Got Milk: 12 of 14 infant formula stocks made gains in April, but most are still below pre-COVID levels
Food & Agriculture
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In April the average infant formula stock gained 21 per cent and only two stocks finished the month in negative territory.
Two of the top stocks were recent ASX debutantes Happy Valley Nutrition (ASX:HVM) and Nuchev (ASX:NUC), which gained 93 and 48 per cent respectively.
| Code | Name | Price (I) | 1Y % Return | 1M % Return | Market Cap |
|---|---|---|---|---|---|
| HVM | HAPPY VALLEY NUTRITION LTD | 0.25 | 25 | 92 | $46.8M |
| LON | LONGTABLE GROUP LTD | 0.14 | -20 | 75 | $29.0M |
| NUC | NUCHEV LTD | 3.05 | 17 | 48 | $136.8M |
| BUB | BUBS AUSTRALIA LTD | 0.88 | -34 | 35 | $490.3M |
| AU8 | AUMAKE INTERNATIONAL LTD | 0.055 | -65 | 20 | $18.3M |
| A2M | A2 MILK CO LTD | 18.79 | 23 | 14 | $13.3B |
| JAT | JATENERGY LTD | 0.048 | -18 | 12 | $45.8M |
| BXN | BIOXYNE LTD | 0.011 | -39 | 10 | $7.0M |
| HRL | HRL HOLDINGS LTD | 0.085 | -23 | 8 | $46.9M |
| KTD | KEYTONE DAIRY CORP LTD | 0.35 | -12 | 7 | $78.5M |
| AHF | AUSTRALIAN DAIRY NUTRITIONAL | 0.079 | -45 | 2 | $30.0M |
| CLV | CLOVER CORP LTD | 2.04 | -17 | 0 | $339.3M |
| SM1 | SYNLAIT MILK LTD | 6.57 | -35 | -3 | $1.1B |
| BFC | BESTON GLOBAL FOOD CO LTD | 0.066 | -47 | -20 | $33.9M |
Happy Valley is at an earlier stage than most other listed stocks. It is still preparing to build a plant and is aiming to be operational in July 2022.
New Zealand’s lockdown laws have meant the company has had to operate remotely and may ultimately delay the plant’s opening by 12 months. Nevertheless, Happy Valley is planning to acquire properties to build the plant in the coming weeks.
Stocks that are already producers continued sales throughout COVID-19. While Nuchev has not yet released its April sales figures, it told shareholders last week that March was a record month for the company.
Bubs Australia (ASX:BUB) also continued to see sales roll in. This included Asian markets such as China and Vietnam.
One of the more intriguing players is Bioxyne (ASX:BXN), which makes supplements for infant formula. While it too has seen demand in Asia, specifically in Indonesia and Malaysia, it has found things trickier due to it being reliant on face-to-face meetings.
The company says it hopes the pandemic will be contained in the third quarter of 2020.
The market giant towers over the rest
Only one stock is sitting in positive territory both on a monthly and 12-month basis and it is market leader A2 Milk (ASX:A2M).
A2 Milk has seen exceptional growth in the last five years and sales have continued strongly throughout April. Like its small cap peers, the company also witnessed increased buying activity.
A2 Milk expects revenue for the financial year to be at least $1.7bn.
The only other billion-dollar infant formula stock, Synlait (ASX:SM1), has not been so lucky, losing 3 per cent in April and sitting 35 per cent down from its value 12-months prior.
While it was able to keep operating as an essential service and completed an acquisition, a resolution to a long-running dispute over a land acquisition was delayed again.
Last year, New Zealand’s Court of Appeal reinstated covenants over the land which hindered Synlait’s development of it. While it was anticipated the Supreme Court would hear Synlait’s appeal, this now won’t happen until at least June.
