Blackmores (BKL) – A balanced view on media speculation
Blackmores Limited (BKL) has seen weakness in share price following the announcement of changes to Chinese regulations and the creation of a list of eligible items to be imported via the cross-border e-commerce platform on 7 April 2016.
Recent media speculation on this issue has contributed to the sharp price drop for BKL during the past two days. We have had a very recent discussion (11/4/16) with management on the media speculation and changes to e-commerce regulations and based on the current facts we don't believe this is likely to impact the business or earnings in the medium term. Management confirmed that they do not expect a sizable impact on the development of the approved list as they believe that most of their products are categorised as permissible items. However, management awaits more clarity from the Chinese government which we will be monitoring closely in the coming days. Further, we expect more insight from BKL's quarterly trading update this month followed by a shareholder briefing in May.
Elio D'Amato
Lincoln Indicators
At this stage, our view is that preference for food security by the Chinese consumer outweighs the sensitivity of the demand pipeline to these incremental price changes in the products. Therefore, we believe that the medium-term demand pipeline will not be materially impacted. It would appear that the recent price moves are more of a symptom of speculation than fact at this stage. However, this reiterates the regulatory risk which exists in this market and should remain an ongoing consideration for investors. Lincoln Indicators continue to cover BKL as a Star Growth Stock with a valuation of $188.73.
Bellamy’s Australia Limited (BAL), who are also exposed strongly to the Chinese food security thematic via their organic infant formula product, calmed the nerves of the market Thursday with a confirmation that their products will continue to be allowed to enter China via the country’s free trade zones.
As BAL’s infant formula is currently registered with the Certification and Accreditation Administration in China (CNCA) that is sold via the Central Board of Excise and Customs (CBEC) channel (cross-border transactions), per guidance issued on 13 April 2016, it will not have to obtain CFDA formulation registration until 1 January 2018.
Given BAL’s current registration with the relevant regulatory bodies in China and their history of operations there, management expects to be able to navigate the accreditation process prior to 2018 and do not foresee any disruption to their access to the Chinese market.
Lincoln Indicators continue to cover BAL as a Star Growth Stock with a valuation of $15.85.
Original article from Lincoln Indicators blog: (VIEW LINK)
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Elio heads up the Lincoln Stock Doctor research team as well as being their chief educator and key media spokesman.
Elio is also a regular fixture on ABC and Sky Business television networks.
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Elio D'Amato
Director of Research & Education
Lincoln Indicators
Elio heads up the Lincoln Stock Doctor research team as well as being their chief educator and key media spokesman. Elio is also a regular fixture on ABC and Sky Business television networks.
Expertise
No areas of expertise
Elio D'Amato
Director of Research & Education
Lincoln Indicators
Elio heads up the Lincoln Stock Doctor research team as well as being their chief educator and key media spokesman. Elio is also a regular fixture on ABC and Sky Business television networks.
Expertise
No areas of expertise
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