Stocks’ Details

Bubs Australia Limited

Foraying into New Market Segment: Bubs Australia Limited (ASX: BUB) had lately declared that it has entered into a new market segment;post-infant nutrition,with the launch of an innovative range of eight toddler snacks certified organic by Australian Certified Organic (ACO). The toddler snacks enjoy healthy margins and thus constitute an important component of the company’s business platform.
 
As per the interim report for the period ended 31 December 2018, the gross revenue came in at $21.03 Mn, up by 465% on prior corresponding period. This rise was driven by strong domestic presence and activation of the daigou distribution channel. Also, the company achieved a gross margin of 19% for 1H19 compared to 12% for the immediately preceding half year. This growth was driven by the optimisation of product and channel mix, engaging new suppliers as well as improvements in allocating the milk pool.
 
What to Expect From BUB: Going forth, the company’s aggressive growth strategy will continue, that will lead to increased penetration into China via strategic partnerships.Also, the company will be exploring entry to new emerging international markets. In the coming business cycles, the growth drivers shall be innovation, increased domestic market penetration, brand awareness & impact and the enhanced Asian focus.
 

BUB’s key Financial Highlights (Source: Company Reports)
 
Meanwhile, the share price has risen by 13.08% in the past six months and up by 56.38% in the previous three months which highlights that the stock is moving an upward direction. Therefore, considering the decent outlook and current trading level, we reiterate our “Speculative Buy” recommendation on the stock at the current market price of $0.770 per share (up 4.762% on March 18, 2019).
 

Wattle Health Australia Limited

Inclusion in S&P/ASX All Ordinaries Index:Wattle Health Australia Limited (ASX: WHA) has recently announced that, as a release of the quarterly rebalancing of the S&P/ASX indices, it’s stock, as on the opening of trading on March 18^th, has been included in the S&P/ASX All Ordinaries Index.
 
Revenue for the half-year period ended 31 December 2018 was $363,000 reflecting a reduction of 43.2% on pcp. This fall was due to the transition to Australian organic nutritional dairy products. The company has been able to cut down on its losses for the period as the losses for the period reduced by 66.8% to come in at circa $4.3 million compared to HY18 of $13.08 million. This was mainly on account of the reduction in the expense recorded for the share-based payments.


1H19 Financial Highlights (Source: Company Reports)
 
What to Expect From WHA: As regards the outlook, the management feels that as the company has, during HY19, pre-purchased product from both B&P and CBDG of circa $8.3 million, there are expectations that the company will derive benefits and cost savings moving forward.
 
Also, the company is virtually debt free with a debt-equity ratio of 0.02x and also the working capital of the company is up 350% to circa $45 million for HY19 as compared to HY18. However, the stock is quite volatile as in the previous three months, the return was -6.52% and, in the previous 6 months, the return was -20.74%. By looking at product innovation, strategic agreement, and current trading level, we give a“Speculative Buy” recommendation on the stock at the current market price of A$0.825 per share (down 4.07% on 18 March 2019).
 

Bellamy's Australia Limited

Substantial fall in Revenue & EBITDA: Bellamy's Australia Limited (ASX: BAL) recently stated that JP Morgan Chase & Co. and its affiliates have raised their voting power in the company from the erstwhile 5.01% to the current 6.71%. The company reported that, for the HY ended 31 December 2018, it has posted a revenue result of $129.6 million implying a fall of 25.9% on pcp and normalised EBITDA result of $26.0m reflecting a fall of 25.5% on PCP basis. These results were materially below the prior year and have been impacted by a number of factors which were earlier indicated to the market. This included a prolonged delay in SAMR registration impacting Chinese-label sales, the decision to run-down trade inventory prior to the Australia-label rebrand, and an observed slowdown in overall category performance.


1H FY19 Financial Highlights (Source: Company Reports)
 
What to Expect From BAL:  As regards the outlook, the company's FY19 full-year guidance has been revised to a group revenue of $275-300m and normalized EBITDA margin of 18-22%.The business retains high confidence in the rebrand, its new product pipeline, continued food growth and successful SAMR registration. Although the management remains mindful of the inherent risks of concerned industry and markets, it strongly believes that the medium-term outlook remains compelling, supported by category fundamentals, its differentiated position and an aggressive 3-year growth strategy. Meanwhile, the stock price has gained by 42.49% in the past three months and trading at the higher PE multiple of 44.98x as compared to the concerned industry.

The company’s revenues have witnessed a significant YoY fall (as mentioned above) which might impact the investors’ decision. Hence, we put our wait and watch stance on the stock at the current market price of A$11.040 per share (down 1.429% on March 18, 2019).


Stock Price Comparative Chart (Source: Thomson Reuters)    
  

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