The Blackmores Limited (ASX: BKL) share price is up more than 10% this morning after news reports suggested the vitamin manufacturer and retailer may be a prime beneficiary of regulatory changes announced by the Chinese government.
According to The Australian Financial Review China has "delayed indefinitely" proposed new "cross border e-commerce" laws that threatened to reduce the sales of the likes of Blackmores and baby formula businesses Bellamy's Australia Ltd (ASX: BAL) and a2 Milk Company Ltd (Australia) (ASX: A2M).
In the six-month period ending December 31 2016, Blackmores' China business contributed sales of $64 million, which were almost double the prior corresponding half and around 20% of the group's total sales.
It's notable that a fair proportion of the group's Australian sales also find there way into China via the 'Daigou' channel, where entrepreneurial Chinese shoppers purchase goods in Australia before selling them usually via online channels to be shipped into China.
Given that Blackmores has substantial, but not precisely known sales feeding Chinese demand it's no surprise to see the share price respond positively to today's news. If nothing else the deregulation will lessen the compliance burden on the business, while potentially encouraging the Daigou back into the market.
Follow the insider buying…
Notably Blackmores' CEO, a company director, Managing Director of Asia and Company Secretary were all buying large amounts of shares at the end of February and in early March this year, despite the stock looking fully valued. I wrote multiple times this month about how this kind of heavy insider buying should be taken as a buy signal for smart investors and increased my own positin in the company accordingly at a price just above $101.
Another Chinese-consumer focused stock rocketing today is natural skin and hair care business BWX Limited (ASX: BWX).
In unrelated news the share price of China-focused online jobs portal SEEK Limited (ASX: SEK) is also up 2.7% as the market reacts to yesterday's news that its investment in an online education business will be earnings per share accretive in financial year 2018. Stocks like Blackmores and SEEK look like good long-term growth prospects to me and on current valuations I rate SEEK and BWX as buys.
