Invast Blog

Small Cap Favourites: Bellamy’s Australia Limited

Bellamy’s has absolutely smashed any market doubt over its amazing share price run. While most of the market attention has been on the narrative, we looked closely at the numbers to figure out what this business is really worth. Here are our notes:

– The balance sheet is super strong, no problems at all with debt. Inventory can be managed and cash conversion looks good.

– Operating cashflow looks a bit weak, this should reverse in the next half. We give them the benefit of timing. If it doesn’t we’ll start to ask questions. Keep a close eye on net operating cashflow in the next set of results.

– Margins are still very solid, EBIT of $54m on revenue of $244m is very impressive for what is largely a food distribution business.

Valuation is also reasonable. As of the time of writing, the current market cap implies a value of about $1.3bn. Now this might seem high for a business with book value of only $83m, but this is no traditional business. It is a high growth, well run branding and marketing business that has the ability to continue growing its top line. It all comes down to good management from here, the earnings base can easily double if management and the board steer this ship in the right direction.



CEO Laura McBain has been in the driver’s seat running the business for a while now, the board and management team look very capable and reminds us of where Blackmores was as a business around 10 years ago. We like what we see in Bellamy’s and are not frightened by the valuation one bit. Well suited in a diversified portfolio.

Invast is very well placed to bring you some huge opportunities in the coming months. Execution costs for ASX stocks are 0.06% (6 basis points) above minimum charge, which means for a trade with a notional exposure of AUD 10,000, the applicable commission is only AUD 6.00.

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Peter Esho

Chief Market Analyst

Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia.   The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.

Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.

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