Back on track

https://www.livewiremarkets.com/wires/the-new-criterion-four-small-cap-recovery-stocks

Over at BWX (BWX, $4.51), ex Blackmore exec Dave Fenlon has been applying his restorative balm to the natural skincare outfit’s distressed corporate visage. After a 100-day campaign after taking on the CEO job on July 1, Fenlon has done much to right the company that had been foundering since last year’s failed management buyout.

Fenlon says the ingredients to success were wholesome and simple: “being obsessed with delivery and speaking directly to consumers who want innovation.”

More tangibly, he set about reducing the company’s bloated product range to its three key brands: Sukin, Andalou Naturals and Mineral Fusion.

BWX’s hero brand Sukin is the biggest natural skincare name here, accounting for 27 per cent of what’s a fragmented market. In the supermarket channel, Sukin’s 14 products are stocked exclusively by Coles.

Conversely, its more premium Anadalou range is the leading facial skincare brand in the US, and is stocked in Albertsons’ Safeway stores (Albertsons is the second biggest grocer in the US).

But a geographic cross-pollination is taking place, with Sukin now in is in 500 US stores, while Andalou is on the shelves of local Priceline stores.
“We want to bring Sukin to the US and Andalou to Australia.”

Meanwhile Mineral Fusion, which relaunched in January, has a 43 per cent share of the US natural cosmetics market.
Fenlon is keen on the Chinese market – who wouldn’t be? – but appears more cautious than his erstwhile employer.

He says risks abound because of fluid government policy and the danger of ceding distribution control to the diagous (individuals or syndicates who buy products outside of China and then ship them there).
“We are not heavily reliant on growth in China,” he says.

Instead, BWX’s expansion plans are focused on the US market and, to a lesser extent, Europe.
Fenlon notes the global beauty market is worth more than $US600 billion a year and growing at a rate of 5.5 per cent annually. The all natural sub-sector is growing at 8.6 per cent, albeit from a low base and is emulating the growth of the natural foods and vitamins sector.

The BWX revamp has weighed on performance, with revenue dipping slightly to $149.5 million in the 2018-19 year. Reported net profit fell 70 per cent to $9.5m , while underlying earnings (ebitda) declined 44 per cent to $19.8m.

Fenlon is confident enough to forecast current year revenue growth of 20-25 per cent, with 25-35 per cent ebitda growth.

The pace of the turnaround has not gone unnoticed by investors, with the shares more than tripling since January’s trough.

In late 2018 14 per cent of the BWX register was short sold, but this pessimistic positioning has now reduced to 8 per cent.