What: Bellamy's Australia Ltd (ASX: BAL) is one of the newest companies to list on the ASX. The Tasmanian-based firm produces a range of organic food and formula products for babies and toddlers and had sales of $51 million for the 2014 financial year.
So what: Since its recent initial public offering (IPO) in early August at a float price of $1, the stock has gained 30% giving the company a market capitalisation of $126 million. Importantly, management has maintained guidance which should see revenues increase to around $84 million in the current financial year and profits jump from about $2 million on a pro-forma basis to $5 million.
Now what: Looking at comparable peers such as Bega Cheese Ltd (ASX: BGA) and Freedom Foods Group Ltd (ASX: FNP) would suggest Bellamy's could be an enticing investment prospect. Like Bega, Bellamy's is angling towards the growth region of Asia where it sees significant scope for expansion. It recently announced that it would recommence exports to China after accreditation was granted to its manufacturing partner.
Meanwhile, like Freedom, holding accreditation in a niche such as organic baby food (or allergen-free foods in the case of Freedom) provides an appealing portfolio of branded assets for investors. Those assets also have the potential for pricing power and brand loyalty.
A long-term winner
Bellamy's has good opportunities for growth and parallels can be drawn to the early stage growth achieved by its peers Bega and Freedom. At the right price I think Bellamy's could make an appealing addition to a portfolio, however it is difficult to see the benefit of purchasing today with the stock highly priced.
