Why BWX Ltd shares are soaring on its maiden profit result

BWX Ltd (ASX: BWX) has delivered strong revenue and earnings growth with its first public result.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in natural beauty company BWX Ltd (ASX: BWX) are trading firmly higher following the release of its maiden profit result as a public company.

For those investors who are unfamiliar with the company, it develops, manufactures, distributes and markets branded skin and hair care products with a focus on the natural beauty segment. BWX also develops and manufactures beauty and personal care products for third party customers.

The company listed in November 2015 and has delivered better-than-expected first-half results with the main highlights including:

  • Revenue of $27.6 million – an increase of 25.5% on the prior corresponding period (pcp)
  • Gross Margins of 59.1% – an increase of 4.1% on the pcp
  • EBITDA of $9.8 million – an increase of 53.1% on the pcp
  • Net profit after tax (NPAT) of $6.3 million – an increase of 61.5% on the pcp
  • Basic earnings per share (EPS) of 8.01 cents per share
  • Net cash position of $3.9 million at 31 December 2015
  • Positive operating cash flows of $7.3 million

According to the company, more than 50% of the revenue growth was generated from its core Sukin branded products as it expanded the number of domestic outlets stocking the brand. Sukin is now Australia's number one selling 'natural' skin care brand in pharmacies and sales grew at more than 36% in the first half.

Although operating expenses increased by 14% during the first half, this was more than offset by the 25.5% increase in sales and 4.1% improvement in gross margins resulting from scale benefits.

Like other retail healthcare brands such as Blackmores Limited (ASX: BKL) and Bellamy's Australia Ltd (ASX: BAL), BWX is also shifting some of its focus to export markets to take advantage of the demand coming out of the Asia region. Investors should note however, this process is still in the early phase with export sales expected to contribute only 12% of total revenue in FY16.

BWX is forecasting full year revenue of $53.6 million and NPAT of $12.4 million that would deliver sales growth of 18.8% and earnings growth of 29.2% over the previous period. The company is also expected to declare a maiden dividend when it releases its full year results with the dividend payout ratio expected to be between 35% to 50% of earnings.

Foolish takeaway

BWX operates in an attractive segment of the beauty industry with the potential for strong growth both domestically and internationally and the company clearly has a unique product offering that connects well with consumers.

Investors also appear excited by the potential expansion into export markets with the share price increasing by more than 80% since listing just over three months ago. At the current share price however, the shares appear fully valued and are now trading at 30x forecast FY16 earnings.

Motley Fool contributor Christopher Georges has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »