1) Quarter revenue of $13 Million, down from $19.7 Million the previous quarter.
2) China direct sales up 26% on pcp - significant slowdown on Q3. Slowdown blamed on cahnging channel mix dynamics.
3) Other market sales up 71% on pcp (only 8% of revenue)
4) Infant formula sales up 20% on pcp.
5) daigou channel constrained due to lack of Chinese tourists and students.
THIS RESULT IS REALLY DISAPPOINTING, WITH GROWTH SLOWING SIGNIFICANTLY, LITTLE OPERAATIONAL LEVERAGE INDICATED, AND A RISK OF CHANNEL STUFFING.
IT WILL TAKE A LONG TIME FOR CHINESE TOURISTS AND STUNDETS TO RETURN TO PREVIOUS LEVELS. I DID NOT REALISE THE BUSINESS WAS SO DEPENDANT ON THIS CHANNEL ( I HAVE NOT SEEN A2M BEING IMPACTED THIS WAY - SUPERMARKET SHELVES REMAIN EMPTY OF A2M PRODUCT).
THE THESIS IS BROKEN FOR ME - I AM OUT.
1) Revenue up 37% on pcp. Driven by strong growth in infant formula, with growth of 77% on pcp.
2) Gross margins increased to 24%, driven by infant formual gross margins of 41%.
3) 22% increase in costs on pcp, with marketing costs up 267% on pcp.
4) Corproate Daigou channel growth strong, at 52% on pcp. Reporting month on month growth, following increased focus on this channel - Presumably this means growth is accelerating. Strong Daigou sales demand is predicted for H2. feedback is demand is driven by supply uncertainty caused by COVID-19.
5) Direct to China sales increased 19% on pcp, however, with infant formula direct China sales doubling on pcp, this is likely to accelerate as infant formual becomes a bigger slice of the direct to China pie.
6) Significant build up in inventory in anticipation of strong growth thsi calendar year.
SUMMING UP, GROSS MARGINS ARE INCREASING BY ABOUT 4-6% PA AS THE BUSINESS SCALES. MARKETING IS CURRENTLY 18% OF SALES, WHICH SHOULD DRIVE CONTINUED REVENUE GROWTH.
Also: 29-Apr-2020: Presentation at 17th AgFood Virtual Conference
MAJOR NEW SUPPLY AGREEMENTS WITH COLES AND OTHER DOMESTIC RETAILERS BUBS ORGANIC® GRASS FED FORMULA NOW THE ONLY AUSTRALIAN MADE AND OWNED ORGANIC FORMULA SOLD NATIONALLY IN ALL MAJOR RETAILERS
--- click on link above for more details ---
Also - in case you missed it - 18-Feb-2020: Major New Supply Agreement with Woolworths
Great results, and there appears to be strong momentum going forward, with SE Asia market now a significant growth driver.
The Woolies store roll out will drive local sales growth short term. Long term, it is a quesiton of whether is is another cae of channel stuffing (BWX), or sustained demand (A2M).
Disc: I hold.
28-July-2020: Wilsons: Cautious Daigous
Wilson's Recommendation: MARKET WEIGHT and 12-mth target price: A$0.93.
16th April 2020: Wilsons: Bubs Australia (BUB): Bubs are indeed immune to it
Wilsons call on BUB is "Market Weight" (i.e. Neutral) and their 12-month Price Target is $0.84.
Bubs confirmed a solid 3Q20 result, with strong Infant Formula sales partly offset by a delay in new Adult Dairy product launches. The accelerated growth in Infant Formula sales (+33% QoQ) was largely in line with our expectation, driven by strong pull-forward sales from COVID-19 and contribution from new products and markets. We remain cautious on the potential for lower replenishment orders in 1H21, while noting early encouraging signs that suggest growth has settled at a higher base compared to that of prior to the outbreak. With the share price outperforming the XSI by 95% over the past month, valuation looks fair. We retain a MARKET WEIGHT rating.
3Q20 result: Bubs confirmed a record quarterly performance led by Infant Formula sales growth. Group gross sales was at $19.7M, representing +67% on pcp and +36% on the prior quarter. A positive quarterly operating cash flow of $2.3M was achieved, bringing quarter-end cash balance to $36.4M.
Wilsons view: The accelerated growth in Infant Formula sales (+33% QoQ) was in line with our prior expectation, driven by strong pull-forward sales from COVID-19 and contribution from new products and markets. Out of the new products launched recently, the outperformance of the new Organic Cow Infant Formula product in Vietnam was particularly encouraging. Early signs suggest the surge in demand following the outbreak of COVID-19 appeared to have settled at a higher base, implying a degree of structural growth. Despite a 4week delay in the launch of the refreshed Caprilac product as Bubs prioritised the production of infant formula products, the underlying growth in Adult Dairy sales growth in the quarter was below expectation. We reset our expectation for the rest of the forecast period. We continue to expect quarterly cash flow to be volatile and now expect a positive operating cash flow from 1H21.
Forecasts: Modest changes to EPS. Sales down 7-16%, largely driven by Adult Dairy. Moderate downgrades to opex.
Valuation: We set 12-mth target for Bubs at $0.84 p/sh using a blended valuation based on sum of the parts ($0.96 p/sh based on a 12-mth fwd EV/Revenue multiple of 7.5x for IF and 5.5x for non-IF) and DCF ($0.72 p/sh).
Risks and catalysts
Risks: Product quality, supply constraints, market access, intellectual property, key customer / supplier risk.
Catalyst: Takeover, registration approval.
--- click on link above for more ---
Bubs confirmed a mixed 1H20 result. Group sales +39% on pcp, but core IF sales remained flat sequentially. Both NPAT loss and cash burn were larger than our previous expectation. We now expect positive EBITDA from 2H21 (previously 2H20). We forecast 2H20 growth to accelerate with pull-forward demand from the virus outbreak and open orders for new products. We note there is more value emerging now after recent share price performance, but opt to sit on the sidelines until we get more confidence on the growth trajectory of IF and clarity on expected ROI from its multi-product strategy.
1H20 result in line with pre-release. Group sales of $27M increased 39% on pcp. IF sales remained flat sequentially on 2H19, with increased activity level in Corporate Daigou offset by a deterioration in small Daigous due to regulatory changes. NPAT loss of $5.5M was higher than expectation from lower GPM and higher marketing spend. Period-end net cash was $13M lower than expected, driven an inventory build ahead of new product launches and timing of receivables.
COVID-19 drives demand. Management confirmed no material impact from the virus at group level despite continued logistical challenges. Encouragingly, management called out the corporate Daigou channel has experienced increased activity level since the outbreak.
Wilsons view. After a full 12-mth impact of regulatory changes around CBEC in China, we expect revenue growth to accelerate in 2H20, driven by a) pull-forward demand from COVID-19, and b) new product launches (ie. Deloraine, grass-fed cow IF and junior nutrition). Beyond FY20, IF sales grwoth trajectory remains key. Our forecasts assume BUB to follow a similar trajectory to BAL’s in its early years. We expect a 50bps GP margin improvement p.a. for IF over the forecast years from the scale benefit associated with one-step conversion manufacturing. We forecast marketing spend at 11-17% of group sales over the forecast years.
B/S a modest concern. Lowest point for net cash is now expected at the end of FY21 at ~$22M. This presents a modest concern given the potential working capital requirements for new products and expansion into new markets.
Forecasts. Sales down 12-16%, largely driven by Adult dairy. NPAT down significantly, with lower GPM and higher D&A partly offset by lower opex in the outer years due to AASB16. We now expect BUB to generate positive EBITDA from 2H21 (vs previously 2H20).
Valuation. We set 12-mth target for Bubs at $0.76 p/sh using a blended valuation based on sum of the parts ($1.04 p/sh based on a 12-mth fwd EV/Revenue multiple of 7.5x for IF and 5.5x for non-IF) and DCF ($0.47 p/sh).
Risks and catalysts
Risks. Product quality, supply constraints, market access, intellectual property, key customer / supplier risk. Catalyst. Takeover, registration approval.
--- click on link above for the rest of Wilsons' report ---
26 Feb 2020
More details about Morning Star Quantitative
Fair value $1.13
Does anyone know how to find a list of SAMR companies approved? Trying to compile a list of ones that have got it and ones who don't see how much difference there is between them and BUB, as I guess most of us have learnt this is pretty important to their success. From what I can tell not even A2M have it and Bellamys didnt receive it so it might be a catalyst that is out of reach for this company? Who knows but if you know how to get more info be interested to hear.