A2 Milk, Bubs and Wattle Health share prices: the current situation
We examine the current outlook for China’s IMF market, as well as a handful of Australian infant formula stocks looking to capitalise on this mega-trend.
The IMF market: growth drivers at a glance
China’s infant formula market (IMF) increased significantly in size between 2013 to 2018.
A confluence of factors – including higher female workforce participation, a growing middle class and a greater focus on nutrition – have led Daedal Research to suggest that China’s IMF market will continue to grow into 2023.
In saying that, Daedal Research also notes that declining birth rates and the domination of foreign brands in the market both represent challenges for the Chinese IMF market. The latter claim however, likely gives credence to why Australia-based IMF stocks – such as a2 Milk, Wattle Health and Bubs have proven so popular among investors – at one point or another, in the last few years.
A2 Milk share price: shorts subside
Most recent data has seen short interest on a2 Milk (ASX: A2M) subside by a modest 0.81%. In saying that, a significant 7.65% of the company’s stock – or 56 million shares – are still held short by investors, according to the most recent ASIC data.
Looking at recent developments, a2 Milk (ASX: A2M) faced investor backlash in CY19, after the company reported that it expected margins to come in lower during FY20 – with profitability being impacted by an aggressive Chinese marketing blitz. Though A2’s Board eventually steered away from such an agenda, it came at the cost of A2’s then-CEO – Jayne Hrdlicka – with Hrdlicka stepping down from her Chief Executive role in December.
A2 Milk is expected to report its H1 FY20 results on February 27.
Wattle share price: trade halted
It’s been a disappointing week for Wattle Health – with the company’s stock currently in a trading halt after it was announced that the company had failed to secure the full amount of funding as part of its recently revealed Rights Issue.
Under this Rights Issue - first announced November 18 – Wattle Health 'received a total of $11,670,447.20 from existing Eligible Shareholders.'
Disappointingly and as outlined in the November Prospectus, Wattle Health was seeking a minimum amount of $55m from the Rights Issue. Given that the company did not meet this minimum amount, 'the underwriting agreement with Claymore Capital Pty Ltd lapsed' on December 31.
The company noted that its stock will remain in ‘voluntary suspension, pending a further update, which will be provided to the market in due course.’
Beyond that, Wattle Health commented that it is 'currently undertaking a major operational restructure and will provide an update to the market in due course.'
Prior to this week’s suspension the Wattle Health (ASX: WHA) share price traded at the 53 cents mark.
Bubs share price: flat following cap raise
Bubs (ASX: BUB) struggled this week – dropping close to 5% over the last five trading sessions – finishing out Thursday’s session at 96 cents per share.
Though the stock was buoyed by general market optimism today – trading roughly 1% higher than it did yesterday – the Bubs share price is still a ways off its 52-week high of $1.651.
Importantly, the company recently completed a $30m institutional placement and a $5m share purchase plan (SPP); with Bubs intending to use these funds to 'accelerate customers acquisition in existing and new markets, advance new product development and meet M&A commitments reflective of the scale we want to achieve and the surrounding market environment.'
The SPP was initially oversubscribed, and as a result had to be scaled back.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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