Treasure Chest: BWX Ltd

This story features BWX LIMITED. For more info SHARE ANALYSIS: BWX

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is BWX Ltd by CLSA.

By Rudi Filapek-Vandyck

Whose Idea Is It?

Analysts at CLSA

The subject:

Multi-national manufacturer, developer and marketer of natural skin and hair care products, BWX Ltd ((BWX)).

CLSA has upgraded to Buy with the shares considered too cheaply priced, as also implied by CLSA's fresh price target of $5.80 (down from $6.00).

It is the analysts' view that the share price has been held back by the recent performance not meeting expectations due to lockdowns and a slower-than-expected recovery of in-person visits to retailers in the US and in Australia, plus some unfavourable FX moves didn't help either.

On CLSA's assessment, foot traffic is now accelerating and the broker thinks positive momentum will not only continue, but also exceed market expectations.

More info:

BWX listed on the ASX in late 2015 as a premium wellness and skincare brand. It wasn't long before the company captured investors' attention as sales of Sukin skin care products quickly gained market share throughout Australia, but the story came unstuck in 2018 and the share price subsequently fell from near $8 to below $2 in 2019.

Through acquisitions, BWX has by now effectively turned itself into a US market story where partnerships with North American retailers offer the promise of a much brighter future. The share price has more than doubled over the past 2.5 years.

On current forecasts (see Stock Analysis on the FNArena website) profits are expected to dip due to the aforementioned slower-than-expected recovery from lockdowns, but expected to be followed-up by a strong growth recovery in FY23.

Analysts at Macquarie, who updated on Thursday morning, equally hold a positive view, as also demonstrated by their $6 price target and Outperform rating. Citi, with a price target of $5.70 and a Neutral rating, had earlier warned that higher freight costs and other covid-related set-backs would eat into the company's margin.

Two other brokers who haven't updated for a while, Moelis and Canaccord Genuity, equally hold price targets well above today's share price. Moelis sits at $5.20 and Canaccord at $5.62.

Where both differ is in their focus. Moelis is with Citi and thus concerned about higher costs eroding the benefits from an acceleration in growth. Its rating is thus Hold, also in line with Citi.

Canaccord Genuity is with CLSA, confident about a very strong looking growth profile for the years ahead, with a valuation that is thus too cheap. No surprise, Canaccord's rating is Buy.

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