Healthy balance sheet with no debt, this overlooked ASX health stock has been paying dividends for years
Health & Biotech
Health & Biotech
Small-capped healthcare stocks may sound like a poor dividend investment when you consider that most have not even reached revenue stage.
But when digging deeper into this ASX cohort, we found a stock that’s been paying dividends consistently for at least the last 10 years.
Vita Life Sciences (ASX:VLS), a $95m capped distributor of vitamins and supplement products, has been handing out consistent payouts to its shareholders as far back as 2014.
Vita Life Science’s historical dividend payments:
The company sell its own brands – Herbs of Gold and VitaHealth – to selected pharmacies and specialised health food channels all over the country, and in overseas markets including Malaysia, Singapore, Vietnam, Indonesia, and of course, China.
“We’re predominantly a vitamins and supplements business,” explained Vita Life Science’s managing director, Andrew O’Keefe.
“We are the brand owners. We utilise third party manufacturers, but for all intents and purposes, we sell and distribute our own vitamins and supplements across Australia and several Southeast Asian markets,” he told Stockhead.
O’Keefe says that Herbs of Gold is predominantly known within the Australian market, whereas VitaHealth is predominantly sold in Southeast Asia.
“We formulate those products ourselves. We have our own team of internal naturopaths, nutritionists and dietitians that formulate our products in conjunction with our manufacturing partners.”
Sales are expected to hit around $73m-$74m in FY23, up from $66.9m in the previous year, with official numbers to be released soon.
On the back of that revenue, VLS expects bottom line profit to hit the $11.3m-11.8m range, up from $10.7m in FY22.
The company said that it saw sales growth during the year in all its major markets: Australia, Malaysia, as well as its exports into China.
“It’s proven now and over time that even in the most difficult financial economies, consumers are still looking after their health and wellbeing,” said O’Keefe.
“Covid proved that. People are looking for alternative sources to maintain their health and make sure their dietary requirements are where they need to be – basically to be fit and healthy.
“So, it’s really an industry that holds up in any economic situation,” he added.
Each of Vita’s two products has different formulations, but essentially the company has positioned itself as a high-end, natural vitamins and supplements provider.
“Our positioning on both brands is we have high-strength formulations.
“So we’re very much at the premium end of the product proposition, and that’s why our margins and our pricing reflects that,” said O’Keefe.
In Australia, the products are currently sold in more than 2,000 selected health food and pharmacies like Priceline, Blooms, and Terry White.
O’Keefe admits that when he joined Vita in 2017, he felt the company’s channel strategy was too narrow, as it was just an exclusive brand for the health food channel.
“So we deployed a deliberate strategy to expand our business into pharmacies.
“Now, we’ve got a very clear channel strategy, and that we’re very selective around how and who we partner with. And that gives us a point of difference with some of our competitors.
“We’ve also been in the market for a long time, particularly here in Australia for over 30 years now with the Herbs of Gold brand, so there’s been a long association and relationship with consumers that are familiar with our brands.”
In terms of expansion, O’Keefe believes there’s an opportunity to grow in some of the countries it’s already selling in, such as China and Vietnam.
In China, the company partners with a distributor which handles sales across all the major e-commerce platforms in the country.
But while China is an obvious big target, it’s Vietnam that O’Keefe says he will focus his attention on outside of Australia.
“Vietnam is an interesting market, and we feel that that it has some good growth prospects for us. A lot of companies are looking at Vietnam as the next new emerging market.
“The economy is doing reasonably well, with reasonably high level of middle class.”
Given all this growth potential, O’Keefe believes the market may have overlooked the stock.
The company has a healthy balance sheet, with a solid cash position; it carries no debt, and has not raised any funds since listing in 2007.
“We’ve got a business that has really good strong growth prospects.
“We’ve got a consumer that has an appetite to continue to look after themselves in a healthy and meaningful way.
“And we’ve got a company here that has proven itself to have good strong financial disciplines and deliver returns over the long term,” said O’Keefe.
The VLS share price has climbed 20% in the past six months.
Wellnex is a developer of some of Australia’s leading health brands, including Wakey Wakey, Nighty Night, The Iron Company, and recently acquired Pain Away.
The company has two joint ventures in place with Chemist Warehouse for Wagner Health Liquigesic, as well as medicinal cannabis.
Wellnex also owns the TGA registration of assorted liquid soft gel analgesics, which is licensed and/or supplied to major pharmaceutical brands in Australia and offshore.
Looking ahead, Wellnex said the recently launched brands during 2H FY23 are expected to accelerate during FY24, and will lead to improved gross margins and profitability.
Vitura Health is a cannabis focused company that owns CanView, an online platform that delivers prescribing, dispensing and medication management solutions for plant medicine.
The company’s subsidiaries include Melbourne-based Cortexa, one of the only companies in the world able to supply validated psychedelics ready for patient use.
It also owns CDA Clinics, a company that provides medicinal cannabis consultations and prescription services in Australia since 2018.
In addition, Vitura recently acquired Doctors on Demand, a nationwide 24/7×365 telehealth platform business with a current annual run rate of ~300k consults.
The company has also recently partnered with WholeLife Pharmacy, a specialised health foods & wellness network.
Anagenics is a beauty, health, and wellness company with owned brands that include évolis and USPA.
Over the last few years, the company has been growing its revenue to $9.9m in FY23, and narrowed its bottom line loss to -$1m.
The company says it will be looking to grow by entering into earnings accretive M&A opportunities.
Anagenics has also recently brought in a new CEO, Scott Greasley, who brings 15 years of experience building market-leading profitable businesses.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.