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31/08/18
09:45
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Originally posted by sandy68
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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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Yep, good summary. For me the crucial point is that BAL are targeting revenue of $500m in FY21. Personally I still think this is conservative, but it cuts through the clutter of when they get CFDA/SAMR. When they do it will take off like a rocket, until then it will be manipulated by instos. But it's still a dangerous game for shorters because any pickup in SAMR approvals (especially when WHA get theirs - and they applied a month earlier than BAL and have passed the technical stage) will be treated positively by the market. At the end of the day, BAL is a solid company with lots of upside. The only downside I see is shorters who need to be treated as fake news. Personally, I use their antics as opportunities to top up. BAL will be a $20 stock again imo, and probably $30 one day too, so I am definitely in for the long haul.