Baby Bunting Group Ltd
Downgraded the earnings for 2018: Baby Bunting Group Ltd.’s (ASX: BBN) stock fell 1.5% on May 08, 2018 after the company downgraded the earnings for 2018, this has followed few earlier downgrades. Two competitors, Baby Bounce and Baby Savings, with each recently entering into the external administration, have weighed over BBN. They are specialty baby goods retailers. Due to the distressed trading of competitors and the liquidation of stock, BBN’s sales and gross margin performance are adversely affected. In the third quarter, the company had posted comparable store sales growth of 4.7%, but now in the first 6 weeks of the fourth quarter, BBN sees the comparable store sales growth of negative 2.5%, driven by a higher level of market discounting and reduced transactional volumes as competitors liquidate stock. Additionally, now the company is expecting EBITDA to be in the range of $18-20 million, excluding employee equity incentives. Earlier BBN had expected EBITDA to be around $23 million for the full year. Overall, year to date total sales have grown 9.6% with transactional growth of 13.1%. The comparable store sales are flat year-on-year, with comparable store transaction growth of 2.7% year to date. As a result, BBN stock has fallen 13.38% in three months as on May 07, 2018 and trades with a P/E of 16.39x. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $ 1.340.
Bellamy's Australia Ltd
Upgraded revenue growth & EBITDA margin forecast for FY18: Bellamy’s Australia Ltd.’s (ASX: BAL) stock that rose 36.36% in three months as on May 07, 2018, was down 1.5% on May 08, 2018. The company had upgraded FY18 revenue growth to 30-35% (from 15-20%) and FY18 EBITDA margin to 20-23% (from 17-20%), excluding Camperdown. The company in 1H 2018, had improved the cash position to net $85.0m and $59.1m in operating cash flow. BAL for 1H FY18 was expecting revenue to be higher than 2H FY18 revenue due to the seasonality impact of Chinese online platform events, higher winter consumption in China and Chinese New Year. Further, all ‘Chinese label’ sales of $18m were earmarked for 1H18 (2H18 $nil) due to previously announced delays in Bellamy’s CFDA registration. Moreover, BAL had submitted the CFDA application and deferred the major facility upgrade at Camperdown to allow for this submission and initial production. Camperdown revenue was impacted in 1H 2018 by suspension and CFDA submission and is expected to perform better in 2H18. Meanwhile, BAL stock is trading at a very high P/E post a rise of 243% in last one year, and many positives are already factored in the stock price. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $ 19.200.
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Net Cash Position (Source: Company Reports)
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