Sharebroker Forsyth Barr has downgraded its view on Moa Group, saying the company is an "unappetising investment case" and is expected to burn through its remaining cash reserves over the next 12 months, which may lead to a capital raising.

The craft beer brewer yesterday reported a net loss of $5.8 million for the 12 months to March 31, up from a $1.9 million loss a year earlier but within the guidance of $5 million to $6 million provided in November.

Moa forecast a loss of $2.5 million for the period in its 2012 listing prospectus, but was forced to scrap many of the projections published in the document following a drop in New Zealand sales - which the company blamed on its former distributor, Treasury Wine Estates - and its subsequent move to a new distribution model.

In a research note published this morning, Forsyth Barr analysts James Bascand and Andy Bowley downgraded their recommendation on Moa stock from "neutral" to "underperform".


Moa Group, which raised $16 million in its 2012 sharemarket listing, said it had cash reserves at March 31 of $4.1 million, down from $11.5 million a year earlier.

"We estimate Moa will move to a net debt position in FY15E [the company's current financial year], raising the possibility of a capital raise," the analysts said. "Capital was initially raised to facilitate growth of the company's brewing facilities, however a failed NZ and Australian distribution model, coupled with a higher cost US model than expected have contributed to larger negative cash flows than initially expected."

Bascand and Rowley pointed out that Moa had secured manufacturing capacity through a contract brewing agreement with Nelson's McCashin's Brewery, which was announced this week..

"However, we continue to struggle with the investment case in light of slow growth in key offshore markets and a trend towards lower margin products."

Moa had been focusing on lower value products in order to achieve its revised growth targets, which had put pressure on margins, the analysts said.

In a note in its financial statements released yesterday, Moa said its major shareholders, the Business Bakery and Pioneer Capital, had provided the company with a letter of commitment, subject to normal commercial terms, to provide financial support to the brewer over the next 12 months.

See the Moa financial statements issued this week here:

"The directors believe that this financial support is sufficient to allow the group to continue to operate and meets its obligations for at least the next year," the company said.


Moa chief executive Geoff Ross told the Business Herald yesterday that it was too early to comment on whether Moa would have to carry out a capital raising.

"That's not on the consideration set at the moment."

Ross said Moa had turned a corner following the slump in revenue last year and sales were gaining momentum as a result of the new distribution model, which has moved responsibility for sales to internal Moa staff while warehousing and logistics are now provided by wholesaler Tasman Allied Liquor.

Moa shares, which fell by more than 11 per cent following yesterday's result, were up 7 per cent in early trading today at 59c.