Thanks for your analysis @Hopeful9 - as someone who follows Bega...

Thanks for your analysis @Hopeful9 - as someone who follows Bega from a distance, always useful.

The challenge I have with this announcement is that there are so many headwinds. It's really hard to see the forest from the trees on this one. Supply chain disruptions, increased competition, floods, China lockdowns, etc. It's claimed this is *only* $40m EBITDA for the year, but I think that seems optimistic. So currently with all their debt, they are trading at an EV/EBITDA of ~12x.

That doesn't seem so bad at first sight - certainly not cheap - but this is on the backdrop of global commodity prices peaking. If you're a milk producer / exporter, and you aren't minting cash at these prices, then how will they you ever return cash to shareholders?



I know, I know, Bega is not just a milk producer. But they are clipping the ticket in their processing, and most of their revs are still milk dependent. The increased competition (Saputo, Fonterra, Synlait, among many many others) is driving the processing margins down. Farmers may be doing alright these days, but not the processors.

Even if I normalised the EBITDA to say $200m, that's still an EV/EBITDA ~10 at peak commodity prices. Let me know if I am missing something, but I just can't wrap my head around the bull case for Bega. Comp this to Synlait at the moment, where EV/EBITDA <10 prior to any normalisation, and plenty of upside with rebounding A2M supplies and new growth CAPEX investments yet to come online.