Thought I might start a thread where posters can post their in-depth analysis’ on BFC, I’ll start !
My analysis will try to cover both qualitative aspects and quantitative aspects, but keep in mind this is just my opinion, I am no professional (in fact, just a lowly Uni student), but I do this for fun because I find it interesting and because I enjoy it (Disclosure: I currently own and plan to be a long term holder of BFC)
Too much detail or not enough? Let me know what you think! Any feedback is great feedback!
Description: BFC are currently invested and focused in four industry segments: dairy (milk, yoghurts and cheese); seafood (lobster, oyster, water and sea water fish); health food (functional food and nutritional supplements, naturally based food ingredients and organic beverages), and meat (processed meat and ready-to-eat meat). Currently exporting to 15+ countries and employing 190+ people. For the best overall description see their website: bestonglobalfoods.com.au
Management: Having Roger Sexton as Non-exec chairman of the board I think is a huge plus, Sexton undertook his tertiary studies in agricultural economics, has worked for the Bureau of Agricultural Economics and was an Executive Director of the Industries Assistance Commission, specialising in rural industries so has a good track record in Agricultural business, this can only help BFC’s business, have a look at Reuters for more detailed information on BFC’s management here: http://www.reuters.com/finance/stocks/companyOfficers?symbol=BFC.AX&WTmodLOC=C4-Officers-5
Also see: http://www.bestonglobalfoods.com.au/home/?page=board-and-management
Also just like to note, Benjamin Ding, the Regional Managing Director from the BGFC (China) Management Team, has previously worked in the Dalian Foreign Trade Bureau (a Chinese Government department), and also as a trade representative for the Dalian Municipal Government, this is obviously a massive bonus for BFC having someone with not only expertise with dealing with China and it’s government but also such strong ties with it. Super excited about that.
BFC so far: This data below can be found in the AGM presentation but will summarise main/best points here Dairy Produced 700 tonnes of whey powder YTD (vs budget of 270 tonnes)
26 million litres milk processed in 3 months (vs budget of 25 million litres for full year 2015-16)
Produced 2600 tonnes of cheese YTD (vs budget of 1400 tonnes for full year 2015-16)
Superior Infant Formula currently being developed in conjunction with NBI & Acquired a2 dairy herd for production of a2 Milk™ (And people say A2M has no competiton? )
First Dairy Sales of 120 tonnes to Food Tech with forward orders of 100 (In Thailand)
First Seafood Sales for a range of oysters, giant crab, live lobsters and fish with Thammachart (In Thailand) Seafood Settled acquisition of Mori Seafood (Port Lincoln) and Five Star Seafood (Port MacDonnell)
Increased lobster production from 128 tonnes pa to 380 tonnes pa (+197%)
Increased processing of Southern Blue Fin Tuna from 650 tonnes pa to 735 tonnes pa (+13% on prior period production)
First to market with 4 tonnes of Southern Blue Fin Tuna retail packs to China (an Australian First)
First BGFC shipment of Kingfish and Oysters to Shanghai customers Meat Completed acquisition of Scorpio Meats
New plant and equipment purchased and installed
Meat processing production increase from 2,000 tonnes to 2,500 tonnes (+25%)
Scorpio now has 98% market share of all meat used in Australian-produced baby foods Health & Wealthbeing Settled 20% investment in Neptune Bio Innovations Pty Ltd
New HQ and product research facility established at Lidcombe Business Park, Sydney
Long-term contract signed with global customer for use of Lo-Sal 50 salt replacement product
Orders obtained for condensed milk replacer product for export to India, Bangladesh and Pakistan
Overall they seem to be already smashing their previous production forecasts! Great news from BFC and hopefully more of it to come. Info taken from pages 16-25 of BFC’s AGM presentation
For November 2015 they have estimated a NPAT of $0.6M, annualised this is a NPAT of $7.2m. With a market cap of $201M this creates a forwarded P/E of ~27. Sure it’s not the lowest P/E in history but NPAT will grow as BFC make more acquisitions and investments into the food industry as well as overall sales/production increasing.
BFC is currently in the process of developing a food traceability app in conjuction with Oziris and BrandLok for Chinese consumers to prove the safety and history of certain food products, boosting consumer confidence in purchasing BFC, apparently a “World first in combining food traceability with anti-counterfeiting technology” but because I have literally no knowledge of IT, apps and how beneficial this app may or may not be, I will be keeping it out of further analysis but definitely keep this in the back of your mind.
Summed up my basic likes and dislikes about BFC: What I like: -Diversification: Dairy, meats, seafood & health food products. No reliance on one sole product or section of the market. More diversification = less risk.
-Appealing to China’s Middle Class & Growing word Population: 326 million new middle class are expected to emerge in China’s urban areas from 2014 to 2030. (http://www.*.com.au/chinas-rising-middle-class-will-create-opportunities-the-world-has...) BFC are in a good position to capitalise on this with existing ties which will be noted below. Also BFC mentioned this in their AGM presentation “The demand for food will increase by 70% between now and 2050, World food production will need to be more than double to feed the global population by 2050” (Page 74) -Appealing to China’s Love ofHigh Quality Products: Personally just my opinion but I visited Hong Kong, Shenzhen and Guangzhou late last year and this cannot be said enough. China’s love of high quality (even more so western) products is outrageous. Their marketing strategy is also well based around this, this quote being from BFC’s AGM presentation “As incomes increase in Asia, people are also demanding more high quality food, in addition to greater quantity.” (Page 74)
-Access to Asia: Beston currently have offices in China (1,361,512,535(excluding HK and Macau) population, (2015), Thailand (67,976,405 population (2015), Vietnam (94,348,835 population (2015) and Brunei (429,646 population (2015). http://www.internetworldstats.com/asia.htm BFC I think are more well positioned than any other ASX listed company going forward, hopefully they look to expand into Indonesia and India once more established. -Ties: BFC’s current majority shareholder is Dashang (14.9% @35c) who is the largest retailer in Northeastern China, they also have a $140 million deal with Dashang committing to take $42 million in products in the first year, $100 million in the second year, with expectations that the trade will continue to grow.
Dashang currently owns over 200 retail stores in 150 cities across 11 provinces in China, BFC has been given the access to stock a premium food section in each of Dashang’s premium retail outlets in 70 different cities. Dealing with Dashang has also given BFC the green light from the Chinese government to operate in China which is one of the biggest bonus’ for me.
Also has a customer relationship with Yihaodian, one of China’s leading online retailers (Note: Walmart has a 51% equity stake in Yihaodian) and had 57 million registered users/customers (fun fact: well over double Australia’s population) as of 2013.
Between Dashang and Yihaodian BFC can access 70 different cities in retail locations in China and access to 57 million users online, which overall is great for brand recognition and awareness, now BFC just have to make the most of it!
Wanting to do Business in China is one thing; getting approval to do it is a whole another story. BFC already have their foot in the door in China and are well placed to expand further there.
-Brand Image: High quality products I think are the key if BFC are to be successful overall in Asia and they know that, already capitalising on Australia’s clean, green healthy image and focusing solely on high quality and healthy products. As always, Quality > Quantity
-Management: I’m going to contradict myself by putting management in both my likes & dislikes but I believe they both have their positive and negative aspects. For positive I found the decision for BFC not to proceed with the acquisition of the Weneeda Dairy Farm as outlined in the Company’s prospectus as a sign that management aren’t prepared to throw their cash reserves at any old asset and are prepared to hold for the right opportunity to come along for the best growth and cash flow prospects. Have currently contacted BFC for more info regarding the decision and am waiting for a response. Good sign in my eyes that BFC won’t bleed money and are going to be smart with their purchases.
Enough of the positives, here's what I don't like:
-Dividend payout: BFC plan to declare a final dividend for the 2015-16 financial year based on a 60% - 85% payout ratio of the Company’s annualised & normalised NPAT. Dividend intended to be within the 1.50 cents - 2.0 cents per share range. Personally I would have preferred to BFC to re-invest their earnings for growth but it’s not the end of the world, will only give me more cash to purchase more BFC share.
-Pump and Dump: Concerned some people might see BFC as a hype-train pump and dump stock. Hopefully the strong growth prospects and Div payout attract more long term mum & dad investors.
- Management: TMF provided some good points in their article, notably “CEO Sean Ebert has a background in engineering and most recently worked for WorleyParsons Limited, an oil and gas services company and prior to that Logicamms Limited an engineering company. Apart from independent non-executive director Don Taylor, who serves as chairman of Graincorp Ltd, there’s virtually no one else with proven senior level management of food and beverage businesses.” Good points, I think time will tell how management performs but I’m showing some faith and believe they can overcome that and help grow BFC. Link to article: http://www.fool.com.au/2015/07/24/why-you-need-to-avoid-beston-global-food-company-limited/
Overall: Not only do I think there is currently a strong current underlying value, but as BFC continues to make future acquisitions and investments, improves brand awareness and brand recognition and lastly strengthens and maintains trade ties overseas I believe BFC are very well positioned for future growth and expansion.
(Disclosure: I currently own and plan to be a long term holder of BFC)
(20min delay)
