Bellamy’s Australia Limited (ASX:BAL)

Waiting for a response regarding its CFDA application - Bellamy's Australia Limited is an Australia-based producer, supplier and marketer of organic baby food and formula. Recently, the Group announced three new strategic arrangements to increase the volume of Australian organic milk that is used in the production of its infant formula products. These arrangements included an amended agreement with Fonterra Australia Pty Limited (Fonterra) to begin development and conversion of a Tasmanian organic milk pool to support infant formula production at Fonterra’s Darnum site, another arrangement included a new multi-year agreement to secure access to Australian sourced organic fresh milk with an affiliate of Australian Consolidated Milk and lastly an amended agreement with Tatura Milk Industries Limited (TMI) to incorporate fresh organic milk into production leveraging TMI’s organic dairy supply base. Norges Bank  ceased to be the substantial holder of the Group since 27 June 2018. The Group is committed and will support the conversion of conventional Australian dairy farms to organic farms and this will further aim to support sustainable farming in Australia, improve farmer economics and promote safe premium Australian made organic products.


Bellamy’s Group Inventory Trend (Source: Company Reports)

These developments will improve outcomes for Australian dairy farmers and will support the Tasmanian dairy industry, and at the same time will take greater control of its supply-chain and cost structure. On the financial front, the group recorded revenue CAGR of 62.9 per cent over the period of 1HFY14-18 at the back of volume and value growth. This growth reflects a better balance between demand and supply, reduced channel conflicts and improved marketing investment incurred during the period. The Board believes that the rising demand for its brand and high-quality, premium organic infant formula in Australia, China and emerging Asia can become an important and value-added platform for Australian farmers. Further, it has been six months that the Group has filed an application but still has not heard fromBeijing regarding its CFDA application. The stock has been rising up since one year and was up by 118.57 per cent and started slipping since three months and was down by 4.90 per cent in last five days as on 29 June 2018 with a further fall of 3.9% on July 02, 2018.The stock looks “Expensive” at the current market price of $14.94 and is trading at a higher level and its better if one can wait and watch the stock from regulatory perspective.
 

The A2 Milk Company Limited (ASX:A2M)

Launch of new premium a2 Milk™ powder with M?nuka honey – The A2 Milk Company Limited recently announced the launch of new premium a2 Milk™ powder blended with authentic M?nuka honey. This was a unique and exciting innovation for the company that led its expansion into a thriving adult nutritional powder market.This new product has been packed by Fonterra New Zealand and was available for sale from June 15, 2018 in Australia, New Zealand and through cross border e-commerce channels in China. Moreover, the Company is a member of the UMF Honey Association who manage the internationally recognised M?nuka honey quality trademark and grading numbers and these numbers represent the level of quality and purity of M?nuka honey contained in products that carry the mark.


Basic EPS Trend (Source: Company Reports)

Recently BlackRock, Inc. ceased to be the substantial holder of the Group since 13 June 2018.  The Company reported a rise of 70 per cent in revenue (NZ$660 million) on the prior corresponding period for the  9 months period ending on 31 March 2018. The Company expects that the Gross margin percentage for the full year will remain broadly and consistent with 1H18. According to the release, the company has reaffirmed the full year 2018 guidance and expects the Group revenue in the range of NZ$900 Mn to NZ$920 Mn, which is lower than what market expected.The stock slipped by 3.40 per cent in last five days (after being up by 42.74 per cent in last six months) as on 29 June 2018. It was down by 1.43 per cent as on 2 July 2018 and was trading at $10.37. The stock can be avoided as of now by looking at the increase in competition in the market while the impact from new product is yet to be seen.
 

NEXTDC Limited (ASX:NXT)

The latest slip - NEXTDC is a technology company that enables business transformation through innovative data centre outsourcing solutions, connectivity services and infrastructure management software. NEXTDC was informed by APDC in the Supreme Court of NSW that one of the key reasons it was seeking valuer access to the Properties is to minimise the risk that APDC will face regulatory action for failing to comply with the Corporations Act. APDC had advised the market about its undisclosed bidder for the Properties at $280 million which had withdrawn its offer. NEXTDC then sought to resolve the access dispute with APDC. NEXTDC offered APDC access to the Properties such that an independent valuer appointed by APDC could value the Properties for the purposes of APDC complying with its regulatory obligations and for any further enquiries that may be raised by ASIC. NEXTDC has successfully completed the institutional placement.


Allocation of Funds (Source: Company Reports)

NEXTDC raised a total of $377.4 million, consisting of the $297 million institutional placement completed on 18 April 2018 and the SPP of $80.4 million. There were few risks related to the placement offer like the proceeds of the equity raising were indicated to be used to fund the acquisition of land and construction of new data centres as well as to meet ongoing customer demand but what if such demand doesn’t exist or that existing customers stop renewing their data centre requirements through NXT. The current ratio moved from 9.14x in June 2017 to 8.84x in December 2017.  In last five years, the stock has been rising up and was up by 192.55 per cent but slipped by 3.45 per cent in last five days as on 29 June 2018. The stock is trading at a higher level and looks “Expensive” as of now at the current market price of $7.51.

Given the run-up in the prices of these three stocks and the end of financial year, investors may now start looking at selling the stocks for profit booking in view of the remaining potential in the stocks.

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