Chinese Demand for Infant Formula - BAL, A2M, BFC

N

neonuke

Well-Known Member
Silver Stacker
Thought I should bring this up here, it is a good place to diversify away from precious metals for those who may be interested.

The demand for 'clean and green' produce (dairy, meat, seafood, etc) from Australia and New Zealand will continue to grow as the Chinese middle class continues to grow.

The companies I think most likely to benefit should be Bellamy (BAL), A2 Milk (A2M) and Beston Global Food Company (BFC)

Bellamys and A2M infant formula stage 3 are almost always out of stock in Aussie supermarkets, most of them are bought, packed and shipped straight to China at a markup. BFC has operations in dairy, meat, and seafood, but is also developing an infant formula.

The story is good, the share prices have had a decent run up of late, especially A2M which announced a profit upgrade. Half year results due to be reported in Feb should show a bumper result.

Please do your own research on these companies and if you come to the same conclusion as I do, it would be good to get in and hold for the long term "dining" boom.
 
neonuke said:
Thought I should bring this up here, it is a good place to diversify away from precious metals for those who may be interested.

The demand for 'clean and green' produce (dairy, meat, seafood, etc) from Australia and New Zealand will continue to grow as the Chinese middle class continues to grow.

The companies I think most likely to benefit should be Bellamy (BAL), A2 Milk (A2M) and Beston Global Food Company (BFC)

Bellamys and A2M infant formula stage 3 are almost always out of stock in Aussie supermarkets, most of them are bought, packed and shipped straight to China at a markup. BFC has operations in dairy, meat, and seafood, but is also developing an infant formula.

The story is good, the share prices have had a decent run up of late, especially A2M which announced a profit upgrade. Half year results due to be reported in Feb should show a bumper result.

Please do your own research on these companies and if you come to the same conclusion as I do, it would be good to get in and hold for the long term "dining" boom.
Click to expand...

I have been following the A2M story without taking a nibble... there appears to be a speculative rush into the dairy based stocks. Any news regarding buying dairy farms or dairy products has been sending speculators into a frenzy.

ASX: A2M
Price: $1.79
Market Cap: $1.319B
52 week low: $0.46
52 week high: $2.36
FY16 Group Revenue Forecast: $300M - $315M
FY16 EBITDA: $33M - $37M

The above data implies this stock is trading as follows;

PE Ratio: 35 - 40

Asians don't trust their local baby formula after glass was found in some mix... hence the flight to Aus/NZ manufactured products (quality).

Balamy's (BAL) have a current PE of 84 (it was 134) for comparison which is just insane.

The time to buy these guys was 1 year ago... before the heard.

DYOR
 
bellinvest said:
Asians don't trust their local baby formula after glass was found in some mix... hence the flight to Aus/NZ manufactured products (quality).
Click to expand...

It not 'Asians' in general, 90-plus percent of the spiking demand are the parents of Chinese infants.

Its not mere glass, the Chinese parents are rightfully worried about buying infant formula containing inadequate nutrition (https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal) or additives harmful to health (such as Melamine, to create the illusion of high protein content).

Its not enough it comes with a 'Made in New Zealand/Australia' label; Chinese parents are willing to pay a substantial premium to have someone pick it off the retail shelf in Australia/New Zealand and mail/Fedex it to China for the assurance it is 'foreign market' stock. The retail freight-forwarding firms are doing a roaring trade shipping infant formula to China.

Beyond baby formula, public food safety is a serious concern in China. Even low-cost foodstuffs (like eggs) are being 'manufactured' with non-edibles to create short-term profits (http://newsfeed.time.com/2012/11/06/how-to-make-a-rotten-egg/)
 
I had a good read into Beston Global Food Company (BFC) tonight and it's rather interesting...

Pro's

- New business
- Rapid growth/expansion into the Asian markets (Dairy products/Seafood and Meats)
- Setting up some serious clients throughout Asia (China, Thailand and Vietnam)
- Huge potential

Con's

- The 2no. main men (founders) whom are associate with Beston Investments (some type of investment banking)
- Both of the main men have given themselves rather healthy 'options' and founders rights (i.e. appears they have put $0 of their own money in the pot on first glance - though i could be wrong).
- Beston Global Food Group need to pay Beston Investments a yearly management fee of 17.5% calculated as follows (don't quote me here...but its something along these lines)

Market Cap * 17.5% * (BFS yearly performance - ASX200 performance)

e.g. $200,000,000 * 17.5% * (BFS performance of say 26% - ASX performance of say 7%) = $6,650,000 fee to... themselves.

I'm staying away from this one only because i found deep in the reports how this massive management fee is calculated. That's not to say this stock will do very well... but many people will be cautious of this metric calculation. They may setup a very good business but will be taking a huge slice of the pie each and every year. It's more of an investment trust structure...

Smart investment bankers if you ask me...

DYOR
 
As mentioned above, the time get into these were a year ago. How much upside they have is unknown but a little risky. Capilano and Bkackmores have also had a good run over last fee years. So yes, good post bringing attention to people who think it's all about PMs.
Farm Pride Foods (FRM) had a good run last six months and latest dairy themed stock to launch is AHF, was around 12c early December now 38c after coming off 45c. That one isn't baby formula but farm to shop milk setup.
 
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