The A2 Milk Company Ltd

FY18 Trading Update and Outlook for FY19:The A2 Milk Company Ltd.’s (ASX: A2M) stock has fallen 21.46% in three months as on August 7, 2018. The company has informed about the change of the leadership of the UK business as the current Chief Executive, UK and Europe, Scott Wotherspoon will step down from his role. On the other hand, for 2018, A2M’s group revenue grew approximately 68% to ~$922 million. A2M expects 2018 EBITDA to Sales ratio for FY18 to be approximately 30%. Moreover, for FY 19, the company expects further growth in revenue specifically with respect to nutritional products. The marketing expenditure in 2019 will be higher than FY 18 given continuing investment in Australia, re-phasing of 2H FY18 activities in China and elevated investment to support the US market expansion. The overhead costs in 2019 is expected to be higher than FY2018, primarily due to an increasing headcount for China and the Corporate office to support the increasing scale of the Company. There will be one-off costs associated with the transition to a new CEO as recently advised in 2019. Meanwhile, A2M stock is trading at a very high P/E. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $ 9.370, down 2.3% on August 08, 2018.
 

Bellamy's Australia Ltd

New arrangements to increase Australian organic milk supply & FY 18 Outlook: Bellamy's Australia Ltd.’s (ASX: BAL) stock has fallen 45.54% in three months as on August 07, 2018. BAL in order to increase the volume of Australian organic milk has made three new strategic arrangements. The company has signed an amended agreement with Fonterra Australia Pty Limited to start development and conversion of a Tasmanian organic milk pool in order to support infant formula production at Fonterra’s Darnum site. BAL has also signed a new multi-year agreement to get access to Australian sourced organic fresh milk that have an affiliate of Australian Consolidated Milk (ACM). Further, the company has signed an amended agreement with Tatura Milk Industries Limited (TMI) to incorporate fresh organic milk into production by leveraging TMI’s organic dairy supply base. Additionally, BAL has raised the guidance for FY 18. The company expects FY 18 revenue growth to be between 30-35% (from 15-20%) and FY18 EBITDA margin is expected to be between 20-23% (from 17-20%). In addition, BAL expects 1H18 revenue to be higher than 2H18 revenue on the back of the seasonality impact of Chinese online platform events, higher winter consumption in China and Chinese New Year. In 1H 2018, all ‘Chinese label’ sales of $18m occurred in 1H18 (2H18 $nil) due to previously announced delays related with Bellamy’s CFDA registration. Meanwhile, BAL stock is trading at a very high P/E. Therefore, based on the latest weakness in the stock with uncertainty prevailing over regulatory approvals, we give an “Expensive” recommendation on the stock at the current price of $ 10.310, down 2.92% on August 08, 2018.
 

1H 18 Financial Performance (Source: Company Reports)
 

Wattle Health Australia Ltd

Strong topline growth in FY 18: Wattle Health Australia Ltd.’s (ASX: WHA) stock has fallen 14.29% in three months as on August 7, 2018. WHA for FY 18 has reported 71% growth in gross sales. The company during the fourth quarter 2018, has signed a minimum supply term agreement with International Supplies and Distribution Company Pty Ltd and this is expected to get revenue of more than $100 million over 42 months. The company has also signed a fully funded transformational joint venture with Organic Dairy Farmers of Australia. Moreover, WHA has secured a distribution agreement with Metcash Trading for WHA’s Australian Natural Baby Food range. The company has appointed leading e-commerce provider, Quality Brands International Direct, to provide the company access to major export markets. WHA has also signed a minimum supply agreement with Chinese State-Owned Enterprise, Shandong Weihai Port International Trade Co. Ltd., amounting to revenue of $34 million over 36 months. Additionally, at the end of the fourth quarter, cash at bank is around $50 million with no debt. Based on the foregoing, we give a “Speculative Buy” recommendation on the stock at the current price of $ 1.410.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.