Keep in mind, though, that the situation with Blackmores and Vita Life Sciences is not exactly comparable.
I think there are two key differences between these two companies worth bearing in mind: firstly, Blackmores has made already it in China, whereas Vita hasn't managed to gain much traction in that country.
The other significant difference is that VLS is a much smaller company, and their previous efforts to expand have been hamstrung by the fact that they don't enjoy the same economies of scale of their larger competitors.
As I understand, Blackmores success in China can be traced back to the early years of this decade, when many Chinese students studying in Australia took a liking to Blackmores products, and then took them back with them when they returned, creating an awareness of the brand in their homeland, and steadily increasing demand. The fact that the brand caught the attention of a popular local celebrity also helped.
At the same time, Herbs of Gold and the other brands sold by Vita Life Sciences didn't seem to have anywhere near the same level of visibility as Blackmores products here in Australia.
Back in 2012, just after I became a shareholder in this company, I made an effort to keep an eye out for the Vita Life products in local pharmacies and shops that I visited, and I couldn't seem to find much.
After 2016, when Blackmores had become a hit in China, the VLS management made an effort to increase the visibility of their product range in Australia, but by then it was too late, they had missed the boat.
The small size of Vita Life also works against them. Years ago, I communicated with Eddie Tie, the former MD of the company. In one email back in 2015, I asked him if there was a danger if the products could be undercut by larger competitors such as Blackmores.
He sent me a reply which I've included below (he has since left the company so I doubt he would mind this being shared here):
...Thanks for your continuing interest in our company. Malaysia and Singapore accounts for almost half of our group sales and like most business, we are constantly under attack by competitors who sell cheap by discounting a lot including Blackmores. Although our products are different from Blackmores, there is still competition when the price difference is huge enough for the consumers to switch. We face this all the time. Fortunately, our most of our 10 products are different and not commodity type. Many competitors use commodity products to boost top line by selling cheap (but very little profit)...
Basically, larger companies are able to charge less for comparable products, and most customers are price-sensitive to some extent, which makes it hard for a smaller player such as Vita Life to compete.
The significance of these new tariffs is that they level the playing field for VLS against the larger US companies who compete with them in China (and indeed, Malaysia and Singapore as well). The Trump tariff increases are likely to raise the cost of hundreds of chemical ingredients used in 'Made in America' health supplements, and US companies in the same industry will probably be forced to pass on the increased costs to the customer.
All up, my guess is that whoever has been buying over the past couple of days is probably thinking that the 'tariffs' situation will offer Vita Life a second chance to penetrate the Chinese market, as well as putting the company in a more competitive position in South-east Asia.
I noticed in the latest results presentation a comment that the Australian results were aided by the export of Herbs of Gold products to China (pg 5), and this bullet point might have caught the eye of the buyer(s) over the past few days. It could be an indication that the company might already have started following in the same trajectory as Blackmores a few years back, and if so, the tariff situation would just be the icing on the cake.
I agree with your point that the share price could see much more upside in the near term. In particular, I think it is plausible that we might see the 'Momentum' crowd start being drawn to this stock.
Apart from the surging share price we have seen over the past couple of days, many momentum traders would no doubt be well acquainted with the success enjoyed by the US company Herbalife, the share price of which is up around 1000% since the GFC, and the possibility that VLS could potentially steal market share from such a company certainly has appeal.
On top of that, the minuscule number of shares outstanding (56 million) would also probably catch their eye. You would be hard pressed to find a small company with less, I reckon. So a good one for the trend-chasers, perhaps.
(20min delay)
