Australia | Nov 30 2006
By Chris Shaw
Food supplements are a growth industry as the world becomes more focused on improving eating habits and health generally, so companies exposed to this sector should enjoy solid growth in coming years, particularly as demographics point to ageing populations in Western countries in particular.
With this in mind Microequities has reviewed Clover Corporation (CLV) and rates the stock as Buy, with a price target of 18.5c. The company’s exposure to the food supplement sector comes through its portfolio of Omega-3 fatty acid products, for which demand is growing strongly.
Microequities points to a report by Frost & Sullivan, a research and consulting firm, which estimates the Omega-3 supplement market should grow at around 8% annually through to 2010, with some market segments to enjoy growth of as much as 20% annually.
This comes off a reasonable base, as the report suggests the global market for Omega-3 products was worth around US$700m in 2005, so Clover appears well placed.
Microequities thinks so, estimating the company should be able to achieve revenue growth of 13% in each of the next two years, while it is forecasting a 64% increase in earnings in FY07.
The group points out the company has a strong balance sheet with available cash and no debt, which leaves it positioned to take advantage of any expansion opportunities that may arrive, so Microequities is confident its revenue forecasts can be achieved.
The group’s price target on the stock is above its year high of 17.5c, which is well above the low of 10c. With around 165m shares on issue Clover is capitalised at just $23m, so it receives little coverage from brokers. Microequities is specialised in so-called microcaps.
The stock is yet to trade today, with its last closing price being 14c.