Research Report expresses the personal view of the Author. DJ Carmichael Pty Limited, including authors of this report, its directors and employees advise that at the time of publication they hold or may become entitled to securities of the issued capital of the company and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions in stocks mentioned in this report.

The analyst does not hold securities in Gage Roads Brewing Co. Limited.

DJ Carmichael Pty Ltd is a wholly owned subsidiary of DJ Carmichael Group Pty Ltd ACN 114 921 247. In accordance with Section 949A of the Corporations Act 2001 DJ Carmichael Pty Limited advises this document contains general financial advice only. In preparing this document DJ Carmichael Pty Limited did not take into account the investment objectives, financial situation and particular needs (‘financial circumstances’) of any particular person. Accordingly, before acting on any advice contained in this document, you should assess whether the advice is appropriate in light of your own financial circumstances or contact your DJ Carmichael Pty Limited adviser. DJ Carmichael Pty Limited, its Directors employees and advisers may earn brokerage or commission from any transactions undertaken on your behalf as a result of acting upon this information. DJ Carmichael Pty Limited believes that the advice herein is accurate. However, no warranty of accuracy or reliability is given in relation to any advice or information contained in this publication and no responsibility for any loss or damage whatsoever arising in any way for any representation, act or omission, whether express or implied (including responsibility to any persons by reason of negligence), is accepted by DJ Carmichael Pty Limited or any officer, agent or employee of DJ Carmichael Pty Limited. This message is intended only for the use of the individual or entity to which it is addressed and may contain information that is privileged, confidential and exempt from disclosure under applicable law. If you are not the intended recipient or employee or agent responsible for delivering the message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication and its attachments is strictly prohibited.

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Recommendation Definitions

SPECULATIVE BUY – Potential 10% or more outperformance, high risk
BUY – Potential 10% or more outperformance
HOLD – Potential 10% underperformance to 10% over performance
SELL – Potential 10% or more underperformance
Period: During the forthcoming 12 months, at any time during that period and not necessarily just at the end of those 12 months.

Stocks included in this report have their expected performance measured relative to the ASX All Ordinaries Index. DJ Carmichael Pty Limited’s recommendation is made on the basis of absolute performance. Recommendations are adjusted accordingly as and when the index changes.

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Michael Ron

Research Analyst

Michael has been trading equities since 2003 and since joining DJ Carmichael in 2004 has worked in numerous roles in operations, trading, compliance and research. Michael’s expertise is in trading and equity strategy using a combination of both technical and fundamental analysis.

Michael holds a Graduate Diploma in Applied Finance, Diploma of Financial Markets, Diploma of Financial Planning, Advanced Diploma of Business Administration and is currently studying towards a Master of Applied Finance.