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.

 

The winners were few in November

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
JAT JATENERGY LTD 0.051 $41.3M -27 0
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
BXN BIOXYNE LTD 0.015 $9.6M -59 -17
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
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