SOHN Investment Conference: Tribeca’s Jun Bei Liu sees value amid China trade tariffs

Jun Bei Liu sees a pocket of sharemarket opportunity in the threat of China trade tariffs on Australian goods.

Jun Bei Liu is a fund manager at Tribeca funds management who is now deputy CEO of one of its biggest funds. Picture: Ryan Osland/The Australian

Tribeca Investments Partners fund manager Jun Bei Liu has tipped Treasury Wine Estates as her top stock at the Sohn Hearts & Minds Investment Leaders Conference on Friday.

Treasury Wines, which is caught in the middle of the trade tensions with China and is currently facing the prospect of tariffs on its products in the country, is a buying opportunity right now because it is so cheap, Ms Liu said.

“Its valuation is pretty much supported by all those premium wines sitting in its cellar.

“We estimate Treasury has over $4bn of the premium label sitting in the cellar and that represents almost 70 per cent of its market value at the moment,” she said.

“The rest is pretty much in premium farmland out of Napa Valley as well as South Australia.”

Treasury Wines shares closed at $9.18 on Friday and have remained broadly flat for much of this year.

At the current price, investors are not paying for any brand loyalty or future demand for its premium labels, Ms Liu said.

These are labels that Chinese consumers can’t get enough of, she said. The value proposition is very strong at the current price, she added, as she addressed the escalating trade hostilities with China.

“Clearly Australia and China are having a bit of political tension at the moment and many of the Australian exports into China have been impacted with higher tariffs. Wine, being one of the fastest growing exports into China, has been caught in the crossfire and the big question for investors is what will future trade look like between Australia and China.”

Citing the tensions between China and Japan, South Korea and India over recent decades, Ms Liu said trade between the countries had not been affected despite the political uncertainties.

“We can’t dismiss the importance of China as a trade partner for the future. This (tension) will pass).

“Clearly the tariff will come. Our view is this is more than captured in the current share price,” Ms Liu said.

The threat of the tariff was the reason why the shares were not trading closer to $20, she added, as she predicted any tariff would not change the demand for the winemaker’s products in China.

“If a high tariff creates any disruption to the distribution channel, it will recover.

“At the current price you’re predominantly paying for those premium labels of wine sitting in the cellar,” she said.

Treasury Wine Estates chief executive Tim Ford last week revealed that work on the possible demerger of its valuable Penfolds brand has been paused, with the winemaker focusing on trading through the COVID-19 crisis, restructuring its US business and dealing with the investigation into anti-dumping by Chinese authorities.

But at the winemaker’s annual shareholder meeting, Mr Ford provided an upbeat assessment of its trading performance in the new year, including promising signs of recoveries in the US and Australia

Jun Bei Liu says tariffs won’t change demand for Treasury Wine products in China.