Ann: Keytone Dairy Full Year Financial Results, page-29

Might not be great for margins as a customer, but they should maintain more of the gross margin with their new production facility allowing for all manufacturing to be done in-house. I think it bodes well for the future and allows them to grow their presence in China and SEA. Their ability to ship products to China, and have certified HALAL for middle-east and SEA markets gives a point of differentiation.

The new production facility is said to be online mid 2019 so within the next 2 months I expect. Really looking forward to seeing the impact on sales; $7-8m revenue for FY20 is a good start with a small profit or at least positive operating cash-flows.

Rinse and repeat with a second and third production facility and sales could grow to $25m in the coming years, with NPAT being achieved.

What I like in particular is their strategy in perfecting their business model with one production facility before scaling up instead of just spending money on mass to grow sales. A slower build than BUBS but at least we're going to be roughly profitable in the early years.

The loss normalised for FY19 is under 1m (given the cost of the option was $1.2m and costs of listing amounting to $1.2m including consulting costs) positions us well for FY20. Will keep a close eye on expenses and gross margins with their proprietary products in the coming year however.

One commentator said they're at the wrong end of the value chain, which is a fair call in comparison to A2, and they don't have the same control over supply as a SM1 or Fonterra either, but the market is big enough for KTD to take a niche share and at least grow their market cap to 200, 300 and 500m over time.

Their blend, packaging and selling strategy helps them maintain margin through the supply-chain, and in-time as their proprietary sales grow they can replace these more profitable volumes with the sub contracting work they do currently. I like their currently strategy of doing OEM volumes now though, as it does help with achieving scale faster while they grow sales of proprietary products.