BAL Details

Positive Update: Bellamy’s Australia’s stock moved up over 4.6% on October 12, 2017, as the group provided a positive market update while Camperdown acquisition is still expected to impact the finances. BAL has indicated that the early results in FY2018 have been encouraging that made the group upgrade its FY2018 guidance for its core business to a target of 15% to 20% revenue growth, up from the earlier stated growth of 5% to 10%. Further, the group now expects a 17% to 20% EBITDA margin against the 15% to 20% range provided earlier in August. However, the guidance is said to exclude the Camperdown business that has been forecasted to generate an EBITDA loss of $1m to $2m and is subject to contingent liabilities including the class actions and any amortisation of intangible assets arising as part of the Camperdown acquisition. As communicated in August 2017, the company expects its 1H2018 revenue to be higher than 2H2018 revenue considering the impact of seasonality and a delay in CFDA registration resulting in all Chinese label sales occurring in 1H2018. The group continues to put efforts to manage challenges with regards to CFDA registration while progressing towards its turnaround strategy. Lately, the group accepted the infringement notice issued by ASIC and paid the penalty as a way to conclude the matter with regards to allegations that BAL contravened its continuous disclosure obligations in the period from 18 October 2016 to 2 December 2016. We maintain a “Hold” recommendation on the stock at the current price of 10.23

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