BAL Details 
Possible easing in import rules by Chinese regulators drove the stock sentiment: Bellamy's Australia Ltd (ASX: BAL) stock soared 15.7% on March 21, 2017 partly driven by the speculation on probable easing of import rules by Chinese regulators. In terms of performance, BAL had reported a 47% year on year drop in 1H 17 NPAT to $7.2 million. The result was impacted by higher than expected inventory impairments and restructuring charges that totalled $8.6 million (one-off costs). There was also an impact on the operating cash outflows of $23.7 million owing to the inventory build-up. The group has given an outlook for 2H17 for underlying EBIT of $11 million – $15 million and reported EBIT of $9 million - $13 million (including a further $3.2 million in restructuring charges). On the other hand, China supply chain has been rationalised and the group has identified about $8 million in cost savings while supply agreements have been renegotiated. In the past one year, BAL has also been impacted by a multitude of other factors, such as departure of the CEO and demotion of the CFO. The chairman of the group, Mr Rodd Peters, recently confirmed that he no longer is an authorised representative for Black Prince Private Foundation (a shareholder of BAL).In addition to the changes and other updates at the board level, the group also reported about a further representative proceeding filed in the Federal Court of Australia in Victoria against the group with regards to shares acquired by shareholders between April 2016 and December 2016. 

2H 17 Outlook (Source: Company Reports)
 
Stock Performance: BAL stock crashed over 68.8% in the last six months (as at March 20, 2017) impacted by the tightened Chinese regulations on imports, impairments and weak performance. On the other hand, the recent update of a probable easing in import rules by Chinese regulators would give a relief to the infant formula makers and especially the group which has been struggling in the recent months. Risks do prevail with regards to factors relating to regulatory changes and raw material supply. On the contrary, the group is intending to put efforts on its turnaround strategy.We give a “Hold” recommendation at the current price of – $ 4.42


BAL Daily Chart (Source: Thomson Reuters)

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