20-Oct-2021:  Henry Jennings from the "Marcus Today" Newsletter wrote up Lark today - for MT subscribers, you can find it here.  

For those that are not subscribers to Marcus Padley's newsletter, they do offer free trial subscriptions if you want to check it out:

https://marcustoday.com.au/14-day-free-trial/

or  https://marcustoday.com.au/member/webpages/1002_trial-sign-up-1-month.php

Disclosure:  I do not hold LRK.  Wish I did!

The following is the first bit of HJ's write-up, however there is more.  He talks about their management, and what they've done previously, their TAM, the acquisition of Pontville including the cap raising, some history, awards they've won, and why he likes the company, although his closing comments suggest he's not yet a shareholder.

"I would recommend accumulating on any weakness, but it may pay to just have a couple of fingers of scotch to kick off the night."

"Finally, if they give shareholder discounts, I am on board."

Moelis Australia: Initiation of coverage: Lark Distilling Co. Ltd (LRK-AU) – BUY – Price: $2.20; Target Price: $2.65

Analyst: Sean Kiriwan, +61 8 6555 8602, sean.kiriwan@moelisaustralia.com

Lark Distilling Co. Ltd (LRK) is a Tasmanian-based producer of craft whisky and gin. LRK’s strong growth outlook (~88% FY20-22e sales CAGR) is expected to be driven by favourable spirit consumption trends, increasing e-commerce penetration and production volume uplift. Initiate coverage with BUY & $2.65 TP

Overview

• LRK is a Tasmanian-based producer of craft whisky and gin. It operates 2 distilleries (Bothwell & Cambridge) and 2 retail premises (Lark Bar Hobart CBD and Brooke St Pier) in Tasmania.
• At 31 Dec 2020, LRK had ~818k litres under maturation, with an est. net sales value (after govt. excise) of ~$114m at maturation. LRK is targeting 1,500,000 litres by FY22 (est. net sales value = $209m).*
• LRK generated $6.4m net revenue in FY20 and a $1.1m EBITDA loss; however, as outlined below, it is on track to double net sales in FY21 which should see it deliver a maiden EBITDA profit in FY21.

Investment summary

• Strong growth outlook underpinned by: 1) favourable spirit consumption trends; 2) rising e-commerce penetration; and 3) investment in inventory + production volume uplift
  • Premiumisation trend expected to continue to drive consumption of spirits
  • Increasing online penetration: 1H21a e-commerce sales ~5x vs pcp
  • LRK targeting 1.5m litres whisky under maturation by FY22 = est. net sales value of $209m1
  • Flexible sourcing model provides low capital intensity expansion optionality
• On track to achieve FY21 net revenue guidance of $12m (1H21a: $5.8m) and deliver maiden EBITDA profit in FY21
  • Moelis FY21e net sales $12.2m (+90% vs pcp); FY22e net sales $22.7m (+87% vs pcp)
  • Moelis FY21e EBITDA $1.3m; FY22e EBITDA $5.1m
• Continued delivery of earnings growth and inventory investment expected to drive valuation re-rate
  • While LRK’s share price is up +55% in last 3 months, LRK still trades on 5.8x Moelis FY22e sales, a -17% discount to its peer average of 7.0x which we view as unwarranted given its strong growth outlook: +88% FY20-22e sales CAGR vs peer average of +20% (+1.0% excluding TSI)
  • Our $2.65/share TP implies 7.0x our FY22e sales (in line with peer average); 31.2x FY22e EBITDA (peer avg: 24.5x) and 17.9x FY23e EBITDA (peer avg: 27.9x; 23.9x excluding TSI)

* Note: Maturation market value based on an estimated future net sales value which is equal to LRK’s historical net sales value achieved.

Click on the link at the top for the full report (which appears to be undated) but was released on Thursday (01-Apr-2021) by the ASX as part of their Equity Research Scheme - which you can sign up for (for free) here.