Why Gage Roads Brewing Co Limited skyrocketed 17% higher today


It has been another great day to be a shareholder of Gage Roads Brewing Co Limited (ASX: GRB). Its share price is once again outperforming the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and has been up as high as 17% today.

Gage Roads Brewing Co is a small company that brews, packages, markets and sells craft beer, cider, and other beverages. It is looking to profit from the growing global craft beer trend, and I believe that although it is just a small player it is positioned well to do so with its quality offerings.

In fact, just last week its Little Dove draught won the Champion Australian Beer and Best New World Style Pale Ale at the Australian International Beer Awards in Melbourne.

The shares have been on a tear in May climbing over 30% during the month. Much of these gains can be credited to the recent news that the company had its contract with Pinnacle Liquor Group, a subsidiary of Woolworths Limited (ASX: WOW), renewed for a further three years.

This contract is vitally important for Gage Roads as Woolworths is the company’s largest customer by some distance. But as it is also the company’s largest shareholder with a 24% stake, I don’t personally believe it was ever in doubt.

The good relationship between the two companies has no doubt fuelled hopes that Woolworths will eventually switch its Pinnacle Drinks brewing to Gage Roads. This could prove to be a huge boost to its earnings growth and send the share price much higher.

With a a market cap of just under $28 million it is definitely a higher risk investment than your usual growth shares such as SEEK Limited (ASX: SEK). But with the next three years looking reasonably secure thanks to the contract renewal, I believe it is well worth adding to your watchlist today.

Gage Roads is undoubtedly an exciting ASX share, but it's not the only one. I believe these three shares could offer strong share price gains as well as a great dividend also.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.