WWN #2 – Bellamy’s Australia: Burnt Milk Still Burning


Image Source: CommSec IRESS

What’s been happening?


What Now?

After being in a voluntary suspension for five weeks since early December, Bellamy’s Australia (BAL) resumed trading on the 11th of January 2017. With the sales outlook looking bleak and major management changes occurring (Laura Mcbain removed and replaced by Andrew Cohen on an interim basis), it is little wonder that the share price rapidly fell on ASX opening for BAL.

A major concern shared by analysts include there being a high level of inventory in range of $105 to $110 million that may need to be liquidated at discounted prices due to lower than expected demand for infant milk. While analysts previously forecasted 2017 financial year earnings to be $46 million, it was slashed by Bellamy’s to somewhere between $22 million and $26 million.

As of 14th of January 2017, some revised target prices have been issued by various analysts:

  • Wilson HTM – $4.25 (hold)
  • Morgans – $4.75 (hold)
  • CLSA – $3.50 (N/A)
  • Ord Minnett – $3.72 (sell)

What’s Next?

There is a lot of uncertainty with Bellamy’s currently and that is reflected through the different value estimates above. Given the relatively low share price, it’s still difficult to say whether BAL is a bargain as there are numerous challenges that lie ahead, including: the board’s search for a new CEO, inventory management, major shareholder/board politics and China’s regulatory environment. BAL’s current share price also provides an opportunity for capital raising whilst exposing themselves to the risk of takeover by other companies. According to Morgan’s analyst Belinda Moore, she estimates that a company turnaround could take 12 to 18 months. In the meantime, it might be best to wait and see what happens.


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