Maggie Beer Holdings Limited

MBH Details

Group Achieved Record 1H21 Sales: Maggie Beer Holdings Limited (ASX: MBH) is involved in the sale of branded premium beverage and food in Australia and overseas markets. Maggie Beer Products, Saint David Dairy and Paris Creek Farms are 3 of its premium brands. As on 22^nd February 2021, the market capitalisation of the company stood at ~$83.05 million. As on 31 December 2020, the Group released a preliminary trading update of the business. The Group reported increase in its net sales by 20% to $4.6 million in 1H21 on pcp basis due to growth in net sales of all the 3 brands. Maggie Beer Products’ (MBP) recorded the highest growth in net sales by 28.6% on pcp basis. Owing to the growth of e-commerce business, launch of a new e-commerce platform in November 2020, refined digital marketing strategy and Black Friday and Christmas holiday periods, MBP’s e-commerce net sales rose by 167% on pcp in 1H21. The net sales from Paris Creek Farms and Saint David Dairy improved by 11.4% growth and 5.4%, respectively, in 1H21 versus 1H20. The trading EBITDA of the Group improved by $2 million in 1H21 versus 1H20. The baseline sales were impacted by pandemic restrictions in Melbourne and 1H21 gross margins dropped by 6.4 points on pcp due to milk swaps. Gross margins of the business would have been almost consistent with 1HFY0 at 51% in the absence of milk swaps/sales.

The Group achieved a positive operating cash position in H1 FY21, an improvement of $3.6 million on H1 FY20. The company held $6.3 million as cash at bank as on 31 December 2020. During 1H21, the company reduced its head office costs by $0.5 million versus H120. The company has completed the re-structure of its Head Office during the period. It is investing in growth and has plans to hire an e-commerce manager to drive the Group’s e-commerce strategy.

Cash and Undrawn Balance, 1H21 (Source: Company Reports)

Outlook: In sync with trading terms with the key retailers, MBH estimates the cash balance to increase further as funds will be received in Q3FY21 from the December 2020 quarter. As the company solidifies relations with its retail network for Maggie Beer products, it looks forward to expanding its national ranging of key lines. The company expects trading conditions to improve in Q3FY21 and Q4FY21 as COVID-19 restrictions ease in Melbourne and labour returns to the Central Busines District.

Stock Recommendation: The stock of MBH gave a positive return of 246.15% in the past nine months and a positive return of 200% in the past one year. The stock is currently trading towards its 52-weeks’ high level of $0.52. The stock of MBH has a support level of ~$0.365 and a resistance level of ~$0.549. On TTM basis, we have valued the stock using an EV to Sales multiple of ~1.8x as compared to the industry median of ~1.6x and thus seems overvalued. Considering the current trading levels, significant returns in the past 9 months and one year, and valuation on TTM basis, we are of the view that most of the catalysts have been factored in the stock performance at the current juncture. Hence, we suggest investors to wait for better entry levels, and we give an ‘Expensive’ rating on the stock at the current market price of $0.450, up by ~12.499% on 22^nd February 2021.

MBH Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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