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Food additive firm's formula for growth: Clover Corporation SMALL-CAP SPOTLIGHT: Tim Morris From: The Australian May 26, 2010 12:00AM Increase Text SizeDecrease Text SizePrintEmail Share
Add to DiggAdd to del.icio.usAdd to FacebookAdd to KwoffAdd to MyspaceAdd to NewsvineWhat are these?COMPANY: Clover Corporation.
COMPANY: Clover Corporation
ASX CODE: CLV
SHARE PRICE: 27c
RECOMMENDATION: Buy

WITH Australians tuning into reality cooking shows in record numbers, budding food connoisseurs must be searching for the healthiest, freshest ingredients. While there can only be one victor in the MasterChef kitchen, there is an opportunity for investors to take advantage of these gastronomic trends by trying their luck on Clover Corporation.
Clover is a profitable food technology company, developing and producing "functional food additives". When you see your favourite loaf of bread sitting on the supermarket shelf with a "new improved formula" or added nutrient, there is a chance that Clover is responsible for it.

Clover's particular niche is boosting the Omega-3 content of processed foods such as baby formula, dairy goods, bread and other basic health products.

Omega-3s have attracted growing attention over recent years for their wide-ranging health benefits. However, this particular class of nutrient is only available in seafood, with smaller occurrences in eggs and lean red meat. Clover's technology extracts Omega-3 oils from these natural sources -- mainly fish -- so the nutrients can be used to enrich more common portions of our diet.
Clover has delivered uninterrupted pre-tax profit growth for the past three years. During the most recent half, pre-tax profits rose 30 per cent to $2.7 million, on the back of an 80 per cent rise in revenues to $16.3m.
The company is targeting export markets for future growth and last year inked a distribution alliance with Corn Products International, a billion-dollar food ingredients company.
Buffering Clover is its strong balance sheet, which is free of debt, with net current assets equating to 11.4c a share. Deducting this from the share price yields an implied price to earnings ratio of just eight times 2009 earnings.
Such a valuation appears very undemanding and, in our view, it won't take much luck for the share price to rally if recent earnings momentum is sustained.