Baby Bunting Group Ltd

BBN Details
 
Earnings estimates lowered for FY18: Baby Bunting Group Ltd.’s (ASX: BBN) stock fell 5.7% on November 20, 2017 after the company gave the trading update in which BBN has lowered the forecast for FY 18. BBN now expects its FY18 EBITDA (excluding employee equity incentive expenses) to be approximately the pro forma EBITDA achieved for FY2017 of $23 million. The company was previously expecting the FY18 EBITDA to be in the range of $25.3 million to $27.0 million. This is due to the fact that, the market pricing has not yet stabilized due to industry consolidation and some aggressive discounting continues. Further, there are some supply issues with a leading car seat supplier, that were expected to resolve from mid-October, which have only now started to resolve. Therefore, the sales got affected by around $2 million during this time. Moreover, FY2018 gross margin % is expected to be around 33.3% compared to last year figure of 34.3% and the comparable store sales growth for FY2018 is expected to be around 4%. Meanwhile, BBN stock has fallen 13.83% in three months as on November 17, 2017. Given the shortcomings, we put an “Expensive” recommendation on the stock at the current price of $1.41



BBN Daily Chart (Source: Thomson Reuters)
 

a2 Milk Company Ltd

A2M Details
 
The Australian Federal Court action continues: a2 Milk Company Ltd.’s (ASX: A2M) stock has risen 57.11% in last three months as on November 17, 2017 as the company had successfully launched a2 Platinum Stage 4 in ANZ region and also reported for growth with regards to its a2 Milk™fresh milk.

 

Momentum in US (Source: Company Reports)
 
Meanwhile, A2M has received China Food and Drug Administration (CFDA) registration through Synlait, which has allowed exports of the company’s China label infant formula to China to continue. The group is also evaluating new product opportunities in the US. On the other hand, the Australian Federal Court action continues to progress while A2M is confident of a positive outcome. The scheduled hearing date has been vacated from November 2017 until the New Year and a new date has to be determined. Given the stock run-up with many growth catalysts already accounted for and forward trailing price to earning level of over 59x, we believe that the stock is “Expensive” at the current price of $7.07, ahead of its Annual General Meeting.



A2M Daily Chart (Source: Thomson Reuters)
 

Wattle Health Australia Ltd  

WHA Details
 
Application has been officially accepted by CFDA: Wattle Health Australia Ltd.’s (ASX: WHA) stock has plunged 6.5% on November 20, 2017 while the group announced about its application that was lodged for WHA infant formula range to obtain CFDA approval, being officially accepted and currently under final review. From January 01, 2018, all kinds of infant formula that can be sold in any traditional retail environment in China are required to have accreditation from the CFDA. Thus, the present development can work in favor of the group considering regulatory changes that China will be implementing from 2018. Moreover, WHA has collaborated with Mason Financial Holdings to obtain equity ownership in one of Australia’s leading nutritional dairy facilities, Blend and Pack Pty Ltd. Blend & Pack is one of a limited number of CNCA Accredited facilities, that has been approved for Infant Formula manufacture in Australia. Meanwhile, WHA stock has risen 73.58% in one month as on November 17, 2017; and the recent stock fall may be owing to profit booking post the rally witnessed in last couple of months. Given the volatile environment, we put an “Expensive” recommendation on the stock at the current price of $2.15



WHA Daily Chart (Source: Thomson Reuters)
 

Bellamy's Australia Ltd

BAL Details
 
Upgraded the guidance for FY18: Bellamy’s Australia Ltd.’s (ASX: BAL) stock has risen 37.50% in three months as on November 17, 2017 as the company’s turnaround plan is on track and BAL continues to improve the underlying business. BAL has thus upgraded the forecast guidance for revenue growth to be about 15-20% from earlier stated 5-10% range and EBITDA margin to be 17-20% from the earlier stated 15-20% range for FY18, excluding Camperdown.

 

FY18 guidance upgraded (Source: Company Reports)
 
Moreover, after adjusting for the one-off items, the group’s 2H17 result was noted to exceed guidance and market expectations in terms of both revenue and normalised EBIT. On the other hand, group’s performance also pivots on registration at the Chinese Food and Drug Administration. We give a “Hold” recommendation on the stock at the current price of $11.22



BAL Daily Chart (Source: Thomson Reuters)

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