Trading Tidbits: BUB, PGH, GCY

Good news and bad from the pandemic for two mid-caps yesterday and the shares of the two went in very different directions while an attempted takeover in gold is getting scrappy.


First up shares in Bubs Australia ended with a near 40% gain on the day yesterday after a surprisingly bullish update delivered to an investment conference for the company’s first quarter

Shares in goat-milk and infant formula maker closed at 50 cents, up 39%, the highest they have been since July.

But the update, especially news of higher sales in the quarter in china, saw other stocks in the dairy sector soar as well with shares in the under pressure a2Milk seeing a 13.4% gain and a 6% plus rise for Synlait, which is a major supplier to a2Milk.

The company says gross quarterly revenue nearly doubled year on year to $18.5 million, while it was up 45%quarter on quarter.

That still left it a little short of levels seen pre-pandemic.

Revenue from infant formula jumped 124%, while adult goat milk powder sales increased 100% year on year.

“Bubs has largely put the disruption and challenges of COVID-19 behind us, delivering a turnaround to high growth during the quarter as we revamped our business strategy in response to the rapidly changing market dynamics,” founder and CEO Kristy Carr said in yesterday’s update.

She also revealed that Bubs are now supplying Walmart in the US (the world’s biggest retailer)

Executive chair Dennis Lin said he was confident in the company’s vision to “take Bubs to a global stage”.

“Having recovered the ground lost due to COVID-19 disruption, we expect to be able to sustain continued growth momentum, to the extent our go forward approach does not depend on a material improvement in the pandemic setting,” he said.

“That being said, effects of the pandemic on our sector may continue to create a degree of uncertainty on future demand.”

The company said it was now focusing on its B2B Deloriane Dairy Solutions and building a presence in South East Asia and the US.

Like other dairy groups such as a2Milk and Synlait, Bubs has been hit by the closure of international borders in the pandemic and in particular the shutting off of the ’daigou’ buying and distribution channels into China.

But the update revealed there are signs of life in China (which helped explain the startling rise in the share price).

Bubs said its Chinese business saw a 156% year-on-year increase in revenue in the September quarter which helped boost international revenue 489% from the first quarter of 20-21.

The company ended the quarter with a strong balance sheet, with $28.3 million in cash on hand at September 30.


Meanwhile shares in Melbourne packager Pact Group ended the day down 12.5% after the company surprised with news that a major asset sale has fallen over, thanks to the pandemic’s lingering effects.

Pact is controlled by Melbourne billionaire Raphael Geminder and the news that it had ceased the sales process of its Contract Manufacturing businesses came as a shock because investors had considered the deal as being ‘done.’

But not so.

Pact said in the trading update said the division was suffering weaker demand and lower margins due to higher input costs while a number of its businesses were dealing with higher raw material and international freight costs.

So that seems to have made the business unsaleable for the moment.

The stock dropped more than 15% to a low of $2.90 after the announcement and struggled back to end at $3.10, off 10% for the day.

“I have consistently advised shareholders we would sell the business if the sale process met our value hurdle. Continued market uncertainty and supply chain disruption arising from COVID-19 has created challenges in realising our expectation. At this time, we believe retaining the business delivers greatest value for our shareholders,” Pact’s CEO Sanjay Dayal said in Wednesday’s statement.

Pact says demand remained resilient in the Packaging & Sustainability and Materials Handling & Pooling segments for the first quarter, “with higher raw material and international freight costs well managed.”

Pact says the Contract Manufacturing segment demand was weaker than expected, impacted by COVID-19 lockdowns, and margins were lower due to higher input costs.

It will provide further trading update will be provided at the company’s AGM next month which has been put back two weeks to November 29.


And Gascoyne Resources told shareholders on Wednesday to reject the recent unsolicited bid from Westgold that implies an enterprise value of $88.8 million for Gascoyne.

The bidder’s statement has not yet been lodged, but Westgold has indicated it will only buy Gascoyne if it does not proceed with a plan to merge with Firefly which would see a combined company emerge with a market value of around $160 million.

Westgold’s all share offer is valued at $105 million.

The Gascoyne deal with Firefly calls for an all share offer that would see Firefly shareholders end up with a 32% stake in the merged company.

“Westgold has made a lot of noise since it announced its intention to make an offer for your company and as Gascoyne shareholders you should have no doubt that Westgold is only acting in the interests of its own shareholders,” managing director Richard hay wrote in a letter to shareholders today.

Gascoyne is 14.7% owned by NRW Holdings and 22.1% owned by Deutsche Balaton, which has indicated it will vote against the proposal.

Westgold is 10.3% owned by Invesco and chaired by founder Peter Cook.

Gascoyne shares fell 9.5% to 38 cents.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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