IN AUGUST last year the South Australian-based Beston Global Food Company floated on the stock exchange with an initial public offer (IPO) of shares at 35 cents each, with the ASX code BFC.
Beston manufactures and distributes food ranging from lobsters to meat, dairy and bottled water.
The Punter at the time thought that was a little pricey, and decided not to subscribe to the IPO. And indeed the shares dropped 10 per cent initially when they began trading, which made the Punter feel rather clever at the time.
But this week he has bought 6,000 BFC at 36c for a total cost of $2180, which is more than he would have paid in the IPO.
The purchase could well be a big mistake, given BFC shares over the past two months have fallen by a third, and they are well down from their peak of 62c in January.
At 36c, they still look expensive by some criteria – they are selling for a whopping 40 times earnings, which is assuming a lot of growth, and the dividend of just over half a cent means the shares only yield about half what you can get on a bank deposit.
Moreover, that dividend is a lot less than the 1.5c to 2c that had been hoped for at the time of the IPO.
On the other hand, Beston has had a busy and seemingly very positive year.
Last month it paid $2.2 million for Australian Provincial Cheese, which will now produce its award winning brands from Beston’s expanding dairy plants in Murray Bridge, South Australia.
In August it entered a joint venture with Singapore-based MindChamps Holdings to provide fresh and nutritious food for MindChamps’ 35 early childhood centres.
In April it bought the AQUAEssence bottled water company, which has rights to 140m litres of high alkaline spring water at Mt Gambier, of which at this stage it uses only one per cent.
Significantly, the Singapore-based subsidiary of the Chinese Dalian Hairunlai Group bought 15pc of BFC at 45c a share in August, putting more than $28m into Beston’s growing bank account and giving it access to the largest business-to-business e-commerce platform in Korea.
It plans to invest in more businesses and assets in Australia and globally.
• The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.