Recovery story, page-2

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ozboypete

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01/10/24

15:39

Post #: 75927950
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Originally posted by saintex: ↑

While the company has been loss making for some time, Bubs seems to be able to turn EBITDA and cash flow positive in FY 25.
In order to reach such targets, they expect to increase revenues by 28 % and cut costs by 11 m$.
Both targets are achievable :
- this revenue increase is in line with the revenue growth in FY 24 (+ 33 %) and is expected to be explained by a growth over 50 % both in the US and China (together they represent 65 % of sales),
- cost cutting is explained by 2 kind of one offs in FY 24 (FDA regulatory costs of 7 m$ to get permanent access to US market and 5 m$ of litigation costs).

If Bubs is able to maintain such a revenue growth in FY 26, without a significant cost increase, it could reach an EBITDA of around 5 m$ in FY 26.

It is quite obvious that this stock is cheap after its 90 % decrease during the last 5 years.
The best way to see it is probably the tax saving potential : as the company has 331 m$ of accumulated losses, it has a potential of tax savings of 99 m$ (at 30 % tax rate).
It corresponds to 11 c/ share, while the share price is now 12.5 c.

Looking at its P&L, the main question is probably why the company has so high fixed costs, while it has already a significant size (revenues of 80 m$ in FY 24) and a decent gross margin* of 41 %.
Also interesting to note that they have already a high market share of around 50 % in their 2 main markets (US and Australia) for goat milk infant formula.

Other element to note : while this stock may look risky, like most of recovery stories, it has a beta of only 0.35.
The main risk in their case is probably the uncertainty to get the permanent FDA approval by Oct 25.

* vs 45.8 % for A2 Milk.

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My concern with Bubs is they haven't re confirmed in the last few annoucement of there plan to be cash flow positive in FY25. I how they are, however then need to come out and advise so.FYI, since February there has been a 6% drop in the USD/AUD exchange rate which isn't good for profits.

BUB Price at posting: 13.0¢ Sentiment: Hold Disclosure: Held
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(20min delay)
Last 17.5¢		Change 0.005(2.94%)		Mkt cap ! $156.2M

Open	High	Low	Value	Volume
18.0¢	18.0¢	17.0¢	$540.3K	3.051M

Buyers (Bids)

No.	Vol.	Price($)
29	1833912	17.0¢

Sellers (Offers)

Price($)	Vol.	No.
17.5¢	150653	4

View Market Depth

No.	Vol.	Price($)
29	1833912	0.170
15	919522	0.165
18	283537	0.160
5	223758	0.155
10	397400	0.150

Price($)	Vol.	No.
0.175	150653	4
0.180	982246	20
0.185	981411	15
0.190	833802	14
0.195	231708	12

Last trade - 16.10pm 28/07/2025 (20 minute delay)

BUB (ASX) Chart

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