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BWX Limited’s stock price surged over 30% despite the massive decline in interim profit

  • February 22, 2019 06:58 PM AEDT
  • Team Kalkine
BWX Limited’s stock price surged over 30% despite the massive decline in interim profit

BWX Limited’s (ASX: BWX) stock sky-rocketed over 30% after the company announced 1H19 revenue of $68.1 million, up from 1.4% on the previous corresponding period’s revenue of $67.2 million. The stock price has rushed up by 30.435% to last trade at $2.100 on 22 February 2019.

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It seems bulls are not affected by as heavy as 51.8% decline in Net Profit After Tax of the company along with downgraded guidance range provided in the First Half Year results of Fiscal 2019. The branded product company revised its FY19 guidance range for underlying EBITDA to $27 million-$29 million which represents an upper range well below the previous guidance range of $27 million-$32 million. The negative change in outlook has been explained as the postponement of several upside initiatives initially planned for 1H19. Â

The upward trend in the company’s net revenue for 1H19 explains the substantial contribution from retail brands including 182% growth in Andalou Naturals’ revenue driven by strong North American domestic consumer sales. However, the previous corresponding year included only two months of revenue from Andalou Naturals as it was acquired on 31 October 2017. Its Nourished Life segment has also recorded growth of 53% to $10.4 million revenue in 1H19 on the back of strong domestic growth rate coupled with favourable momentum in the second quarter.

But the Group’s highest margin brand, Sukin, got significantly impacted by the disruptions faced by the company during the ERP rollout and warehouse relocation in the first half. Positioned as number 1 skincare brand in Australian pharmacy, Sukin has reported a 36% decline to $23.2 revenue in first half of FY19 compared to the previous corresponding period.

BWX Managing Director and Chief Executive Officer, Mr Myles Anceschi, stated that the company has faced several challenges during the half year as it re-set the business. However, there has been a significant turnaround in the second quarter leading to positive momentum in the company’s transformation plan.

More on numbers front, it can be seen that reported EBITDA of the Group declined by 40.5% to $7.2 million in 1H19, compared to 1H18. Reported NPAT was $2.6 million, a 51.8% decrease on NPAT of the previous corresponding period.

BWX’s Board did not declare any interim dividend for the first half of Fiscal 2019 given the impact on its cash balances as Net Operating Cash Flow declined from $3.7 million in 1H18 to -$7.3 million in 1H19. Reported earnings per share (EPS) also declined by 3.1 cents per share to 2.1 cents for the half year ended 31 December 2018.

Further, the company intends to launch two new international markets in the second half of FY2019 which is expected to further boost the revenue in the period.

BWX last traded at a Price to Earnings multiple of 9.470x with a market capitalisation of $200.04 million. Over the past 12 months, the stock has gone down by 67.54% including a negative performance change of 49.05% over the past three months.


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