Infant formula seller Bubs just doubled its revenue forecast in $17m deal; shares gain
Infant formula maker Bubs Australia (ASX:BUB) has signed a $17 million sales deal with a China online distributor.
The deal with New Times Asia — which supplies infant formula and other products to major China e-commerce sites — would “at least double our total company net sales revenue” in the first year, Bubs founder and boss Kristy Carr told investors.
Bubs shares jumped 14 per cent to 87.5c in early Monday trade.
The purchase order would grow from $17 million this financial year to $24 million in 2020 and $37 million in 2021.
“The agreement with New Times Asia is a major step forward in our China expansion strategy, and shows the investment we have been making and continue to make in building our China presence is bearing fruit,” Ms Carr said.
New Times Asia founder and CEO Michael Deng said: “We are very pleased to partner with Bubs Australia. We are confident we can quickly build brand awareness and consumer demand for Bubs in China given the trend for premiumisation as reflected in the rapid growth of specialised formula, goat milk and organics.”
Dairy and infant formula exporters such as Bubs, Jatenergy, Bioxyne, Wattle Health, Bellamy’s and A2 Milk have all made big share price gains over the past year.
Chinese demand for Australia consumer goods is expected to continue growing — especially in smaller cities which are becoming bigger, richer, and more eager to spend.
Private consumption in China’s smaller cities “could be on track to triple between 2017 and 2030”, investment bank Morgan Stanley predicts in research released last week.
The ASX’s 55 or so (non-resources) China-focused exporters have performed strongly over the past year.
Measured over 12 months, more than half of the stocks show gains — some very significant.
Jatenergy, Bubs, Bioxyne, Wattle Health, Bellamy’s and A2 Milk have all made gains of more than 200 per cent.