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$13.23 bellamy's australia limited

FY18 Guide & Annual Results, page-481

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Bre Wolf

471 Posts.

209

31/08/18

00:57

Post #: 35311193
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Originally posted by sandy68 ↑

Thank you Bre Wolf .

I've some views regarding what analysts are saying and I'll do some maths once I get some more data, the first for me is to remove my own confirmation bias and extract some numbers.

First of all, the normalised EPS which came at 40 cents/share and statutory EPS which was a little lower due to one one-off expenses was very much praised by the market and this puts BAL at value buy amongst all primarily infant formula brands publicly listed. PE of 29. Shorting this is just not wise. Any deep pocketer can begin to accumulate at these levels and people may miss out. This will happen too.

Morgans have once again used a no brainer discount rate while bring forward future cashflows. This company has no debt and Morgans need to do more work on this front, a lower discount rate is advisable there. "One size fits all" approach they've, but I don't take them seriously as this company has got no debt. Yes - no debt! Using a large discount rate will make the intrinsic value of the company lower. Target price lower.

The sales for FY18 which was $328.7 million has less than 6% sales attributed through offline channel (SAMR scenario). If we had achieved SAMR, than it means $19.39 million (Im using 5.9% here ) would have contributed to the sales revenue of FY18. The management which has guided the market a conservative 10% domestic revenue growth, which means the revenue could be ( not would be ) $328.7 - $19.39 = $309.31 and + 10% = $340 million (round down). This is what Morgans have for FY19 sales estimates and this is how they got to this. It does not factor in Vietnam or other product mix revenue. It is almost guaranteed to be revised upwards. We know now that the absence of SAMR only makes less than 6% dent into the final revenue, as evident from FY18. Even a simple update on Vietnam sales figures will make broker revise their price targets. As for the marketing expense, management have indicated that cost savings from OPEX and better EBIDTA margins will be diverted there. This will make forecasting more predictable.

Now this makes me conclusively feel that as soon as SAMR is announced, I'll just have to bite the bullet and buy a massive chunk on the day at whatever price I can get as every broker and their cat will revise their price targets significantly upwards within a day or two. Multiple broker upgrades creates a positive effect and I'll just want to capture that wave. Offline channel in China is very profitable and market can grow exponentially there, subject to BAL's logistical knowledge. August has ended and SAMR is due anytime now.

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Wow good to hear, so thank you for your very detailed analysis as helps give me more confidence to lock down holding this stock even more and ride out the Insto's shorter's games over the short term.

I must admit this has been a difficult stock to fathom, so glad I sold out on the downtrend and bought back in in the high 9's to help me recover my initial loss, as I jumped in too late at the high point

Keep up the good work as I admire your analysis far more than a lot of the other fundies views, who like to talk the talk but walk the walk in another direction!

GLTA LT SH's

BAL Price at posting: $11.36 Sentiment: Hold Disclosure: Held
4 Upvote

0 Great analysis

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