Hi there,I've been following this business for some time,...

Hi there,

I've been following this business for some time, including rewarding short selling last year when it was overvalued, but to be honest, I've only just started tipping my toe in here and started to buy stock with the aim of continuing to purchase over the next 3 months.

Is there any reason I should stay clear of this now at this price?

To me, it looks like there is a huge opportunity with more upside than downside.

State of play:

Market Cap is $40m
They have been hammered.
They made some arrogant, ego driven purchases, and played in dumb channels.
They made lots of mistakes, and had some ridiculous people in management.
Management + board was out of control and still is out of control.... but I'm hoping for change so someone can sort out the mess and realise the huge opportunity.

Current MD - Thinus...He worked at Coles.
He doesn't understand natural foods & natural skin care products, or the natural online channel.
He understands supermarkets. I don't think he is the right fit, is out of his depth and it concerns me that the board wasn't able to find someone more suitable, which to me screams corporate profile risk and attracting good talent will be a major challenge. They need someone who actually believes in the natural channel and making better products, not just greenwashing which is where I feel management team + products sit right now.

Previous CEO/MD - Rory:
Seems weird to have someone with his commodity experience in the chair.
He seemed to understand mainstream plays, but this is not the opportunity (i.e. was at Coles, then went to a biscuit/chip company, then went to a PZ Cussons which does mainstream poor quality cleaning products, to then another mainstream supermarket goods type company (Monde Nissin), and now various roles in BWX which concerns me)... i.e. being both Group CEO and Managing Director...

No disrespect to Rory, but BWX needed to be led by someone who understands the natural foods channel or luxury goods channel as a minimum - this would have helped with branding, with the right channel. Right now you can see Sukin being flogged in the reject shop, this should never have ended up here... why they brought on Thinus doesn't make sense.

There is an opportunity for shareholders if Thinus is no longer CEO/MD and someone with a wealth of knowledge in different spaces comes in to lead and inspire a workplace, it can be done.

Managing Director Asia Pacific: Stephen Brown
Again, this bloke has extensive mainstream experience but doesn't understand the natural foods channel or online channel. He's very much focused on FMCG (Cadbury, Schweppes, Kimberley Clarke etc)... The risk with Stephen is he is putting his people in to prop him up, i.e. Tony Leach (Sales Director) who had mainstream experience.

The Marketing Director, Fiona, seems to be also from a mainstream background (Mars Petcare, Heinz, Swisse).

I've looked through most of the people in the organisation and what surprised me was how management heavy it was! How many people do they actually need? These employees from mainstream organisations are used to massive teams and not having to do it themselves in a fast moving, innovative and entrepreneurial space... BWX is on the verge of bankruptcy... they need to totally slim down, and get back to their entrepreneurial spirit, quickly. The board needs to put in someone with a vision, someone a focus on innovation.

Then, at Board level, you've got a bloke who worked at the Reject Shop which explains why Sukin is always in there, you've got a lady now join who was in marketing for Coles... not very inspiring.

What I do find interesting is Director Marcus Derwin... he seems to, if given the right tools, be experienced enough to actually able to transform the business, and this is the opportunity.

I'm sure they are great people, but I don't think it's in their DNA to run the quality brands & products that falls under BWX umbrella. The reason I'm slowly starting to acquire this stock:

1. The opportunity for management team to dissolve.. I cannot understand why some of the management team of some of the businesses they acquired aren't more prominent in the organisation... I assume poor cultural fit (poor on BWX). But the founder of Nourished Life, founder of Flora & Fauna etc surely had a wealth of knowledge, and had some fantastic people in their organisations. They need to bring these people in.

2. The trending categories... during a recession, women want to spend a little bit of luxury on themselves to make them feel good, and makeup/skincare/personal care will go through the roof, it always does. This is why I'm dabbling in the stock.

3. Brand value. The brands, and general goodwill would surely be more than $40m... even if they wanted to free up cash, they could sell down some of the brands to refocus.

4. Brand positioning - move the brands from being mainstream low value offer, to position them as being a quality brand that operate outside of supermarkets. They need to fix their channel strategy big time as this is impacting their brand offer.


TLDR: Get rid of board & management, bring in people who are inspiring and can lead change management, without only FMCG experience as the brands need to operate & establish outside of this so they aren't reliant on the brand bastardisation of Chemist Warehouse, Coles & Reject Shop.

I'm embarrassed for the board & management team. I'm embarrassed for the previous founders on the seperate businesses, they'd be very upset if emotionally connected still. This is a messy business with overpaid people stealing from shareholders.

But I'm hopeful, I'm hopeful that someone can really lead this wonderful business, an innovative CEO could absolutely transform this business and I think the upside is bigger than the downsize (stock to zero). A CEO + MD who are tied to long term performance of business, not short term.

My forecast over the next 6 months is:
A) Zero. Business is bankrupt
B) $0.78-$1.05
C) $0.50 and acquired by private equity

I'm rolling the dice on this one and buying stock, I think reward is much bigger than risk.

I'd love your input as to why not to buy the stock to see if I'm missing something.