Steven Everett No Comments

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BWX Limited is a listed company which owns, manufactures and distributes a range of beauty and skin care products. The range of Sukin products in particular is the Company’s most successful range.  In addition to being priced affordably, the range is made with naturally derived ingredients, cruelty free and vegan, appealing to the growing market of socially and environmentally conscious individuals.
BWX caught our eye in early 2016 as a company with great potential, boasting a compound annual growth rate of almost 30% year on year, a unique offering, solid management and fantastic outlook. Their Sukin range of natural cosmetic products had been well accepted by the market in Australia, and demand quickly spread to include North America, China and the U.K with products now featured in the Boots & Co. chain of chemists.  The Company also maintains a strong Daigou (grey market exports) sales channel and has products featured on a number of Chinese e-commerce platforms, with plans to solidify the Chinese expansion strategy during calendar year 2017.
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This week the board announced the US$38.4 million acquisition of California based Mineral Fusion LLC, providing the Company with a strong footing in the US market for their well performing Sukin brand.  This purchase also provides access to Amazon and Wholefoods which Mineral Fusion has current standing contracts.  In fact, management made mention that the Mineral Fusion are also achieving 30% compound annual growth rate in sales volume, and achieves 10 times the average dollar return per area of shelf space in the Wholefoods stores.  This acquisition adds to their vertical integration strategy after adding Lightning Brokers, a national distributor of skincare products to their portfolio in February 2016.Monday’s conference call once again provided confidence that management have well and truly got their finger on the pulse with guidance re-affirmed for the full year FY17.

That being said, BWX is a young, smaller company expanding very quickly and the current valuation reflects this growth. With such growth, particularly into International markets, there is always execution risk.  Acknowledging this risk, there is also considerable upside in this sector which is fast growing globally.

Although we still remain positive for the outlook of the company, we have taken some profits after the recent announcement given the fast run up of the share price and expect a pull-back which will provide the opportunity to add again, or an entry.  Either way we intend to continue to follow the BWX story very closely as in this competitive investment market, it is difficult to find attractive growth stories that aren’t quickly engulfed by the “crowded trade”.

If you would like some more details about BWX or other less covered companies in our watch list feel free to contact us.

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