KATHMANDU HOLDINGS LIMITED (ASX: KMD)

Healthy Financial Performance expected in first half of 2018: In the recent trading update, KMD highlighted that its Group Net Profit After Tax will at least be $12.0 m for the half year ending on 31 January 2018, whereas it was $10.0 m for the same period in the prior year. Its total sales for 1H FY 2018 is expected to be around $204 m whereas it was $196.3 m for the same comparative period. Group’s same store sales for 25 weeks that is ending on 21 January 2018 was down 0.8% at constant exchange rates, and same store sales grew by 1.9% in Australia while in New Zealand it declined by 6.4%. The group lapsed about 9,100 of its performance rights which were issued on 7 December 2016. KMD’s performance in financial year 2017 was successful on many fronts with the total dividend pay-out for the full year increasing to a record of 13 cents per share, which is an increase of 18% over the prior year. There are new Australian warehouses which are in pipeline and provide a significant step up in capacity for both online sales and physical stores. The strength of KMD’s brand and its products will underpin the future success of the company. It has also launched a global website which is responsive and is trying to become an online platform so that one can transact online and at the same time, one can get a lot of information about its products.Given the on-going momentum, we put a “Buy” recommendation on the stock at the current price of $2.22
 

Supplementary Update (Source: Company Reports)
 

WATTLE HEALTH AUSTRALIA LIMITED (ASX: WHA)

Released positive quarterly activities report: Up 4.7% on January 24, 2018, WHA released its quarterly activities and cash flow statement for the second quarter for FY 18. Its cash receipts for Q2 were $540,027.94, which represented a 58% of its total sales for FY 17. The Company expects sales to continue to grow in 2018 due to an extended product portfolio and by increased distribution both domestically and internationally. At the end of the quarter, WHA had a strong cash balance of more than $9.6 m with no debt and inventory at a cost of circa $1.2 million. Starting February 2018, WHA will distribute its infant formula range through API, which is one of the largest Australian pharmacy outlet. Thus, WHA’s infant formula range will be stocked nationally throughout the Australian pharmacy retail market for the first time. WHA also expects that all the negotiations with ODFA will be finalised in 2018 and it will result in the company being the only fully Australian organic infant formula and nutritional dairy brand on the market. It also successfully lodged its application for WHA’s conventional cow infant formula range with China Food and Drug Administration (CFDA) but is yet to receive any notifications from the relevant authorities for any issues or for any foreseeable delays. WHA expects to receive a formal accreditation soon. Looking at the price scenario, we give an “Expensive” recommendation for the stock at the current price of $1.975
 

Share Price Performance (Source: Company Reports)

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