Seems like huge accounting games being played 27m inventory impairment when new management took over then a 20m reversal of that impairment for the next financial year, CFO resigns to retire before the end of the financial year with the 20m impairment reversal but turns up at First National real estate 3-4 months later as CFO. A further 1m reversal in the last half as well sounds like the initial impairment wasn't really that required, sales did pick up so the inventory might have been used up elsewhere, but usually with these things after the initial impairment you get further impairments down the track so its clearing the decks for new management and then inflates the numbers that they achieve afterwards.
Inventory sitting at 62% of revenue for the half in the last half yearly, much more as finished goods now, not sure what a steady state would be.
6m provision for credit losses seems quite high from trade receivables, plenty of opportunity for channel stuffing in China for increasing sales without cash receipts. So cash for me would be a better way to track things
Net revenue for last quarter was 23.2m but revenue for the half to December 2024 was 48.5m, quarter before net revenue 28.7m so there could be some seasonality there but they are not really that hugely established in USA or China with cow's milk infant formula now so it's not just niche goats milk formula now so where is the growth.
Manufacturing costs went up 50% in the last quarter hence cash generation was much lower, so seems like it is coming to the end of the inventory impairment reversals, so hopefully numbers are cleaner from now.
No FDA trials and submissions and legal fees for lawsuits if that finishes is 5m a year less expenses which is a decent amount for profitability given the market cap and also less distractors for growing the company. If they actually recover some money that is a bonus.
Infant formula market is huge, haven't tapped India, China, USA full potential at all yet so lots of blue sky and the manufacturing plant has very low utilisation so lots of room to increase sales without that much capex so lots of potential. Not sure why the plant is not SAMR registered though if they are selling to china?
Team does seem to be putting runs on the board though.
BUB Price at posting:
13.5¢ Sentiment: Hold Disclosure: Not Held
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