Wattle Health Australia Ltd’s [ASX:WHA]share price has risen by nearly 20% today, after China gave it the green light for general trade of milk products.
Wattle Health describes its mission as providing ‘high quality, 100% Australian made health and wellness products you can trust through all stages of life.’ It’s certain that we have the trust of the Chinese market, after this morning’s announcement.
Wattle Health have managed to secure regulatory approval to sell one of its products in China. The product in question is a one-kilo retail bag of Pure Australian Grass Fed Milk Powder, a popular type of infant formula.
The share price has levelled out but is still up by 9.09% at time of writing. Why is the market in a frenzy?
It’s quite clear that this development will be a strong positive on the sales front. Not only will entry into a new market generate additional revenue, but Wattle Health will become more visible as a brand in the highly competitive Chinese market.
In fact, it could potentially become a number one go-to brand for the Chinese. Several marketing reports have long indicated that Chinese consumers perceive Australia as clean and green, with high quality, healthy and authentic products.
And scandals with China’s own infant formula brands in the past will only further push the Chinese market into loyalism towards Australian brands.
However, it’s important to remember this approval still doesn’t amount to the CFDA accreditation that the company longs for. Until that’s been granted, Wattle Health still won’t be able to sell its products directly into China. Should you invest in Wattle Health?
While the share price is certainly riding at a healthy-looking high, the excitement could be short-lived — particularly if the company has to wade through any sticky spots in getting its CFDA accreditation ticked off.
And though this is positive news, tensions in trade are often only one political faux pas away. It could pay to remain abreast of US-China relations.
Wattle Health seems to have a great product that’s in Chinese demand. But let’s remember that A2 Milk Company Ltd [ASX:A2M], Bellamy’s Australia Ltd[ASX:BAL] and Bubs Australia Ltd [ASX:BUB] are also on the race to win hearts in that market.
Still, there’s some exciting scope for opportunity in the emerging Chinese middle class…
For now, it could be wise to look carefully at each competitor before making any huge investment. You wouldn’t want to miss out.
Regards,
Ryan Dinse,
Editor, Money Morning
Wattle Health Australia delivers record sales as it broadens its product range and enters new markets
12:30 06 Apr 2018
Wattle is also expanding into new markets, having made its first sales in Macau and India in the March quarter.
Wattle Health Australia Ltd (ASX:WHA) has requested a suspension in trading of its securities, but not before it released some impressive March quarter sales figures.
The company issued a statement around midday, saying that it would be releasing an announcement regarding the finalisation of a joint venture and/or potential capital raising.
The voluntary suspension will remain in place until April 20, 2018, or at such time as the company has finalised its joint-venture or capital raising initiatives. Strong sales growth
In the three months to March 31, 2018, Wattle’s range of dairy and nutritional products generated gross sales of $804,379.
This was a particularly strong performance given that it represented 121% of total sales for the six months to December 31, 2017.
Importantly, the company is growing its sales in Australia and overseas assisted by high-profile distribution agreements. Metcash, API and Tesco among distributors
In Australia, the company’s distributors include Metcash (ASX:MTS), Australian Pharmaceutical Industries (ASX:API) and JR Duty Free.
The company has three major distributors in China, including Tesco Lotus Supermarket.
Wattle is also expanding into new markets, having made its first sales in Macau and India in the March quarter. Adds new products and breaks into new markets
The company has broadened its product range, adding nutritional dairy products pitched at seniors, nursing mothers and students. In February, Wattle acquired 80% of organic baby skincare company Little Innoscents for $300,000 in cash and $400,000 in shares.
It has a range of products made from 100% natural, organic and botanical ingredients.
The group is already profitable, generating underlying earnings of $250,000 from revenues of $900,000 in fiscal 2017.
Its products are distributed through 700 stores in Australia and exported to markets in the Middle East and South East Asia.
Wattle Health Australia Ltd (ASX:WHA) strikes supply deal with Chinese state-owned Shandong
Wattle Health Australia Ltd (ASX:WHA) announced this morning that is has struck a supply deal with Chinese state-owned business Shandong Weihai Port International Trade Co Ltd.
The deal will see Wattle supply Shandong with its conventional cow infant formula range, with Shandong agreeing to minimum order volumes over the first 3 years, worth cumulative revenue of approximately $34 million over the period.
This deal is the latest in a string of steps made by Wattle in a bid to boost its sales pipeline, in particular, its ability to tap the Chinese market to its potential.
In April, the company signed a similar deal with International Supplies and Distribution Company Pty Ltd (ISDC) to supply its conventional cow infant formula for sale in traditional retail/general trade in Mainland China.
In late May, Wattle struck a deal with consumer staples wholesaler and distributor Metcash Limited (ASX:MTS) to supply its baby food range to Metcash Trading Limited, the wholly owned subsidiary of Metcash Limited.
Earlier this month, the company completed a capital raising, raising approximately $33.9 million which will be used to partially fund its obligations as part of the Corio Bay Dairy Group (CBDG) Joint Venture, announced in early April.
Wattle entered into the joint venture with Organic Dairy Farmers of Australia Limited (ODFA) and Niche Dairy Pty Ltd (Niche) to form CBDG, of which Wattle owns a 45% stake. CBDG will design, construct and operate a dedicated organic milk spray drying facility in Geelong, Victoria, and will have the capacity to be able to process up to 200,000 litres of fresh organic milk per day (up to 73 million litres per annum).
Last week, Wattle also announced it had entered into an agreement with Quality Brands International Direct (QBID) which will provide access to major export markets via e-commerce. QBID is a leading e-commerce provider predominantly in the Chinese market with more than 20 brands represented.
WHA Price at posting:
$1.14 Sentiment: Buy Disclosure: Held
(20min delay)
