COMPANY NEWS & UPDATES
Bega Cheese Limited ( BGA )
Hold Valuation $ 5.20
Earnings Forecast
Yr to June |
2021A |
2022F |
2023F |
|
Sales Revenue
($ M )
|
2.073.4 2,990.0 |
3,149.1 |
|
Reported
Profit ($ M )
|
39.8 |
45.0 |
76.7 |
EPS ( c ) |
15.0 |
14.9 |
25.3 |
Div ( c ) |
10.0 |
11.0 |
12.0 |
P / E ( x ) |
36.3 |
32.4 |
19.0 |
Yield (%) |
1.8 |
2.3 |
2.5 |
Franking (%) |
100.0 |
100.0 |
100.0 |
|
EPS Growth
(%)
|
0.8 |
-1.1 |
70.5 |
* Profit & EPS adjusted for options , goodwill , notional earnings and nonrecurring items .
Working Towards Post Covid- 19 Normal
Following the release of the BGA FY22 interim result we maintained our $ 5.20 valuation . Underlying EBITDA , which excludes one-off items including transaction costs related to the Lion Dairy and Drinks acquisition , lifted 46 % on the prior corresponding period to $ 106 million . The sizable increase in EBITDA represents the inclusion of earnings from the Lion Dairy and Drinks business from January 2021 . Bega declared an interim dividend of 5.5 cents per share , up 10 % on the prior corresponding period , and we continue to forecast full-year dividends of 11 cents per share , an increase of 10 % on FY21 . We expect Bega can comfortably continue to pay out 50 % of EPS without compromising its organic expansion plans while continuing to partake in industry rationalization via acquisitions .
Bega ' s profitability during the period was heavily impacted by pandemicrelated cost increases . The firm incurred over $ 20 million in additional costs for the period , mostly from high absenteeism as up to 30 % of staff was forced into social isolation . This was exacerbated by elevated third-party logistics costs and rising input costs across the board from fertiliser , milk , peanuts , and coffee as well as costs related to testing , cleaning , and the provision of personal protective equipment such as masks . We expect elevated costs to persist through the second half . Given that the spread of the omicron variant of COVID-19 only peaked in mid-January 2022 and continued to heavily impact forced isolation for the month thereafter , we expect COVID-19-related costs for the second half to exceed those of the first half by a wide margin . We lower our FY22 EBITDA forecast to $ 190 million , from $ 215 million , below the firm ' s unchanged FY22 guidance range of $ 195 million to $ 215 million .
But as Bega eventually enters a post- COVID-19 normal , we expect profitability to recover . Further , we expect management extracts synergies from the merger with Lion Dairy and Drinks , such as
� |
optimising |
milk |
|
procurement , and |
|
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processing . |
|
We forecast group underlying EBITDA margin increases from FY22 , underpinned by mix shift to higher margin products , cost out initiatives , and improved operating efficiencies , driving our five-year EPS CAGR of 20 % from pre-Lion FY21 levels . However , we anticipate margin expansion to be more subdued over the longer term due to Bega ' s continued heavy reliance on powerful supermarket customers and its lack of pricing power .
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