Blackmores Limited

Blackmore Announces Update In Directors’ Interest:Natural health care company, Blackmores Limited (ASX: BKL) engages in developing, selling, and marketing natural health products for humans and animals in Asia, New Zealand and Australia. The company recently announced final director’s interest notice where Richard Henfrey (ex-CEO & MD) holds 11,764 fully paid ordinary with 3,045 Share Rights granted under FY17 Executive Share Plan. The release stated that 520 ordinary shares are held in the name of Ms Fiona Henfrey (Spouse).In another interest update, the company’s interim CEO Marcus Charles Blackmore acquired 5,343 fully paid ordinary shares under dividend reinvestment plan at $89.85 per share, taking the final holding to 4,010,043 ordinary shares.

In the H1FY19 results, it reported increase in its Australia & New Zealand revenue by 19% pcp to $144 Mn which was driven by both domestic growth and continued increased levels of sales through Australian retailers who are focussed on servicing China export channels.Blackmores remains the number one VDS brand in Australia with 16.7% market share. Its China segment sales were down by 11% pcp to $65 Mn. In Asia, revenue in Korea, Taiwan, Hong Kong and Indonesia grew by 67%, 150%, 39%, and 72% respectively.which was driven by Success of NPD and marketing programs; Distribution and retailer expansion; and Improved supply environment.


H1FY19 Market Data (Source: Company Reports)

What To Expect From The Company:Blackmores’ China sales in the third quarter are being impacted by continuing changes in the consumers purchasing style as well as higher inventory in the trade and a general softening of consumer sentiment, which is expected to affect company’s H2FY19 performance.However, growth in other markets is expected to improve; hence overall group sales are expected to improve. The company plans to save $60 Mn over the next three years through optimizing operating structures, which is expected to help company in making investments towards strategic initiatives.

Stock Recommendation:Blackmores’ share generated negative YTD return of 28.07%. Its current ratio for H1FY19 stood at 2.06x better than H2FY18 at 1.73x and H1FY18 at 2.02x, which indicates company’s ability to fulfil its short-term liability. In the span of previous one month and three months, the stock had generated the return of -1.04% and -25.60%, respectively. Currently, the stock is trading close to its 52-week lower level of $80.450. Hence, considering the decent performance in 1H FY19 and volatility in the stock, we have a wait and watch view on the stock at the current market price of $91.80 per share (up 1.887% on April 12, 2019).

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