BWX capitalises on rising demand for natural products
For some time, BWX Limited (BWX) has been capturing an increasing band of loyal followers for its natural body, hair and skin care products. With recent forays into the US and UK, we think this small Victorian company has a really bright future.
Our views on BWX were confirmed a couple of weekends ago at the Byron Bay Writers Festival, where acclaimed author Kate Grenville discussed her most recent book, “The Case Against Fragrance”. Normally associated with elegance and beauty, it is thought one-third of the population reacts badly to the fragrances around us: other people’s perfumes, scented cosmetics, cleaning products and air fresheners.
After studying gold star scientific analysis, Grenville concluded the chemicals in fragrance can be linked not only to short-term problems like headaches, eczema and asthma, but to long-term ones like hormone disruption and cancer. Products can be released to the market without testing on humans and the ingredients don’t have to be named on the label.
This got me thinking about the tailwind enjoyed by BWX and its Sukin brand of natural skin care products and the recently acquired Mineral Fusion brand, the leading natural cosmetics player in the US. Free from parabens, artificial fragrance, synthetic dyes and phthalate, both divisions should continue to see very strong growth as consumers become more attuned to the merits of natural products.
BWX is broadening its reach, with Sukin now being sold across the Holland and Barrett 765 store network, UK’s leading health retailer. It is also being trialled in over 160 Boots stores, and there is potential to extend this to its 2,500-strong retail network. Apart from Whole Foods Market, currently under takeover from Amazon, Mineral Fusion is sold across a wide variety of natural grocery and wellness retailers including Sprouts, Natural Grocers and Earth Fare. In addition, it is available in 300 of the highest volume CVS pharmacies.
BWX is expanding further into the mass market, and the logical next step for the company would be to leverage Mineral Fusion’s distribution channel across 3,000 retail outlets in North America to also include the Sukin brand.
Hot off the press, BWX Limited has just reported a normalised net profit of $18m (+41%) on $73m (+32%) of revenue for the year to 30 June 2017. Together with the contribution from Mineral Fusion, the market is looking for profit growth of 40 per cent in FY18 to $25m (or EPS of 27 cents). At the current price of $5.18, BWX is on a prospective PE of 19X. A combination of favourable market trends, the right products and good execution of the global opportunities should make BWX Limited a much larger business than it is today.
The Montgomery Funds own shares in BWX Limited.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
