Ok guys, I'm exiting hold mode, just cos Bega Cheese decided to open offers on the 26th of July. Pity it had to be now during GFC2 time. :/ I'm in it for the long-term (60+ years), and think Bega Cheese is the kind of company that is held long-term. It's not gonna pay the dividend yields I aim for - calculated to 0.625%! (Last div was 1.25 CPS). Well certainly not at the start. But since the company supplies a primary need, I think it can survive tough times and I see a benefit to that. I expected its offer price to be somewhere between 80c to $1, so I'm surprised it's offer price is $2. Though I do feel that it's value will reach somewhere between $3 - $4 at least, in the mid-term. I'll be buying a reasonably large amount upfront, but definitely won't be going "all in". Anyone else planning on buying the offer?
Are you serious? I do not know enough about beqa's market or books, but I am be about as keen to participate as I was for the myer IPO.
No will not be partaking - to many variables and to many downsides vs upsides IMO. Look at the number of dairy farmers hitting the wall over the last few decades and ask yourself why.
I'm not joking this time around, seriously @_@ I never found the Myer IPO interesting either. I could not see anything special about it - I don't even shop there. While Bega Cheese obviously did something wrong to end up in sufficient debt to make a float feasible, in the long-term I think agriculture is the only industry we'll have left. Manufacturing is pretty much already offshored to China, and our Services industry is slowly being sent to India. So what's left? Agriculture I must admit I am biased somewhat in regards to the product: cheese. My fridge never lacks kilos of cheese or litres of milk. :| The biggest downside for me is that I could be making more profits elsewhere. Generally though... Cons: -capital is to repay debts -low div yields -negative forecast -listing during GFC2 (i.e. uncertain whether it will hold out like Woolies can - that's the risky part) Pros: -quality product -consumer staple -good infrastructure -established supply contracts Feel free to add/remove from the above. Of course, I'll be waiting until after the 2nd of August before buying - no rush as the prices won't change
I'm think less in agriculture and more in aquaculture. But what do I know, I follow you guys and hope I pick right.
jnkmbx statistically speaking the share price of most floats ends up lower after 12 months. If your patient and don't buy in on the float you may have a chance to buy lower later on. Plus give the company a year or 2 to prove itself. Many companies float with lofty profit projections only to disappoint with downgrades soon after. Also you'll get a chance to see the management team in action via their commentary, strategy and results. As a general rule I don't buy into floats, and most wise investors (Phillip Fisher, Benjamin Graham and Warren Buffett, etc) advise the same general rule. A lot of the time companies get dressed up for a float (i.e. crimp capex leading up to the float, channel stuffing their product, etc). Also sellers tend to sell when they can get a high price, which is why there are few bargain floats.
I see what you're saying Bargain Hunter. Maybe it's just the fumes of cheese, but I thought that perhaps since they've been operating privately in a similar fashion to a publically listed company (i.e. farmers are shareholders with voting rights, board provides annual reports, board organises AGMs, company pays dividends etc...) I figured the step to becoming listed wasn't too hard for them and that they are used to this structure already. I of course read whatever pre-float shareholder material was available as soon as they announced they would float, so felt I got a good overview of their operations before it went into the cosmetics room to cake on the make-up. Well I was under no illusions it was flip-proof, so if it happens (most likely will happen), I suppose my long-term stance could deal with that dip. Something tells me the flip wouldn't be as big due to GFC2 times. i.e. Day traders being cautious and probably not leveraging as much. Though perhaps I'm too keen on cheese and should consider cost averaging this one by buying the float at the minimum offer and buying on the dips throughout the year. :/ There's still time to ponder, and the US still has a few more days to play out its debt drama.
Taken from the "Entertain Me" thread http://forums.silverstackers.com/topic-9713-entertain-me-page-3.html
Another question in regards to Bega Cheese is the strength of the brand and the lack of sustainable competitive advantage. No doubt people will consume cheese for a long time to come. The question is whether they will continue to consume Bega cheese in increasing quantities or whether they will switch to other brands. Bega is a well known brand in Australia, but in my opinion people aren't especially loyal to the brand (i.e. the brand is not a source of sustainable competitive advantage like the Coca-Cola brand is). Just like Qantas and Hoyts and Toyota are well known brand but that doesn't mean that people will pay a huge premium for the product/brand. In my opinion Bega cheese is selling a commodity product and is vulnerable to any potential future price wars, vulnerable to an increase in the price of cheese (reduces cheese demand from consumers), vulnerable to increased competition via foreign cheeses entering the market. You have to ask yourself does Bega Cheese have a sustainable competitive advantage of being the lowest cost producer of cheese? I don't know the answer to that. In Australia examples of well known brands which represent a sustainable competitive advantage are Reckon (Quickbooks, etc), MYOB, Darell Lea.
bega is not a boutique brand basically just big slabs in a few flavours considering the amount of dairying in the area, you'd think that they'd have an enhanced line one issue in particular in the area is periodic flooding - even the cheese factory took a hit fwik floods can make travel in and out of the area difficult or impossible another issue is price suppression bread and milk are aggressively targetted at coles - $2 for 2L and $1 or 1.5 for bread cheese could be up on the chopping block on the other hand, Bega Cheese is a major employer in the area the town itself has just one street dedicated to commerce so, I think a lot would be done politically to keep that company going in the event of future problems
I buy whatever cheese is on special when I grocery shop. No brand loyalty here when it comes to cheese.
Aside from supplying cheese directly under their brand, they also supply bulk cheese, process and package it for other brands such as Kraft Foods and Aldi (long-term contracts). This means that even though "Bega Cheese" isn't on Aldi shelves, it exists there under different names and non-premium prices. Over 50% of their revenue comes from "Value Add Packaging" i.e. re-branded cheese. ~83% of their revenue is from the domestic market, so it's probably ok that the brand is not really known elsewhere. I guess they could work on it if they wanted to increase exports. That's the $254,054,000 market cap question O_O I'll say @_@ Bega Cheese's products outside of the duopoly may help minimise the risk.
Oh well, looks like waiting till after the debt ceiling woes settled didn't work out in terms of timing. I guess I'll keep an eye out for some deals instead.
Where do I start? The world needs food. Australia has the land. Basics........... Then the government steps in. Will look into the company. Thanks for your insights. Got any Honey?
