##{"id":58714,"date":"2011-08-22T10:22:21","date_gmt":"2011-08-22T00:22:21","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/08\/22\/asia-to-drive-growth-for-blackmores\/"},"modified":"2011-08-22T10:22:21","modified_gmt":"2011-08-22T00:22:21","slug":"asia-to-drive-growth-for-blackmores","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/08\/22\/asia-to-drive-growth-for-blackmores\/","title":{"rendered":"Asia To Drive Growth For Blackmores"},"content":{"rendered":"

\n\t– Asian growth drives solid Blackmores<\/span> result
\n\t– More of the same expected in coming years
\n\t– Credit Suisse upgrades to a Buy on valuation grounds<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tVitamins and supplements distributor Blackmores<\/span> ((BKL<\/span>)) delivered what the market viewed as a solid full year result, net profit increasing by 12% to $27.3 million. Much of the increase in earnings was due to gains made in the Asian operations, where revenue in Australian dollar terms rose by 40% against a 3% increase in sales and earnings from the Australian business.<\/p>\n

\n\tJP Morgan notes the new market of Korea was one to surprise on the upside in terms of revenue growth, while RBS<\/span> Australia points out margins improved on the back of strategic sourcing benefits and some economies of scale.<\/p>\n

\n\tOperating cash flow for the year was soft, but as this was a result of the timing of major customer payments JP Morgan doesn't view this fact as an issue in terms of operating performance.<\/p>\n

\n\tLooking forward, solid earnings growth for Blackmores<\/span> is expected to continue. As Credit Suisse notes, this is partly due to the Asian operations reaching critical mass and partly the result of continued investment in and re-invigoration of products sustaining what is already a strong brand name.<\/p>\n

\n\tWhile management at Blackmores<\/span> gave no guidance for FY12<\/span>, consensus expectations according to the FNArena<\/span> database are for earnings per share (EPS) to increase from the 163c<\/span> earned in FY11<\/span> to 182.6c<\/span> in FY12<\/span> and 201.9c<\/span> in FY13<\/span>. These estimates factor in minor changes to forecasts made post the full year result.<\/p>\n

\n\tThe changes to forecasts mean minor changes to price targets, the database showing a consensus target for Blackmores<\/span> now of $30.88, down from 31.12 previously.<\/p>\n

\n\tOn Credit Suisse's numbers Blackmores<\/span> is now trading on a FY12<\/span> earnings multiple of 15.8 times, which is in line with historical multiples for the stock but a premium to the long-run average multiple relative to the Small Industrials index.<\/p>\n

\n\tWith solid growth in earnings expected in coming years Credit Suisse sees such as multiple as reasonable, arguing the share price should trade close to the broker's discounted cash flow valuation of $31.70. <\/p>\n

\n\tThis is enough for Credit Suisse to upgrade to an Outperform rating from Neutral previously. JP Morgan is similarly positive on the stock, seeing strong growth in Asia and a maintenance of market leadership in Australia as a combination likely to deliver share price outperformance<\/span>.<\/p>\n

\n\tBut RBS<\/span> is a little concerned about the impact of continued strength in the Australian dollar and increasing competition in the domestic market. This means despite a positive view on Blackmores<\/span> as a company the share price reflects fair value at current levels, so RBS<\/span> retains a Hold rating. These are the only three ratings on Blackmores<\/span> in the FNArena<\/span> database.<\/p>\n

\n\tShares in Blackmores<\/span> have traded in a range over the past year of $23.01 to $32.10. At current levels the share price implies upside of less than 10% to the consensus price target in the FNArena<\/span> database.
\n\t <\/p>\n

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