Speculators always have their eye on the next big thing, and with the recent explosive performance of Blackmores Limited (ASX: BKL) and Bellamy's Australia Ltd (ASX: BAL), it was perhaps inevitable that healthcare and supplement company Vitaco Holdings Limited, otherwise known as VITACO DEF SET (ASX: VIT) was going to soar upon its ASX debut.
Bellamy's supplies baby formula while Blackmores is more into vitamins and mineral supplements.
Vitaco currently sells a number of well-known brands such as Musashi, Aussie Bodies, Nutra-Life, Abundant Earth, and Biolane. Its products include milk drinks, protein powder and other sports supplements, organic and natural foods, as well as a range of health food products.
Seemingly a combination of the best of both Bellamy's and Blackmores, Vitaco Holdings actually does most of its business in Australia and New Zealand at present.
However, management has dangled the 'China' card in front of investors, who have eagerly bought the stock – which is up 20% in 2 days – in the hopes that it could replicate either Bellamy's or Blackmores' performance. Bellamy's and Blackmores are up 491% and 316% for the year respectively.
As a recent Initial Public Offering (IPO) there are a number of risks with Vitaco, in particular the fact that private equity (the more-informed seller) is selling the business to less-informed buyers, and also strong speculative interest built into the stock, which could easily be reversed if the company hits speed bumps in its growth strategy.
With that said, Vitaco looks to be trading on a forwards (based on forecast earnings this year) Price to Earnings (P/E) ratio of around 17, which is both substantially lower than Blackmores and Bellamy's, and not overly expensive if the company experiences success in its new markets Brazil and China.
