Despite the problems with US Customs and Border Protection (CBP) during H117, PureCircle has reported an encouraging set of FY results. The US CBP issues are fully resolved, and the company has continued its investment programme. The new generation of stevia is being introduced and both taste and calorie-reduction have improved. The innovation pipeline remains strong. The company is well-positioned for FY18 and hopes to regain some of the ground lost due to the US CBP issues.
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PureCircle |
Getting sweeter
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Consumer |
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22 September 2017 |
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Despite the problems with US Customs and Border Protection (CBP) during H117, PureCircle has reported an encouraging set of FY results. The US CBP issues are fully resolved, and the company has continued its investment programme. The new generation of stevia is being introduced and both taste and calorie-reduction have improved. The innovation pipeline remains strong. The company is well-positioned for FY18 and hopes to regain some of the ground lost due to the US CBP issues.
Continuing to grow
FY17 sales were below FY16 due to the US CBP issues, although growth excluding North America was a healthy 8%. As a reminder, North America accounted for 34% of sales in FY16. The $42m refinery expansion was completed on schedule and within budget. This will allow the company to meet future increased demand, and the new technology will allow increased efficiency and lower manufacturing costs. Stevia remains an attractive sugar substitute due to being a highly efficient source of sweetness with zero calories. PureCircle’s stevia product is also 100% natural.
A diversified business in a unique position
PureCircle is well-diversified both by geography and by product category. Geographic diversification helps to reduce geopolitical and climate risks, while category diversification demonstrates that stevia has moved well beyond the traditional carbonated soft drinks market with which sweeteners have long been associated. Stevia now has a significant presence in other beverages (for example juices, hot beverages), and also in food categories such as dairy, bakery and confectionery. PureCircle is uniquely positioned in the industry through its vertical integration, which spans from plant breeding through to extraction and application. This allows deep expertise regarding stevia, which is backed up with intellectual property, and the company is increasingly looking to become a solutions provider for its customers, by working ever more closely with them on their innovation.
Valuation: Significant share price recovery so far
The share price is up 36% over the last 12 months and +81% ytd, and the shares now trade at consensus FY19e P/E of 40.1x. PureCircle continues to be valued at a premium to the global ingredients peer group given its significant growth prospects. It is on a strong growth trajectory as stevia continues to gain traction as a natural sugar substitute. Volatility is likely to remain a feature while the products become more established. Over the next 12 months, we also expect the company to benefit from a recovery in the US now that the US CBP issue has been resolved.
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Consensus estimates
Source: Actuals as reported, forecasts from Bloomberg consensus as of 19 September 2017 |
EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Disclaimer
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Disclaimer
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After a year of internal and external challenges, we believe Yowie has built a strong and reliable operational base and business plan that will support continued sales growth and a move to profitability by the end of fiscal 2018. With US$1.25/ADR in cash, no debt and modest working investment needs, we see Yowie shares as compelling value for long-term growth investors.