Stocks’ Details

Baby Bunting Group Limited

Decent FY19 outlook:Baby Bunting Group Limited (ASX: BBN) is an Australia based nursery retailer and one-stop-baby shop providing all kinds of baby products. As per its FY19 guidance, the company expects comparable sales growth to be mid to high single digits with an EBITDA of $25.0-$27.0 million. It is expected that the gross margin will exceed 34% level in FY19. It also expects the total sales from private label and exclusive products to exceed 25% in FY19. BBN has already opened 3 stores in FY19 and plans to open 3 new stores in this financial year.


% of total sales for private label and exclusive products (Source: Company Reports)

During FY18,the company reported lower than industry margins. It reported EBITDA and Net margin of 5.8% and 2.9% respectively as compared to the industry median of 11.0% and 6.9% respectively. It reported a favourable debt to equity ratio of 0.11x (industry median of 0.13x) along with a current ratio of 2.06x in FY18.The asset turnover ratio of 2.17x was also above the industry median of 1.14x showing thatthe company is utilizing its assets in a better way than its peers to generate revenue.

During the past six months, the stock has generated a positive yield of 28.53%. The Relative Strength Index along with the Bollinger band is visible in a neutral position. With better earnings guidance for FY19, better utilization of assets to generate revenue, and better debt and liquidity profile of the company, we give a“Speculative buy” recommendation on the stock at the current market price of $2.140 (up by 1.422% on February 01, 2019).

 

Bubs Australia Limited

2Q FY19 updates:Bubs Australia Limited (ASX: BUB) is an Australia-based company providing a range of organic pouch baby food and goat milk formula. The company has recently announced its quarterly update for December 2018 with a robust growth of 499% over pcp in gross revenue attributable to sales in China which were up by 2,281%. It also reported an improvement of 37% in the gross margin as compared to FY18 and a cash balance of $26.715 million as on 31 December 2018.


 
Cash flow summary (Source: Company Reports)

Over the past five years, the margins of the company have been fluctuating and are negative. It reported a favourable debt to equity ratio of 0.03x (industry median of 0.27x) along with a current ratio of 4.36x (industry median of 1.38x) in FY18.

During the past six months, the stock has generated a negative yield of 30.5% and trading close to the lower level. With the robust sales growth in the recent quarter and better debt and liquidity profile of the company, we maintain our“Speculative buy” recommendation on the stock at the current market price of $0.490 (a dip of 7.547% on February 01, 2019).

Wattle Health Australia Limited

Australian organic nutritional dairy range to be launched in April 2019: Wattle Health Australia Limited (ASX: WHA) is a dairy farming company based in Victoria, Australia. It provides nutritional dairy products and natural baby food for infants. The company is launching first truly Australian organic nutritional dairy range in April 2019 and it is in the process of expanding its distributional channel in China. It reported a cash balance of $42.148 million as on December 31, 2018.

 

Cash flow summary (Source: Company Reports)

Over the past four years, the margins of the company have improved but are still negative. It reported a favourable debt to equity ratio of 0.02x (industry median of 0.27x), current ratio of 26.17x, and cash conversion cycle of 27.9 days (industry median of 60 days) in FY18.

During the last month, the stock has generated a positive yield of 4.95% and is trading near to its 52-week low price. The Relative Strength Index along with the Bollinger band are visible in an oversold range. With the launch of first truly Australian organic nutritional dairy range in April 2019, improving margins, better debt and liquidity profile of the company along with faster cash conversion cycle, and a bullish indication through charts, we have a“Speculative buy” recommendation on the stock at the current market price of $0.955 (down by 1.546% on 1 February 2019).


Stock Price Comparative Chart (Source: Thomson Reuters)  

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