a2 Milk Company Ltd

A2M Details
Positive performance in first four months of 2017: a2 Milk Company Ltd (ASX: A2M) stock rose over 6.23% in the last three months (as of January 06, 2017) driven by their positive first four months 2017 performance. A2M generated NZ$155.2 million against NZ$79.3 million of the prior corresponding period driven by growth in infant formula and milk products. Given the rising awareness of the group’s A2 beta casein protein, the group is able to quote for premium prices. The group is strengthening supply chain via arrangements for supply and manufacturing, and the efforts include a comprehensive Supply Agreement with Synlait Milk for access to a guaranteed level of production capacity without any “take or pay” obligation. On the other hand, A2M corrected over 12.1% in the last four weeks (as of January 06, 2017) driven by the sector headwinds following Bellamy's Australia Ltd.’s (ASX: BAL) weak update regarding the Australian infant formula performance in China. Rising inventories and competition were highlighted as concerns with regard to the infant formula companies. As a result, concerns over A2M performance in China in this rough period mounted day by day while the group has remained confident on the growth potential. There does exist some bit of uncertainty and A2M stock is also trading at an unreasonable P/E. We give an “Expensive” recommendation on the stock at the current price of - $ 2.01

 
A2M Daily Chart (Source: Thomson Reuters) 

Bubs Australia Ltd

BUB Details
Targeting key opportunities to fast track China growth: Bubs Australia Ltd (ASX: BUB) was listed on ASX on January 03, 2017 (as part of relisting of a repurposed Hillcrest Litigation Services Ltd) and had a market capitalization of $32.2 million by the time of market close. BUB targeted for $5.15 million as prospectus offering. The group strengthened their capital position to boost the domestic market presence as well as is seeking international expansion in SE Asia and China. BUB is focusing to deliver differentiated premium products while building strong links throughout Asia. BUB offers products in China via e-commerce platforms like Tmall Global and JD.com. 

BUB performance and regional mix (Source: Company Reports)
 
The group built a strong foothold in Australia by selling premium quality Australian infant nutrition products for over a decade, via giant retailers including Coles. BUB stock spiked 129.6% in last five days (as on January 06, 2017) but fell 22.6% on January 09, 2017. On the other hand, BUB is targeting key opportunities to fast track China growth, but this might be challenging given the current scenario. Bellamy's Australia Ltd (ASX: BAL) has already been hit in the Chinese market and other infant formula makers may also witness some headwinds with regard to market conditions. We believe the stock is “Expensive” at the current price of – $ 0.24

 
BUB Daily Chart (Source: Thomson Reuters)

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