A Lens Over Four Consumer Sector Stocks – BGA, BAL, ELD, TGR

Consumer Staples’ Stocks

The consumer staples sector companies deal in daily use products. Since, the performance of this sector depends on the demand from the consumer, any change in consumers’ demand directly impacts the operational and financial performance of the company.

Bega Cheese Limited

Bega Cheese Limited (ASX: BGA) is an Australia registered company, which is involved in processing, cutting, packaging and manufacturing  of traditional cheese products and it is also engaged in manufacturing of other high value dairy products. Bega Cheese Limited was officially listed on Australian Stock Exchange on 19th August 2011. Recently, the company updated the market with its operational performance for FY19. It was mentioned in the release that the company has achieved a record milk intake of 1.06 billion litres in FY19, which is reflecting a rise of 41% or 308 million litres on FY18. With respect to Australian milk pool, the company has raised its market share to 12.4% from 8.1%. The company further stated that the rise in milk intake has been achieved in a market, which has been contracted by 7.9% or 733 million litres because of drought and exit of farmers.

Appointment of Alternate Director

In an announcement dated 24 May 2019, the company informed that its Executive Chairman Mr Barry Irvin is likely to remain on remain on leave for around 6 more months to recover from surgery. Meanwhile, Mr Irvin has appointed long time director Max Roberts as his alternate director for the duration of his leave, and Mr Robers would also act as a Chairman of the Board, as per the company’s information.

Financial Performance

As per the 1H FY19 result presentation, the company reported revenue amounting to $0.65 billion for the period, reflecting a rise of 6%. It posted normalized and statutory EBITDA of $57.9 million and $39.6 million, respectively. When it comes to profit, it delivered normalized and statutory NPAT amounting to $18.9 million and $5.0 million, respectively.


As per the updated guidance, the company expects its normalised EBITDA to range within $113-$117 million for FY19, down from its previous guidance range of $123- $130 million. The company stated that it has decreased gearing in 2H FY19 and it would deliver net debt to $300 million. The company’s strategy is to be well place to ensure the changes in the milk supply landscape, which are reflected in greater production and logistics efficiency. The company projects this positioning to come at a cost during FY2019 and FY2020.

Stock Performance

BGA stock price last traded at $4.240, down 4.289%, on 2 August 2019. The stock provided returns of -7.32%, -16.73% and -12.28% in the time span of one month, three months and six months period, respectively.

Bellamy’s Australia Limited

Infant formula company, Bellamy’s Australia Limited (ASX: BAL) is engaged into distribution and production of branded food product. Bellamy’s Australia Limited got listed on Australian Securities Exchange in 2014. Recently, the company, via a release, announced that Fort Canning Investments Pte Ltd and associated entities have become the substantial holder of the company with 6.94% of voting right, effective 24 July 2019.

In an announcement dated 24 April 2019, the company stated that State Administration of Market Regulation (or SAMR) had released an approval series. It was also mentioned in the release that approval by SAMR is in relation to the new Bellamy’s branded formulation-series. Bellamy’s Australia Limited intends to put an amount for investment in the range between $4 million- $6 million to secure long-term production capacity with ViPlus as well as for product transition.

The company further clarified the market via a release dated 1st May 2019 that registration amendment for ViPlus Dairy’s formula-series has been approved by State Administration of Market Regulation (SAMR) but the application for Bellamy’s organic formula-series is pending. The following picture provides an overview of financial performance of the Bellamy’s

Bellamy’s Australia Limited delivered gross margin and EBITDA margin of 27.2% and 1.6% in 1H FY19 against the industry median of 40.0% and 14.3%, respectively. It posted return on equity of 4.0% for the same time period, compared to the industry median of 7.9%. BAL reported current ratio of 4.84x in 1H FY19 against the industry median of 1.40x.

BAL closed at $9.790, down 4.859%, on 2 August 2019. The stock last traded at a price to earnings multiple of 41.330x with a market capitalisation of $1.17 billion. In the time span of one month, three months and six months period, the stock delivered returns of 21.92%, -4.90% and 21.06%, respectively.

Elders Limited

Elders Limited (ASX: ELD) is in the business of providing services in trading of livestock, grain and wool. It also provides financial planning and real estate related services and got listed on Australian Securities Exchange in 1981. The company stated that Pendal Group Limited has made a change to its substantial holding in the company with the voting power changing from previous 5.011% to 6.11%. The change in substantial holding was made on 24th July 2019.

Institutional Entitlement offer and Placement

As per the release dated 17th July 2019, Elders Limited announced that it had successfully wrapped up the institutional component of a 1 for 6.7 pro rata accelerated non-renounceable entitlement offer and institutional placement and, which was fully underwritten. In total, the company raised $100 million including A$40 million via institutional placement and A$60 million institutional entitlement offer at an offer price of A$5.55 per share. Elders Limited witnessed strong support from existing and new institutional shareholders. In the 1H FY19, the company reported 41% decline in its profits from continuing operations. The following picture depicts the Balance sheet position of the company.

ELD stock price last traded at $7.180, down 1.644%, on 2 August 2019. The stock closed at a price to earnings multiple of 14.720x with a market capitalisation of $984.85 million. Over the past In one month, three months and six months period, the stock produced returns of 17.13%, 17.50% and 18.82%, respectively.

Tassal Group Limited

Consumer staples company, Tassal Group Limited (ASX: TGR) is primarily engaged into the marketing and production of salmon. Tassal Group Limited got listed on Australian Securities Exchange in 2003.

In a recent direct interest notice, Tassal notified that Director John Watson have made a change in holding by acquiring 10,000 more TGR shares at the consideration of $4.77 per share on market as on 6 May 2019. The total number of securities held with Mr John Watson after change to 116,924 ordinary shares.

A look at Financial Performance

The company communicated that the financial performance of TGR represents the strong operational platform in place, which would fuel continuous growth for its suppliers, communities, staff, shareholders and customers. The company reported operating EBITDA and operating net profit after tax (NPAT) of $64.3 million and $31.7 million in 1H FY19, respectively.  It posted operating cash flows amounting to $79.6 million in 1H FY19, reflecting a robust increase of 96.3%on 1HFY18. Its operating return on asset stood at 10.6% in 1H FY19, excluding Prawn earnings.


The company confirmed that the domestic and international market is on track to grow demand for seafood in Australia, projected to outstrip seafood and aquaculture growth. Tassal also stated that around 6-10% world supply growth required to maintain price parity. It is worth noting that the prawn earnings of the company would begin in 2H FY19.

The company reported gross margin of 40.5% in 1H FY19 in comparison to the industry median of 40.0%. It delivered net margin of 10.2% for the same time period as compared to the industry median of 6.3%.

TGR stock price edged up by 0.387% to last trade at $5.190 on 2 August 2019. The stock last traded at a price to earnings multiple of 14.670x with a market capitalisation of $922.59 million. Over the past 12 months, the stock has surged up by 23.21% including a positive price change of 0.59% in the past three months.


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