Bellamy’s Australia Ltd

BAL Details

While infant formula company, a2 Milk Company Ltd (Australia) (ASX: A2M) has been witnessing a surge in share price owing to positive sentiments driven by few brokers’ upgrade on the rating, Bellamy’s Australia Ltd (ASX: BAL) also joined the bandwagon with a 4.7% rise in stock price on October 05, 2017. Thus, the move seems to be driven by overall sector sentiment.

In its FY17 results, the group has focussed on its turnaround strategies to be on track with improvement in the stability of the business. However, the group achieved a small statutory EBIT profit of $0.6 million for FY17 as the performance was impacted by one off costs associated with the business reset including a $27.5 million one off payment to Fonterra. On the other hand, the group’s Camperdown acquisition and reinstatement of the CNCA licence is expected to provide a path to CFDA registration in China. Given these developments, the group has forecasted for profitable growth in FY18 for the core business (excluding Camperdown). The group particularly expects to witness a 5%-10% revenue increase and 15-20% increase in EBIDTA margin in 2018. Further, benefits from seasonal changes and all ‘Chinese label’ sales in 1H18 have been said to help BAL witness 1H18 revenue to be better than 2H18. 

Revenue Trend (Source: Company Reports)

In last one year, the stock has fallen about 39% at the back of regulatory challenges and performance issues but moved up 75% in the past six months (as at October 04, 2017) with changes brought in terms of adopted strategies. Going forward, key thinks to watch would include recovery in gross margin, extent of marketing investments and earnings contribution from Camperdown. We maintain a “Hold” on the stock at the current price of $ 8.03


BAL Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.