• Australian (ASX) Stock Market Forum

BAL - Bellamy's Australia

Discussion in 'Stocks 0-H' started by System, Aug 7, 2014.

  1. galumay

    galumay learner

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    These advisors have 20/20 hindsight! Probably was one of the advisors pumping BAL when it was all the rage!
     
  2. So_Cynical

    So_Cynical The Contrarian Averager

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    So whos buying Bellamys tomorrow?
     
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  3. galumay

    galumay learner

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    Not touching them with my barge pole even!
     
  4. Boggo

    Boggo

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    Yes, I guess there are people who rely on others for their investment decisions and fall for that sort of selling.

    He didn't sound like someone who had made a killing though ;)
     
  5. McLovin

    McLovin

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    I don't know. They've got no real competitive advantage that I can see, and the big multinationals like Danone/Unilever have the scale and distribution in to Asia. How premium can you get when every process of your product is controlled by external parties? It's not like they invest in genetics to create cows that produce better whey, and like you say they have no economies of scale in manufacturing. To me it just seems like a near commodity product and in the long run competition will erode margins.
     
  6. McLovin

    McLovin

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    I was thinking more about this. Even more strange is that FSF too a second mortgage over BAL's assets as part of the contract extension. But if the contract can be terminated by someone lobbing in an offer what's the point of the lien? They won't get paid out if there's a takeover. I guess if they fail FSF gets $110m in milk formula?
     
  7. Garpal Gumnut

    Garpal Gumnut

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    As a chartist I have only ever seen such a loss in value, lead to extinction and tears.

    Firstly in Dec.16 you have a fall in value of 50%.

    Then after a trading halt, in the last few days a further loss on huge volume.

    I doubt if the Vatican Bank still has a holding. Prayer only goes so far.

    gg



    bal.gif
     
  8. Huskar

    Huskar Formerly known as 'hesking1'

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    They say there is a direct correlation between number of babies in an annual report and performance over the following period. BAL certainly proves it - I understand that that is what they sell but every 2nd page has cute little eyes peering at you.
    Call me contrarian but I am interested in this as a turnaround. McLovin you mentioned that this is a commodity product but I disagree - I have seen myself how important it is in China / Hong Kong / wider Asia to find quality products. And Australia (+ NZ) has done remarkably well in building a reputation for quality that will take a long time for Chinese producers to meet. Even European and American producers are seen more sceptically.
    Looking at the balance sheet now for FY16 the leap in inventories (x3 cf with doubling of revenues) is a giveaway that product was not selling as fast as it should. Some sort of writedown or at least a shakeout looks likely in the short term. But that is not a company killer unless it is poorly handled...
    We will see :)
     
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  9. skc

    skc Goldmember

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    Your chart's volume looks wrong. Volume should be 0 during the suspension.

    I also don't think infant formula has to be a commodity product. Being a parent myself... we make lots of decisions involving babies/kids based on brand and reputation. Sustained premium positioning is a viable strategy in infant formula... whether BAL can achieve that is the $B question.

    Re: inventory at end of FY16... I think it was flagged by various commentators but the management response was that it was deliberate. Supply was tight and demand was going to keep surging... what a terrible mistake it would be if BAL can't sell all that customers wanted to buy. The $68m inventory is about 20% of the projected FY17 sales forecast ($340m I think)... which is not that different to prior periods. Also there may be some seasonality in inventories supplies that they decided to lock up early. So imo it was something worth monitoring and questioning but I wouldn't have concluded that sales growth had slowed.
     
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  10. McLovin

    McLovin

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    Hey Husk.

    I did say "near commodity", I do think there is some differentiation, I just don't think it matters that much in the long run. I totally agree with you about Australia's food reputation in Asia, but BAL imports much of their milk from Europe, and many of their other ingredients are from other parts of the world. The only thing they guarantee on their website is that no ingredients come from China. Those ingredients are then turned into formula by a NZ company in Victoria. They're more an Australian marketing company than an Australian food company. They're big selling point is they're made in Australia and that they're organic. Organic is good, but A2M is now the biggest seller into China and it's not organic. So did Chinese buyers ever care about it being organic or just that it came from Australia?...This is what I mean about it being a near commodity. How hard would it be for me to replicate the BAL business? It's not super hard to source organic milk and toll manufacture it into infant formula. High margins incentivise competition. There is nothing I've seen, yet, that leads me to think the last couple of years are indicative of what they next ten will look like.
     
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  11. Garpal Gumnut

    Garpal Gumnut

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    I apologise for that chart.

    I've always been a believer that breast is best for babies, and I am quite sure my old mate Xi Jinpeng who I met in Fujian shortly after the millenium celebrations would agree.

    Powdered milk is a risky product to export particularly to China where cleanliness is next to Maoism.

    Nonetheless I abhor fundamental analysis but note that if ole Ji decided every Chinese mum tomorrow should breast feed, rather than bottle feed their infants, there would be a weeping and gnashing of teeth in the dairies and the holders of BAL.

    I will attempt to post a better chart tonight, but it may be worth considering going to the pub today if the price shoots down through $4.00 on high volume and have a bottle.
     
  12. Huskar

    Huskar Formerly known as 'hesking1'

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    Agree with what you've said here, and when you talk about replacement value not being overly demanding that does get me worried as a longer term hold. I have not looked into it much further for now as investigating a few other names.

    As an aside, the top and bottom 10 returning stocks of 2016 was an interesting list: http://www.thebull.com.au/premium/a/64825-top-10-and-bottom-10-stocks-for-2016.html.

    And by comparison the best/worst of FY16: http://www.thebull.com.au/premium/a/61299-the-best-and-worst-performers-for-fy-2016.html.
     
  13. notting

    notting

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    Didn't pay its bribes to the Chinese properly and not even this could get them back in ~

    Bellamy's Australia has put its shares in a trading halt as it determines the impact of the suspension of a key licence by Chinese authorities overnight at its recently acquired Victorian cannery, Camperdown Powder.

    Last month, it raised $60 million to help fund the purchase of the cannery, which was supposed to deliver the company a key licence to allow its products to be sold into China, where regulations change in 2018.
     
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