Growth Focus: Bega Cheese Ltd (BGA)

by Patrick Taylor



Date of Data Capture: 20/6/2018
 
Name: BEGA CHEESE LTD (BGA)    
      
Classification: Food Processing - Dairy
 
Current Price: $7.52
 
Market Capitalisation: $1.39B
 
Forecast EBITDA Growth: 55.81%
 
Yield Estimate: 1.68%
 
Consensus Price Target: $7.33
 
# Covering Analysts: 6
 
Premium at Current Price: 2.53%
 
Price Target Trend: Increasing-Flat
 
Signal Timeframe: Quarterly-Monthly-Daily
 
Trend Bias: Up-Flat / Long-Medium

Indicators:
Short-term: Positive
Medium-term: Positive-Neutral
Long-termPositive

Recommendation:Buy
 
Focus:Dividend Income & Capital Growth
 
Set up Notes:
·    BGA goes through cyclical rallies and declines every couple of years, even as the price climbs towards all-time-highs, now we have fresh signs another uptrend could be beginning here.
·    Performance has been good and steady, combining well with very strong forecasts through to 2020 showing robust earnings growth on booming sales in expanding markets.
·    Pricing is looking attractive with linear resistance breaking last month and $7.50 structure cracking right now as the well-correlated longer-term signal turns positive.
·    Only one resistance target remains at $8.00 before the stocks faces blue sky and support is layered down from $7.00 and $6.50 if needed.


Growth Focus: Bega Cheese Ltd (BGA)

Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

One of the favoured setups we use when looking to find value is in recovery stocks, especially when companies are consolidating strong multi-year rallies – and this is where we find Bega Cheese Ltd (BGA) churning its way up through resistance levels and seemingly destined to continue its rise to the top again.

BGA is a well-aged dairy collective, established in Bega NSW in 1899 and listed on the ASX in 2011 where it achieved significant success, increasing in value by 300% in the time since. Operating within Australia and New Zealand, this company owns Bega Cheese and Tatura Milk and produces milk, cheese, butter, powders and nutritionals. Recent history shows both strong organic growth as well as an active acquisition strategy which should continue to drive pricing higher and could have a whey to go yet.

Performance has been good with steadily improving sales, margins and earnings over the last few years and this is expected to continue and increase going forward into 2020. Earnings growth is set to return in strength this year with aggressive forecasts seen reflecting the recent boost to growth from its Mondelez International acquisition. Current pricing does sit slightly above consensus price targets though it must be noted that these targets have been steadily rising for years and the overall sentiment of the covering analysts are strongly majority positive with no negative, sour notes curdling the outlook.

Techncially speaking they are at a fascinating crossroads between resistance layered between $7.50 and $8.00, sitting directly above current pricing, and the new potential longer-term uptrend that seems to be emerging here following the linear resistance break earlier this month. This coincides well with a fresh positive signal coming through in the long-term/monthly timeframe, though we have to note there is some weakness in the medium-term/weekly timeframe so we could see some downward pressure and choppy price action before the uptrend re-establishes itself. There is good support down to $7.00 and $6.50 if needed, but with strong signal correlation we could not let this one go past your eyes.

Bega Cheese combines solid fundamental performance and growth potential with an exciting technical setup backed by positive price action and recent resistance breaks. We see BGA as a good growth prospect, ready to chase old peak highs at $8.00 and if this resistance ceiling breaks only blue skies would remain - for investors, that would be udderly legendairy.

 

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.