BUSINESS & FINANCE
Anthony Ward, Ord Minnett Buderim.
NOT FISHY AT ALL
I
t’s been interesting times in the stock market of late. Overall the returns have been positive but not all boats have floated with the tide. If one held the top four banks plus Telstra you would have significantly underperformed. The smaller companies have been the standout for winners this year. Netwealth Group (NWL), HUB24 (HUB), Service Stream (SSM) and Hansen Technologies (HSN) are a few that come to mind. A recent stock that has come on the radar is Clover Corporation (CLV). Its share price has doubled since March and hence made investors take a closer look. Clover Corporation is a key member of the infant formula supply chain, with its strong position in the encapsulated tuna oil market being due to the high quality of its product. The key ingredient is docosahexaenoic acid (DHA). Growth in Chinese infant formula
demand is driving revenue, while contract talks and other initiatives will lift gross margins. In addition, European Union regulations require a doubling of DHA content in infant formula by 2020. Clover sells powdered tuna DHA to most major infant formula brands, but with brand-specific risks diversified across more than 50 clients. The company’s key product strength versus rivals is the quality of its encapsulation process – this minimises the ‘fishy’ smell and taste that can come with other fish oil products while still ensuring maximum nutritional value is delivered. These drivers deliver an expected earnings per share compound annual growth rate of 28 per cent over fiscal 2018-21. The global market for infant formula is estimated at circa $US40 billion (about $53 billion) by Euromonitor and is expected to grow at five per cent per annum over 2016-2021. The Chinese market is valued at circa $US20 billion and is expected to expand five to 10 per cent per annum over the same period. Most countries will see continued increases in demand for formula, but rapid growth in China is grabbing most headlines. Anthony Ward is an authorised representative (no 427051) of Ord Minnett Ltd, AFS licence 237121. This article contains general financial advice only and does not consider your personal circumstances; you should determine its suitability to you. Before acquiring a financial product you should consider the relevant product disclosure statement. Past performance is not a reliable indicator of future performance.
RTO 0275 CRICOS 03020E
myweeklypreview.com.au
27.indd 1
My Weekly Preview | June 8, 2018 27
6/4/2018 1:31:22 PM