Bellamy’s Australia Ltd tipped to have its CNCA license reissued

How far the Bellamy’s Australia Ltd (ASX: BAL) share price will fall when it emerges from its trading halt has been a hot topic of conversation amongst investors.

However, there is a glimmer of hope that the latest catastrophe to hit the infant formula company could in fact be averted.

According to a report from the Australian Financial Review, Graham Huddy, executive chairman and secured creditor of Camperdown Dairy International (CDI), believes that Camperdown Powder will have its CNCA license reinstated almost immediately.

Camperdown Powder had its license suspended on July 6 to allow Chinese authorities to respond to quality concerns which were put forward by an unidentified third party in relation to CDI products.

Mr Huddy told the AFR that he did not know who would have made such a claim against CDI, but that he didn’t believe anything was wrong and therefore expects the permit to be reissued.

What if it isn’t?

If the permit is not reissued then Bellamy’s will find itself in an incredibly difficult position.

As outlined here, it would not be surprising to find a few angry investors asking for their money back following the capital raising to acquire Camperdown Powder.

Then of course Bellamy’s would need to find another canning facility to replace Camperdown Powder.

Unfortunately another facility that Bellamy’s is believed to have been running the rule over previously may now be off the market.

Yesterday Wattle Health Australia Ltd (ASX: WHA) announced that it has entered into a conditional agreement to acquire an equity interest in Australian infant formula and nutritional products manufacturer Blend & Pack Pty with Hong Kong-listed company Mason Financial Holdings.

With its options limited, there is now a danger that Bellamy’s may have to pay over the odds for another facility.

But hopefully for Bellamy’s shareholders Camperdown Powder will have its license reissued and this latest crisis will be averted. Bellamy’s has until the weekend to respond to the CNCA’s quality concerns.

I would suggest investors avoid the drama of Bellamy's and invest in these quality stocks instead. Each has the wind in its sails right now and could be a great long-term investment.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

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