Bubs Australia Limited (ASX: BUB)
The Australian infant food manufacturer, Bubs Australia Limited (ASX: BUB) recently announced a non-binding Memorandum of Understanding to form a Joint Venture (JV) for marketing and distribution of Bubs full portfolio of infant formula and organic baby food products in China. The MoU was signed with Beingmate baby and Child Food Co. Ltd. Beingmate is a ~A$1.29 billion Chinese infant and maternal nutrition company. It had reported revenue of circa A$520 million in FY18.
Under the proposed JV, Bubs would deliver infant formula and organic baby food products to Beingmate’s durable distribution network. A total of 30,000 Mother and Baby stores throughout China are functioning under Beingmate. Also, it has a basket of 280 infant formula and baby products and owns the largest number of registered infant formula brands in China. The Chinese new multi-child family policy should augur well for Bubs, as the addressable market is huge considering the Chinese lower-tier cities. The Chinese parents place a high value on premium quality, when it comes to infant nutrition. Bubs is well-positioned to take mind share, as it is positioned as a premium infant product.
Bubs is consolidating its portfolio of products, by selling non-core investments. It recently sold its 49.9% interest in dairy manufacturing JV in Uphamgo Australia on 28 February 2019, with the purchase price of $3.493 million. Further, the company reported a very strong set of 1H19 numbers. The net revenue for 1H19 came in at $19.56 million vs. $3.25 million in 1H18, registering more than 502% increase on a YoY basis. Normalized EBITDA for 1H19 was negative $3.52 million vs. negative $2.59 million in 1H18, a de-growth of 36% on a YoY basis. The company is investing in building scale, and this reflects in its marketing spend standing at 7% of the net revenue. Bubs is increasing its core markets and corporate capabilities, with increased headcount of 167%.
The stock of the company last traded at A$0.735 as on 15 March 2019, up by 0.685% from its previous close. The stock price of BUB has delivered phenomenal returns in the short term. A return of 58.70% and 37.74% in last three months and one-month respectively.
Bingo Industries Limited (ASX: BIN)
Bingo Industries Limited (ASX: BIN) received the Australian Competition and Consumer Commission’s (ACCC) nod for its proposal for an acquisition of Dial A Dump Industries (DADI). This acquisition would help Bingo to grow its waste volumes, by freeing up space across its resource facilities. DADI is an NSW based waste management and recycling service provider. Its operations ranges from collections to recycling, recycled product sales, and landfill. The total approved capacity is about 2,000,000 tons per annum, and 15 years of remaining landfill life. Bingo expects to achieve cost synergies of around $15,000,000 per annum over two-years. The company announced a share buyback of up to $75,000,000 of its ordinary shares. The twelve months long buyback is set to begin on 15 March 2019.
The company reported its 1H19 results, the net revenue saw robust growth of 25.4% coming in at $178.7 million vs. $142.4 million in 1H18. However, the underlying EBITDA grew single digit at 4.1%, reported underlying EBITDA of $45.6 million in1H19 vs. $43.8 million in 1H18. The underlying EBITDA margin contracted by 530 bps from 30.8% in 1H18 to 25.5% in 1H19. This was due to headwinds, in the multi-dwelling residential construction market in NSW and VIC, and lower margin mix of material in post-collections business. Further, the company’s operating free cash flow increased by 33%. On the outlook front, the company management intends to improve the margin to 30%, through a focus on increased diversion rates, and internalization of volume in Victoria together with cost out program driven by completion of reconfiguration program during FY20.
The stock of the company last traded at A$1.630 as on 15 March 2019, up by 0.308% from its previous close. The share price has been in a downward trend in the recent past. It has delivered a negative return of 48.90% and 28.10% in the previous six months and one month respectively.
Baby Bunting Group Limited (ASX: BBN)
The one-stop baby shop retailer Baby Bunting Group Ltd (ASX: BBN) was recently added into the S&P/ASX 300 Index. The S&P/ASX 300 Index represents the top 300 companies among the listed space in ASX. The addition of BBN, into this index would lead to a technical increase in demand, for shares due to the ETF participation. Also, the trading interest increases due to various speculator’s participation.
The company reported a healthy set of 1HFY19 results. The total sales came in at $177.7 million in1HFY19 vs. $151.7 million in 1HFY18, reflecting a growth of 17.2%. The sales were aided by good comparable store sales growth of 9.5% and online sales growth of 61%, and with this performance online now stands at 11.5% of the total sales. Also, on the gross margin front, the company delivered a good performance, 1HFY19 gross margin came in at 34.6% vs. 33.0% in 1HFY18. This was made possible due to range improvements, and growth in private label and sale of exclusive products and the company expects its gross margin to be ~35% for FY19. The baby goods market is around A$5.1 billion in Australia, and BBN has a total addressable market of A$2.4 billion. The company had a total of 52 stores in1HFY19 across Australia.
The stock of the company last traded at A$2.380 as on 15 March 2019, up by 1.277% from its previous close. The share price has been in a minor uptrend in the recent past. It has moved up by 14.08% and 0.86% in the past three months and one month respectively.
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