Top member reports
Consensus community valuation
$0.056
Average Intrinsic Value
37.6%
Overvalued by
Active Member Straws
#Broker Reports
Added a month ago

25-June-2020:  Phillip Capital: BFC: Surprise $12m capital raise to accelerate growth; Debt slashed

This is an update from PC that comes only about a week after their last one - which I also posted a link to here.  PC have a Buy Recommendation on BFC, Risk Rating: High, 12-month Target Price: A$0.16 (2 Year TP: A$0.20). 

I sold my BFC recently for a quick profit after they popped from 5 cps to over 10 cps.  They have been perennial underachievers and underperformers for a few years so I find it hard to get excited about them longer term.  There's always been a good story there, but never been much in the way of shareholder returns.

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#Broker Reports
Added 2 months ago

17-June-2020:  Phillip Capital: Beston Global Food Co (BFC): Dairy Farms sold; Debt to be slashed; Structural change planned

PC have a "Buy" call now on BFC (upgraded from Hold), a Risk Rating of "High", and a 12-mth Target Price (AUD) of $0.15 (2 Yr: $0.23).  BFC are in a trading halt pending a capital raise announcement.  They last traded at 10.5 cps ($0.105, on Wednesday 17-June-2020).

Disclosure:  I have a small position in BFC, bought at 6.3 cps (average price paid) in May.  I recently sold half at 10 cps.

From Phillip Capital's Report:

BFC is changing from a food related investment company, to an operating company focussed on Dairy and precooked Meat products. Assets at 31/12/19 comprised:

  1. Dairy ($101m or 69% of segment assets) – Two refurbished and upgraded cheese factories (Murray Bridge & Jervois) in South Aust (capacity: 300 million litres milk processing, 30k tonnes pa of cheese) plus four dairy farms near Mt Gambier SA (545 Ha; ~17m litres milk production).  
  2. Provincial Food Group ($14m, 9% of segment assets) – Specialist provider of pre-cooked meat products to supermarkets, food service and exports, based at Shepparton Vic. Significant new business recently won.
  3. Corporate/ Other ($25m including $18m of tax assets).

Sale of Dairy Farms

  • BFC has announced the outright sale of the 4 dairy farms to Aurora Dairies for $40.4m (Vs $30-35m expected), subject to FIRB approval. A 5% deposit has been received and completion is expected by September.
  • BFC has also agreed a 10 year offtake agreement for the milk, plus additional milk volumes from Aurora’s other farms. This improves BFC’s overhead recovery.
  • Net debt of $46.1m at 31/12/19 and gearing of 60% will be slashed to just 10% gearing on completion. The capital raising we feared has been avoided.

Lactoferrin Upgrade project can now be funded

  • BFC has provided comprehensive details on a planned $12m upgrade and expansion of its lacto plant, which should increase lacto production from 12 tonnes pa from current 3.4t. Incremental revenue of $13.5m expected, most of which should flow to profit. Construction expected to take 6-8 months with only 2 weeks of production downtime at switchover.
  • 2 further stages costing $9m could add another $12m of incremental sales.

Corporate structure to be normalised

  • External Management structure to be internalised by Feb 2021. Details still to be negotiated.

Changes in Forecasts

We downgrade FY20 by -$1.2m, but upgrade FY21 by $1.3m and FY22 by $5.3m. FY22 EPS is increased by 71% to 2.7 cents. We project BFC will finally become profitable with a respectable ROA of 9.5% in FY22.

Upgrade to Buy (High Risk) from hold

Our Sum of the Parts valuation is now $86.5m or 18.4 cents per share. We apply a 20% discount as there are still some risks. Our 12-mth price target is 15 cents (previously 5.8c with upside to 15c), and 2-year PT $0.23. Our recommendation is Buy (High Risk) - previously HOLD. 

--- click on link above for more of this report ---

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#Presentations / Reports
Added 2 months ago

12-June-2020:  Corporate Update Presentation

BFC rose +81.82% yesterday (from 5.5 cps to 10cps) on the back of the announcement that they've sold their Dairy Farms for $40m (but still get all of the milk produced by those farms), so I locked in the profits by selling half of my personal holding, as well as selling all of the BFC on my Strawman.com scorecard.  This Presentation gives a good overview of the investment proposition now, post the farms sale. 

BFC have been a perennial underperformer for a number of years now, never really living up to the initial hype and promise.  They had issues with a major Chinese customer who were also a substantial shareholder in BFC (major orders not materialising) and plenty of other problems.  They produce good cheese, and they're really having a go in a tough space (dairy-based food manufacturing in South Australia predominantly).  I like the concept - fresh clean food into Asia, particularly China, based on Australia's reputation for quality food production.  However, the execution has been very underwhelming. 

It's been very easy to lose money with Beston (BFC) over the past few years, and a lot harder to make money.  And so I've been following them from the sidelines.  Until they got down to 7c.  I've been buying at 7c and below - down to 4.9c, as they were clearly oversold down there. 

It's unusual for an investment (or punt) like that to pay off within a fortnight or so, but I'll take it.  They don't always work out so well.  I had similar opportunities a couple of years back with other companies and I'm still waiting for the investment cases to play out...

Some take longer than others.

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#Sale of Dairy Farms
Added 2 months ago
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#Broker Reports
Last edited 3 months ago

15 May 2020:  Phillip Capital: Beston Global Food Co Limited (BFC): Company update and Two Major Deals Proposed

PC have a "Hold" call on BFC and a 12-month PT of 5.8 cps.  They closed at 6.2 cps today, suggesting there is very limited upside from here, if PC are correct in their analysis. Interestingly, PC's 5.8c happens to be BFC's 12-month low, achieved on 13-Mar-2020.  Their 12-month high was 13.5c on 09-Jul-2019.  At the beginning of 2016, BFC were 56.5 cps.  Mostly downhill from there though...  So much promise.  So little in the way of results...

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#Broker Reports
Last edited 3 months ago

17-May-2019:  Beston Global Food Co Limited (BFC) - "A day with the new CEO - Site visit to Shepparton Meat Division", a broker report from Phillip Capital.

They think there's value there for a 3 to 5 year buy and hold.  They don't expect BFC to be profitable when they report their FY19 numbers, and they (Phillip Capital) expect only $0.6m profit in FY20 and $1.6m in FY21, so it's a slow burner investment case, not a way to make a quick buck.  

 

Disclosure:  I used to hold BFC, and I was very bullish on them at the time, but a series of disappointing results and downgrades from management (the old management, as they now have a new CEO) caused me to lose that positive view and I sold out at a loss last year.  I have been watching them since then, but my sense is it's still too early to call the bottom.  As they are widely expected to report another net loss for FY19 when they report in August, I certainly believe there could easilly be further downside from here.  There may be a time to jump back on this bus, but I don't think we're there yet.

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#ASX Announcements
Added 3 months ago

07-May-2020:  CEO Letter to Shareholders

Recently (Feb/March):  25-Mar-2020:  Update on Current Trading & COVID-19   and   16-Mar-2020:  Update on AGM Presentation   and   28-Feb-2020:  FY2020 Half Year Results Media Release

On their knees at sub-7-cents.  If they survive, they will likely multibag from here... IF they survive...  [not held].

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#Bear Case
Added 10 months ago

any money made won't make its way to minority shareholders...

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