Citi initiates coverage

Citi initiated coverage on Vitaco with a "neutral" rating and a price target of $2.85 a share. "Vitaco has a portfolio of New Zealand and Australian vitamins, sports nutrition and health food brands that are well placed to exploit the growing Chinese demand for provenance. Vitaco's own manufacturing will boost its operating leverage. We forecast FY16e EBIT of $22.5 million, 12 per cent ahead of prospectus forecasts. Vitaco trades at a PE ratio of 27x FY16e. Given its 29 per cent EPS CAGR to FY18e, we see this as a fair multiple. Any upside from here will be driven by better sales growth in China, which has boosted multiples for relevant comparable companies. The company is working on increasing its Asian brand profile by leveraging its NZ provenance."