Products such as food, household goods, beverage, alcohol, tobacco, wellness products etc. are considered to be non-cyclical due to their consistent need from the end-users, irrespective of the general economic scenario. Companies that cater to such products are bucked under the consumer staples category. Typically, consumer staple companies fit into the portfolio of the majority of the conservative investors’ portfolio.
On ASX, the consumer staples are represented by the S&P/ASX 200 Consumer Staples (Sector) index. On 1 August 2019, the S&P/ASX 200 Consumer Staples (Sector) was under pressure and closed down by 0.46% to 12,452.7, while the benchmark index S&P/ASX 200 was faring better and closed at 6,788.9, with a cut of 0.35%. In this article, we would cover the recent update on two consumer staple companies.
Holista CollTech Limited
Holista CollTech Limited (ASX: HCT) is a research-driven biotechnology company engaged in research, development, manufacturing as well as the marketing of wellness products to meet the growing requirements of natural medicine. Holista was formed from the merger of Holista Biotech Sdn Bhd and Colltech Australia Ltd.
On 31 July 2019, Holista CollTech Limited announced that HolistaFoods, which is its indirect subsidiary, had shipped the first 20-foot container of low Glycaemic Index (low-GI) noodles to China. The bulk international order with the exclusive distributor, Express Trading of Canada, is for 12 months starting from July 2019.
The company has 53% ownership in the LiteFoods, which owns 74% of HolistaFoods. At present, the company is in the process of acquiring LiteFoods and HolistaFoods and is expected to be closed by the December 2019 quarter.
The agreement between HolistaFoods, and Express would help the company to enter into the world’s largest noodle market- China. As per the contract, the company is expected to ship ~ 58 containers worth A$2.1 million which will be shipped from Canada to China till December 2019. During 2020, the company expects this number to increase to an average of 40 containers per month.
Both the companies had signed the MOU in February 2018 however, due to various regulatory requirements in China along with the label adjustments to meet Chinese government requirements, the confirmed orders, as well as shipments, got delayed.
The confirmed order from Express is a significant milestone for the company as it is the first bulk contract of the company into an international market. Further, the order would also help in improving the financial performance in FY2019 and beyond, stated the Founder and CEO of Holista CollTech- Dr. Rajen Manicka.
The low-GI noodles are developed and patented by HolistaFoods and have a GI reading of thirty-eight in independent tests that were conducted by Glycemic Index Laboratories, Inc which is situated in Toronto, Canada. A GI reading helps in understanding the rate in which foods comprising carbohydrates increase human blood sugar levels. A lower GI reading gives an indication of food being healthy.
Eighty-five grams of HolistaFoods’ noodles comprise of 12 gms of protein, 4 gms of fibre, and zero sugar. At the same time, its low sodium and cholesterol levels offer continuous energy. Further, the product follows the guidelines and recommendation of Diabetes Canada.
Further, China ranks amongst the most populous countries of the world with 10% of its population suffering from diabetes. Also, noodles form a main component of the Chinese diet, which is related to the cause of diabetes. From recent studies, it was found that 50.1% of Chinese adults are pre-diabetic.
Holista’s patented formula is made up of extracts of okra, lentils, barley and vegetable fibre that are clean label and natural and does not any artificial ingredient or preservatives that are harmful to the body.
On 30 July 2019, HCT released its quarterly report. To know more click here.
At market close on 1 August 2019, HCT’s stock was trading at a price of A$0.072, down by 2.778% as compared to its previous closing price.
Yowie Group Ltd
On 29 July 2019, The Panel had agreed to a request by Yowie Group Ltd to draw out its application to the Panel related to its affairs.
As per the market release on 17 July 2019, Yowie was under the subject of an off-market scrip takeover bid by Aurora Funds Management Limited (Aurora) as a responsible unit of the Aurora Dividend Income Trust (ADIT).
At the time of submission of the application by Yowie, a sitting Panel was not selected, and no decision was made if the proceedings would be conducted or not.
On 20 May 2019, Aurora had announced its intention to make a bid and on 5 July 2019, it filed a bidder statement with ASIC. Further, on 11 July, Aurora filed a replacement bidder’s statement.
On the other hand, Yowie submits an application in which it stated that unacceptable circumstances came into the picture as Aurora failed to disclose appropriately in the replacement bidder’s statement.
On 26 July 2019, the company received a notice from Aurora that it would not be proceeding with the scrip takeover bid (Bid) for the Company as Aurora finds Yowie’s financial performance in the Q4 FY2019 “represents a Material Adverse Change”.
Based on the announcement that Aurora would not be proceeding with the takeover bid, the applicant (Yowie) had taken consent to withdraw its application. Further, the panel had conducted proceedings because it had certain issues with respect to the bid and disclosures in the replacement bidder’s statement regarding bid consideration as well as premium. Since Aurora’s bid would not proceed, the panel has consented to the applicant withdrawing its application and considers it not against the public interest to do so.
On 29 July 2019, the company released an announcement providing an explanatory statement related to the meeting called at the request of Keybridge Capital Limited.
In the previous 18 months, the company had noticed that it was targeted by units related to Farooq Khan as well as Nicholas Bolton to use significant influence over Yowie. It includes the demand for various board members to step down and new directors to be appointed in their place.
Meanwhile, those entities have requested for a shareholders meeting for the removal of the directors along with announcing two separate takeover bids but never moving ahead with either.
In June 2019, YOW received a request from Keybridge Capital for a general meeting. At that point of time, Keybridge was holding ~6.5% of the shares in the company and had right to control vote attached to an additional ~ 12.2% of shares in Yowie, held by an entity known as HHY fund of which it was an investment manager.
Since that period, Keybridge was suspended from trading on the ASX. It also got involved in litigation with entities that were related to Nicholas Bolton. Its investment management agreement with HHY terminated.
Apart from that financial health of the company is improving as highlighted on the announcement dated 24 June 2019.
At market close on 1 August 2019, YOW’s stock was trading flat at a price of A$0.074, as compared to its previous closing price.
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