Shares of natural skin and hair care company, BWX Ltd (ASX: BWX), have plunged more than 10% today, despite reporting FY16 results that exceeded its prospectus forecasts.
Some of the highlights from the result included:
- Revenue increased by 19.7% to $54 million
- Gross Margin increased by 0.51% to 61.9%
- EBITDA increased by 36.5% to $20.2 million
- EBIT increased by 34.3% to $19.2 million
- Net profit after tax (NPAT) increased by 25% to $12 million
- Earnings per share of 14.1 cents
- Maiden fully franked dividend of 4.8 cents per share
It appears investors were expecting slightly better results, which is unsurprising considering the shares have gained around 140% since their November 2015 listing and were trading at more than 40x earnings.
Nevertheless, this was still a strong underlying result that was driven primarily by the growth of its Sukin brand. As highlighted in the chart below, the natural skin care range, that is stocked primarily in Australian pharmacies, showed sales growth of more than 40% over the past 12 months.
A large proportion of the sales growth from Australia has come from 'grey export market' sales to China and BWX is now implementing an export strategy that will enable it to sell products directly into China. It has established online stores with Tmall.com and JD.com and the company expects to see the benefit of this move in the second half of FY17.
As previously announced, BWX is also looking to expand into the UK market and recently announced a partnership with Boots Pharmacy. It is also ranging a number of core lines with the UK's number one health food retailer, Holland and Barrett, and these partnerships are also expected to make a positive contribution in the second half of FY17.
Outlook
BWX expects the growth of the business to continue in FY17 and is forecasting EBITDA to grow at 30%, whilst maintaining margins at around 62%. The majority of growth is once again expected to come from Australian pharmacy sales with a growing contribution from its sales directly into China and UK.
Should you buy?
There wasn't a whole lot to complain about from BWX's first full year result as a listed company, but with the shares trading at such a premium, there was always a good chance of a sell-down if the results came in slightly below expectations.
Even with today's share price decline, the shares still trade on a lofty price-to-earnings ratio of around 36. This means investors buying shares today will need to have complete confidence that BWX will be able to maintain double-digit earnings growth for a number of years to come.
