Guide to Investing in Infant Formula Stocks-A2M, KTD, NUC, CLV, BUB

Guide to Investing in Infant Formula Stocks-A2M, KTD, NUC, CLV, BUB

During the last few years the requirement for infant formula, specifically the formula made in Australia, has increased exponentially. The dairy or infant formula related products manufactured in Australia and New Zealand have high quality and are clean.

The best way for a nutritious and healthy intake to an infant is breastfeeding, though, for the proper and entire development of babies who are not breastfed, a reliable and nutritious alternative of breast milk is suggested for the infants and toddlers.

The infant formula and products are regulated under Standard 2.9.1 which stands for Infant Formula Products, in the Australia New Zealand Food Standards Code. There are mainly three categories of infant formula/products under this standard-

  • Infant formula that is suitable for infants aged 0 to <12 months;
  • Follow-on formula that is suitable for infants aged from 6 to <12 months;
  • Infant formula products for the specific dietary requirement and use.

According to some media research reports, the global baby infant formula market size is projected to grow by a CAGR of 9.5% from 2018 to 2025 to reach approximately $45,348 million by 2025. One of the key drivers for the growth of baby infant formula market is considered as the rising number of women working outside their houses. Due to the rising demand of infant formula, investors are considering investing in these stocks.

Let us now discuss five ASX listed infant formula stocks- A2M, KTD, NUC, CLV, BUB

The a2 Milk Company Limited (ASX:A2M)

An ASX listed Infant formula company, The a2 Milk Company Limited (ASX:A2M) was founded in 2000 in New Zealand by Dr Corran McLachlan. The company is engaged into commercialising A1 protein-free milk under its brands the a2 and a2 MILK with its operations in the US, China, Australia, New Zealand, and other markets.

Leadership Update-

The a2 Milk Company announced the commencement of Race Strauss as the new Chief Financial Officer of the company because of Craig Louttit electing to step back from the role of Chief Financial Officer, as advised to the market in September 2019. Addition to this, a2 milk recognises Mr Louttit for his significant contribution and mentioned that the company is delighted that he would continue in the role of Deputy Chief Financial Officer.

The company also revealed that it’s Chief Technical Officer Phil Rybinski would leave his role to pursue some other interests and Shareef Khan, Chief Operations Officer would undertake responsibility for all technical function activities on a temporary basis. More arrangements for permanent leadership would be declared at a future date.

Stock Information-

On 17 January 2020, the A2M’s stock closed the day’s trade at $14.680, up by 3.308%. The company’s market capitalisation stood at nearly $10.46 billion, with almost 735.88 million shares outstanding. The 52 weeks high and low price of the stock was noted at $17.30 and $10.645, respectively.

Keytone Dairy Corporation Limited (ASX:KTD)

Australia and New Zealand based company Keytone Dairy Corporation Limited (ASX:KTD) is an established producer and exporter of formulated dairy products as well as products for health and wellness. The company has its operation in the dairy products division of the FMCG industry. Keytone’s products are produced under its brands KeyHealth® and KeyDairy®, and in ranges, including nutrition powders and premium milk.

Completion of Powder manufacturing facilities

In mid-December 2019, the company announced that integration of the company’s two Melbourne based powder manufacturing sites is completed before its scheduled time. This integration would lead to considerable annualised synergies and operational efficiencies.

Moreover, the company also mentioned that all necessary accreditations and licensing had been received, including Dairy Food Safety Victoria and Certification and Accreditation Administration of the People’s Republic of China (CNCA).

Regulatory approval received

In December 2019, the company announced that it’s second (state-of-the-art) manufacturing facility in New Zealand has received all required licensing approvals from the New Zealand Ministry of Primary Industries and by extension, CNCA registration. The New Zealand based new facility is ready to start full-scale production.

Stock Information-

On 17 January 2020, the KTD’s stock closed the day’s trade at $0.400, up by 2.564%. The company’s market capitalisation stood at nearly $83.9 million, with almost 215.12 million shares outstanding. The 52 weeks high and low price of the stock was noted at $0.700 and $0.330, respectively.

Nuchev Limited (ASX:NUC)

An Australian based company Nuchev Limited (ASX:NUC) was established in 2013 and is engaged in the development, marketing and selling of a variety of goat formula products into the Australian and Asian markets. The company has its operations in a unique position within the dairy nutrition market and its highly skilled and experienced management team lead by its CEO Ben Dingle.

Nuchev’s products-

The primary products of the company are Oli6® branded goat infant formula (GIF) range that is formulated specifically for the requirements of children and infants.

Addition to this, the company has recently launched a Goat Milk Powder product under the Oli6® brand, which is aimed for adult end customers, and the company anticipates developing other goat nutritional products in the future.

The company primarily manages in the global goat infant formula market that is a segment of the infant formula (IF) market.

The Chinese goat infant formula market is projected to grow at a CAGR of 18.8% from 2018 to 2023, achieving $9.2 billion and representing 12.8% of the total Chinese infant formula market in 2023.

In early-December 2019, the company updated its financial report for FY2019 (ended 30 June 2019). The key financial highlights are-

  • Nuchev generated revenue of nearly $9,499,278 for FY2019, which was $3,441,257 for the previous corresponding year.
  • The cash and cash equivalents of the company for the fiscal year 2019 (at 30 June) was nearly $10,314,376.

Stock information-

On 17 January 2020, the NUC’s stock was closed the day’s trade at $3.700. The company’s market capitalisation stood at nearly $166.5 million, with almost 45 million shares outstanding. The 52 weeks high and low price of the stock was noted at $4.170 and $3.160, respectively.

Clover Corporation Limited (ASX: CLV)

Evolved from being an R&D, production and marketing company, Australia headquartered, Clover Corporation Limited (ASX: CLV) is focussed on establishing strategic relationships centred on the new product, technology development and commercialisation. The microencapsulation technology of the company is superior and enables nutritional oils, such as fish, fungal, algal, tuna oils, to be added to foods and beverages, infant formula.

Outlook 2020-

In November 2019, the company updated the market with its Annual General Meeting presentation on ASX, mentioning the full year performance highlights, including the outlook for the first half of the fiscal year 2020. The quick highlights are-

  • Growth in China and European markets are driven by the necessity to improve DHA levels in infant formula, with the potential for volatility as a result of movements in customers’ supply pipelines and regulatory change.
  • Melody Dairies investment is underway with access for qualification targeted for the third quarter of 2020 and production for the second quarter of 2021.
  • The company is planning to complete the spray drying facility in Hamilton, New Zealand.
  • Clover would establish consumers, for new products in pharmaceuticals nutraceuticals as well as in sports nutrition.
  • The company is expecting growth in South America, Asia and the US.

Stock information-

On 17 January 2020, CLV’s stock closed the day’s trade at $2.670, up by 3.61% from its previous close. The company’s market capitalisation stood at nearly $460.68 million, with almost 166.31 million shares outstanding. The 52 weeks high and low price of the stock was noted at $3.310 and $1.305, respectively.

Bubs Australia Limited (ASX: BUB)
An ASX listed infant formula company Bubs Australia Limited (ASX: BUB) is engaged in providing a broad range of organic baby food and goat milk formula products for infants. The company’s products are also available across various retail outlets in Australia and cross-border e-commerce platforms of China.

Completion of the share purchase plan

In an announcement dated 30 December 2019, Bubs Australia revealed that it has successfully completed the share purchase plan (SPP), which was declared by the company to ASX on 20 December 2019. Approximately 5,263,158 shares, which will rank similarly with existing Bubs Australia shares, have been issued to the shareholders of the company.

First-quarter 2020 highlights-

The company updated its Annual General Meeting presentation highlighting the financial information for the first quarter of FY20. The quick summary for Q1FY20-

  • In the first quarter of the fiscal year 2020, the company has delivered the highest gross sales revenue record.
  • The direct export sales to China represent 22% of group revenue.
  • The company is the market leader in providing goat dairy products and produces over 65% of all Australian goat milk products.

Outlook- For the remainder of the financial year 2020, the company will focus on three key drivers for its long-term growth-

  • Sustainable leadership in vertical supply chain value creation;
  • Deepening customer brand connection to drive scale and improved margin;
  • Expansion into new non-infant growth segments and new geographical markets, by developing new premium adult goat dairy products.

Stock information-

On 17 January 2020, BUB’s stock settled at $0.945. The company’s market capitalisation stood at nearly $532.28 million, with almost 560.3 million shares outstanding. The 52 weeks high and low price of the stock was noted at $1.615 and $0.420, respectively.

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