Got Milk: Infant formula stocks were flat again in November; but a handful made curious moves
Food & Agriculture
Food & Agriculture
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Here it is – your monthly recap of ASX infant formula stocks
Historically the industry and hence this column has had a heavy focus on China.
However, there’s a changing landscape with the Asian powerhouse not just focused on conquering it’s domestic market but also steadfast in being the dominant player in the Australian market.
In September, Tasmania’s Bellamys (ASX:BAL) was acquired by Hong Kong-listed dairy company Mengniu. And just last week China bought Australia’s second largest dairy company Victoria-headquartered Lion Dairy and Drinks for $600m.
China market intelligence firm Red Pulse said it was part of China’s goal to expand into the Australian market.
And this has prompted some Aussie small caps to look at tapping new markets.
On November 11, Bubs Australia (ASX:BUB) announced it was entering Vietnam.
It told shareholders this market was worth $2.2 billion annually and growing at a compound average rate of 7.7 per cent each year.
Producers of premium products, however, could have a way into the Chinese market.
Bloomberg Intelligence analysts Catherine Lim and Kai Tung Pang suggested earlier this week that Chinese and foreign infant formula makers would push to sell more premium products to penetrate into smaller Chinese cities.
One example of premium product is organic milk and Australian Dairy Nutritionals (ASX:AHF) obtained organic certification at its Yaringa Farm. Organic milk is a premium product because it is free of chemicals that can be picked up in the production process.
Only three stocks sit higher than a month ago. November’s biggest winner is also the largest company, A2 Milk (ASX:A2M), which provided a slight upgrade to its revenue and earnings margin guidance.
But it has shifted some investment for next year and JP Morgan analyst Shaun Cousins said last week capital expenditure was needed to penetrate the market.
“The revenue growth opportunities for A2M in China and the United States are significant and require increased brand, capability, marketing and systems investment,” he said.
“The progress so far [was] assisted by the reliance on the daigou channel which is [penetrated through] low cost, credible marketing.”
The second biggest mover for November was Longtable Group (ASX:LON) which bought Maggie Beer’s food business earlier this year.
The company told shareholders at its AGM two of its brands were cash flow positive and it aimed to become earnings positive across the entire business this financial year.
Finally, Bellamy’s held firm as Mengniu moves closer to the finish line with its takeover.
On a yearly basis the picture looks a little rosier with only four stocks gaining but recording solid gains.
Bubs Australia (ASX:BUB) is up 125 per cent, Clover Corporation (ASX:CLV) grew 84 per cent, Bellamys (ASX:BAL) gained 63 per cent and A2 Milk (ASX:A2M) is up 36 per cent.
|Code||Name||Price||Market Cap||1Y Tot Return||1M Tot Return|
|A2M||A2 MILK CO LTD||14.34||$10.7B||36||19|
|LON||LONGTABLE GROUP LTD||0.17||$35.2M||-51||10|
|BAL||BELLAMY'S AUSTRALIA LTD||13.25||$1.5B||63||1|
|HRL||HRL HOLDINGS LTD||0.11||$54.3M||-8||0|
|SM1||SYNLAIT MILK LTD||8.83||$1.6B||-4||0|
|BUB||BUBS AUSTRALIA LTD||1.07||$544.9M||125||-3|
|AHF||AUSTRALIAN DAIRY NUTRITIONAL||0.097||$39.0M||-18||-11|
|KTD||KEYTONE DAIRY CORP LTD||0.395||$85.0M||-8||-12|
|CLV||CLOVER CORP LTD||2.76||$445.7M||84||-14|
|BFC||BESTON GLOBAL FOOD CO LTD||0.08||$35.0M||-53||-19|
|AU8||AUMAKE INTERNATIONAL LTD||0.1||$34.9M||-64||-22|
|WHA||WATTLE HEALTH AUSTRALIA LTD||0.4722||$91.8M||-42||Susp|