Wattle Health - milking the Chinese market

Milking the Chinese Market | PUNTER


Opinion
BUY HIGH?: The Punter went against the grain this week, buying shares in Wattle Health Australia after they jumped 20 per cent. Photo: Shutterstock.

BUY HIGH?: The Punter went against the grain this week, buying shares in Wattle Health Australia after they jumped 20 per cent. Photo: Shutterstock.

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This week, the Punter bough shares in Wattle Health Australia after they jumped 20 per cent.

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The Punter doesn't usually buy shares when they have just jumped 20 per cent, but he could not help following the herd on Friday after shares in Wattle Health Australia (ASX code WHA) did just that.

Wattle Health has been on his watchlist because of its involvement in the growing organic infant formula market and its focus on China. It is a crowded market with competitors such as Bellamys (BAL), and WHA investors have had a roller-coaster ride this year. At the end of February WHA were changing hands around $2.9 each. Four months later they were 90c.

Friday's bounce came following Wattle's announcement that it had signed a non-exclusive supply term sheet with Shandong Weihai Port International Trade Co for WHA's conventional cow infant formula range.

Shandong, a state-owned Chinese enterprise, has committed to take approximately $34m worth of WHA formula over the first three years, with $6.6m of that in the first year.

This follows news in April that China's International Supplies and Distribution company agreed to supply WHA's formula to the general retail trade in mainland China - a deal expected to bring in more than $100m over three years. WHA also inked a deal with Melbourne-based online distributor Quality Brands International Direct, which is also focused on China.

The Punter was happy to pay $1.04 for 3,000 WHA. That's below the $1.25 price of the recent rights issue which, with together with a $20m private placement, raised $53.9m. That cash ensured the Wattle can pay its 45pc share of a joint venture with Organic Dairy Farmers of Australia and Niche Dairy to build and operate an organic spray drying facility. That venture means Wattle's business will stretch from the farm to the consumer.

It has been a good year. The Punter's portfolio is up some 24pc in 12 months.

  • • 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.
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