Bellamy's Australia Ltd

BAL Dividend Details
 
Building solid brand distribution channels:  Bellamy's Australia Ltd (ASX: BAL) stock had been aggressively bullish in the last one year and generated outstanding returns of 294.12% to its shareholders (April 01, 2016). On the other hand, the stock had been correcting by over 31.16% (as of April 01,2016) during this year to date on reports of a possible declining demand from China on Australia brands. However, we believe this correction opened an attractive entry opportunity for investors given its ongoing efforts to strengthen its brand. BAL made a five year agreement with Fonterra to manufacture its infant formula. The group is building sales to retailers via SIIC and other distributors as well as focusing on its consumer base in China through T-mall.com and JD.com online presence.
 

First half of 2016 business performance (Source: Company Reports)
 
In Singapore, Bellamy's Australia doubled its market share and captured 3% (as of first half of 2016) of the market share in the region. BAL is targeting other Asian regions like Malaysia and Vietnam for further growth. Management issued a revenue forecast in the range of $240 million to $260 million for fiscal year of 2016 and expects to maintain its EBIT margin. The stock has been added to S&P/ASX 200 Index as per the March quarterly review updates by S&P Dow Jones Indices. Based on the foregoing, we give a “Speculative buy” recommendation on this stock at the current price of  $10.07
 
 
BAL Daily Chart (Source: Thomson Reuters)
 

Warrnambool Cheese and Butter Factory Company

WCB Details
 
Targeting business growth via acquisitions: Warrnambool Cheese & Butter Factory Co. (ASX: WCB) is acquiring Lion Dairy & Drinks Pty Ltd, the cheese business for $137.5 million to further enhance its cheese market. With this move, the group would now add brands like Coon, Mil Lel and Cracker Barrel to its cheese portfolio. On the other hand, the group reported a net operating loss after tax of $1.2 million for the half year ended in September 2015, representing a total of $18.1 million decline against the prior corresponding period (pcp) impacted by ongoing international commodity prices pressure coupled with rising raw milk costs. Despite the management estimating better international dairy prices for fiscal year of 2016, the rising Australian dollar might pose pressure to its performance given the ongoing rise in cost of raw milk. Meanwhile, WCB stock has been correcting over 6.25% (as of March 30, 2016) during this year to date and we believe this pressure in the stock could continue in the coming months. With the stock trading at a relatively high P/E, we give an “Expensive” recommendation on the stock at the current price of $9.00
 
 
WCB Daily Chart (Source: Thomson Reuters)
 

Australian Agricultural Company Ltd

AAC Details
 
Strengthening brand via strategic initiatives: Australian Agricultural Company Ltd (ASX: AAC) delivered solid first half of 2016 performance, with top line surging by 107.2% on a yoy basis, driven by Meat & By-product Sales which rose by 102.1%. This increase was mainly driven by the rising throughput at the Livingstone Beef Facility coupled with improving Wagyu and Shortfed/Other red meat sales prices. Therefore, to maintain its growth track, Australian Agricultural Company is building a vertically-integrated business, to further enhance its operating margins productivity and efficiency.
 

Australian Agricultural Company first half performance (Source: Company Reports)
 
Accordingly, the group undertook three strategic initiatives - Product branding, Innovation & technology and Supply chain optimisation. Accordingly, the group is targeting to start its branding project by FY17 as well as deigning a five year investment program to implement its branding strategy. Meanwhile, AAC stock is also trading at cheaper valuations, with a low P/E. With the stock rising by 6.61% (as of April 01, 2016) in the last one month, we continue to be positive on the stock and accordingly give a “BUY” at the current price of $1.29
 
 
AAC Daily Chart (Source: Thomson Reuters)
 

Freedom Foods Group Ltd

FNP Dividend Details
 
Low dividend yield: Freedom Foods Group Ltd (ASX: FNP) stock surged over 8.18% (as of April 01, 2016) in the last three months driven by its strong first half of 2016 performance. FNP reported an overall sales growth of 21%, driven by contribution from new Cereals and Bars as well as non-dairy beverages. Moreover, the improving sales of Australia’s Own Kids Milk in China (with Shenzhen JLL partnership) during the second quarter of 2016, also contributed to the top line.
 

First half of 2016 performance (Source:  Company Reports)
 
Consequently, the group’s operating EBDITA rose by 32% yoy due to better Cereal, Snacks and Beverage performance despite pressure from Seafood and North America. Meanwhile, we believe that the heavy rally in FNP stock placed it at relatively higher valuations which is trading at a high P/E. The stock also has a low dividend yield. We put an “Expensive” recommendation on this stock at the current price of $3.96
 
 
FNP Daily Chart (Source: Thomson Reuters)
 

Bega Cheese Ltd

BGA Dividend Details
 
Focus on branded and value added consumer goods: Bega Cheese Ltd (ASX: BGA) stock corrected over 21.33% (as of April 01, 2016) during this year to date on investors’ concerns over the group’s performance in China, given the current tough market conditions. Moreover, the volatile global dairy commodity prices, coupled with ongoing sanctions in Russia are also impacting the supply and demand across the globe. However, BGA is trying to focus more on branded and value added consumer goods instead of commodities and even made a partnership with Blackmores for infant formula and life stage nutritionals. BGA’s nutritionals platform’s revenue increased by 32% during the first half of 2015. But, we believe that BGA stock is trading at high valuations with a high P/E. We believe that the stock would continue to face short term pressure, and hence give an “Expensive” recommendation on this stock at the current price of $6.04
 
 
BGA Daily Chart (Source: Thomson Reuters)

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