3. Introduction
• Team selected 3 companies listed on the Australian stock Exchange as follows:
1. Bega
2. Blackmores
3. Fonterra Shareholders Fund
• Above 3 companies were analysed based on the fundamental and technical analysis to deduce investment viability
• Data for the 3 companies were gathered from ASX, Market Index and Yahoo Finance for analysis.
• Based on the Analysis, the team has also made a recommendation on which of these companies' investment should be made.
4. Company Profile - Blackmores
Corporate Social Report.
• Australia, the Blackmores Mercie Whellan Women & Wellbeing
Awards
• Malaysia team’s Project Kindness, which served 7,500 meals to the
urban poor and homeless in 2018
• Thailand team’s Keep Running Keep Wellbeing program which
recently donated 7,543 pairs of shoes to needy school children.
Corporate Governance : responsibility is delegated by the Board to the
CEO and from the CEO to other levels of management.
Sustainability : Blackmore’s key initiatives are:
• Net zero carbon emission by 2030
• Ethical sustainable supply chain and 100% recycle packaging by 2025
Risk management: Blackmore’s risk management framework is
overseen by Board, Group Executive Team, Group Risk and the
business. The risk are reviewed at each quarter to assess the
effectiveness of risk management.
Competitor: Product competitor is Swisse
History
Founded in the 1930s by naturopath Maurice Blackmore
(1906-1977). Initial business for Blackmore was a health food
shop in Brisbane, Queensland, Australia.
In February 1962 Blackmore became a private company as
“The Blackmores Naturopathic Organisation Pty Limited”
Product
• Blackmores: Australia’s No.1 natural health brand
• BioCeuticals: Australia’s leading practitioner range
• PAW by Blackmores: Natural health products for pets
developed by veterinarians, natural health products for pets
• Impromy: Pharmacy-based weight management program
developed in collaboration with CSIRO
• Blackmores Institute: Our academic and research centre of
excellence
Overview
Blackmores is Australia’s leading natural health company.
It provides the quality range of vitamin, minerals, herbal and
nutritional supplements, and continued support of the
community and environment, are among the many reasons.
“Good health changes everything”.
5. Company Profile – Fonterra Shareholders Fund
History
Founded in 2001 – merger of New Zealand Dairy Board, New
Zealand Dairy Group and Kiwi Co-operative Dairies
Corporate Social Report.
• Social/Voluntariness – Fonterra Milk for Schools, Fonterra
Grassroot Fund
• Environmental Dimension – Energy Efficiency Programme,
Living Water Partnership
Corporate Governance : Board of Directors; Management Team,
Governance Dev. Programme, Fonterra Co-op Council,
Sustainability Advisory Channel
Sustainability : Fonterra’s key initiatives are:
• Net zero carbon emission by 2050
• Quality Management System – ISO9001:2000, ISO7025, FSSC
22000, BRC
Risk management: Fonterra’s risk management framework is
overseen by the Board through the:
Safety and Risk Committee - Food Safety Quality & Regulatory,
Security (Including Cyber Security), Incident/Crisis management
Finance and Audit Committee – Finance risks
Product
Range – Milk, cheese, ice cream, yogurt, butter
Top Brands - Anchor™, Anlene™, Anmum™ and Mainland
Overview
• Fonterra is a multinational publicly traded dairy co-operative
that collects, manufactures, and sells milk and milk-derived
products.
• 30% of the world's dairy export
• Owned by over 11,000 dairy farmers
6. Company Profile – Bega
History
• Cooperative founded in 1899
• 2001: Long Term Supply and Licence agreement with Fonterra
• 2011: ASX Listing, Value listing for Farmers
• 2017: Acquisition of grocery brands such as Vegemite
Corporate Social Report
• Nutrition : Reduce sugar by 5% in Bega Peanut butter range.
Goal is to reduce 1000Tons of added sugar by 2025.
• Diversity : 35% of Senior Management are Women, Salary
Equity
• Greenhouse Gas: 40% emissions reduction by 2030
Corporate Governance : Board of Directors; Management Team,
Governance Dev. Programme, Fonterra Co-op Council,
Sustainability Advisory Channel
Sustainability
• Carbon Target : Net Zero Emissions by 2050
• Packaging : Removed 655 Tons of Single use PVC
• Water : 34% of Capital Grants for water Management
Risk management
Integral to operations of Bega Cheese business
Structured Risk Management Environment
Board and CEO review the strategic risk framework
Recognised and managed
Products
Fresh milk, Yogurt, Milk based beverages, Spreads, Chilled Juice,
Creams, Custards and Plant based milk
Overview
• Processes and distributes dairy products in Australia. Two
segments: Branded and Bulk.
• The branded segment manufactures value added consumer
products.
• The Bulk segment manufactures bulk dairy ingredients, nutritional,
and bio-nutrient products.
• Vision is ‘To become The Great Australian Food Company’
7. Risk Analysis
Financial Risk:
• Foreign currency risk
• Interest rates:
• Credit management
• Liquidity risk
Operational Risk
• Data and information security
• Safety, health and wellbeing consumers
and employees
Market Risk
• Reputation and Brand image
• Consumer and market demand
Strategy Risk
• Partnership with key distributors and
retailer
Blackmores Fonterra Shareholders Fund
Financial Risk:
• Foreign currency risk
• Interest rates:
• Credit management
• Liquidity risk
Operational Risk
• Data and information security
• Safety, health and wellbeing consumers
and employees
Market Risk
• Reputation and Brand image
• Consumer and market demand
Strategy Risk
• Partnership with key distributors and
retailer
Bega
Financial Risk:
• Foreign currency risk
• Interest Rates
• Credit management
• Liquidity risk
Operational Risk
• Impact of COVID-19: Staff
• Cost of commodity inputs
• Data and information security
• Health, Safety and Environment
Market Risk
• Reputation and Brand image
• Consumer and market demand,
Competition
Strategy Risk
• Partnership with key distributor and
retailer (Fonterra)
8. Fonterra Shareholders
Fund
Blackmores
Bega Cheese
Snapshot
Commonwealth Government Indexed Bond – 1.70 %
Market Cap (intraday) (AUD) 1.02B 1.43B 310.03M
Revenue (ttm) (AUD) 2.87B 619.38M -89M
Revenue Per Share (ttm) (AUD) 9.52 31.98 -0.83
Net Profit (AUD) 72.20M 28.62M N/A
Enterprise Value (AUD) 1.45B 1.37B N/A
Trailing P/E 12.5 46.68 N/A
Forward P/E 13.23 32.15 N/A
Earnings Per Share 0.258 1.576 N/A
Beta 0.44 0.48 0.11
Return on Assets 3.08% 5.84% -12.95%
Return on Equity 6.26% 9.84% 0.00%
Quarterly Revenue Growth (yoy) 113.00% 14.40% N/A
Total Debt (mrq) (AUD) 486.9M 28.81M N/A
Debt to Equity 0.97 0.48 1.52
Annual Yield 3.13% 1.39% 5.55%
Share Price (AUD) $3.38 $75.84 $2.88
Dividends per Share (AUD) $0.105 $1.050 $0.160
mrq = Most Recent Quarter | ttm = Trailing Twelve Months | yoy = Year Over Year | lfy = Last Fiscal Year | fye = Fiscal Year Ending
9. Fundamental Analysis
1
2
3
4
Earnings Per Share
Price to Earnings Ratio
Price to Book Ratio
Debt to Equity Ratio
5
6
7
8
Return on Equity Ratio
Price to Sales Ratio
Current Ratio
Dividend Yield
Fundamental analysis of stocks focuses on the
company itself and seeks to determine the true,
fair value of a company’s stock price, based on
recent earnings, past earnings growth rates,
projected earnings, multiples like PE ratio, debts
and other financial and accounting measures. By
studying these metrics, fundamental analysts
create forecasts for where they think the stock
price could go based on the performance of the
company.
10. Earnings per Share
2017 2018 2019 2020 2021
Bega Earnings Per Share (EPS) 89.3 15.37 5.61 9.77 27.2
Blackmores Earnings Per Share (EPS) 340.1 405.7 309.15 103.54 147.54
Fonterra Earnings Per Share (EPS) 27.59 32.16 0 0 0
0
50
100
150
200
250
300
350
400
450
Earnings Per Share
Bega Earnings Per Share (EPS) Blackmores Earnings Per Share (EPS) Fonterra Earnings Per Share (EPS)
• EPS measures the profitability of a company on a per share basis and the willingness of the market participants to pay for the stock, for every dollar of profit that
the company generates. The EPS gives a sense of the profits generated on a per share basis. The higher the EPS the better it is for its shareholders and the more
expensive the stock is.
• Based on the observations, all 3 companies EPS dropped during the period of 2019-2021. Apart for Fonterra, both companies have a healthy EPS with Blackmores
having the highest. EPS information could not be ascertained for Fonterra Shareholder Fund.
11. Price to Earnings Ratio
• The price/earnings ratio, also called the P/E ratio, tells investors how much a company is worth. The P/E ratio simply the stock price divided by the company’s
earnings per share for a designated period like the past 12 months. The price/earnings ratio conveys how much investors will pay per share for $1 of earnings.
• The P/E ratio shows how much growth investors expect from companies they invest in. A high ratio indicates that investors are paying much more per share than
the company is earning, which is common in new businesses with a lot of investment capital, like tech start-ups. Lower ratios indicate that growth has slowed, but
that doesn’t necessarily mean the company is failing; in fact, a lower P/E ratio may mean the company has solidified its market share.
• Based on the observations, Blackmores shares may be overvalued, where as the share prices for Bega and Fonterra could be seen as within its value.
2017 2018 2019 2020 2021
Bega Price to Earnings (PE) Ratio 6.48 30.57 21.23 42.71 12.24
Blackmores Price to Earnings (PE) Ratio 28.18 35.12 28.24 76.96 39.47
Fonterra Price to Earnings (PE) Ratio 20.62 14.61 28.94 15.79 12.71
0
10
20
30
40
50
60
70
80
90
Price to Earnings (PE) Ratio
Bega Price to Earnings (PE) Ratio Blackmores Price to Earnings (PE) Ratio Fonterra Price to Earnings (PE) Ratio
12. Price to Book (PBV) Ratio
• The “Book Value” of a firm is the amount of money available after the company pays off its obligations. Consider the book value as the salvage value of the
company.
• Used to gauge whether a stock is valued properly. A P/B ratio of one means that the stock price is trading in line with the book value of the company. In other
words, the stock price would be considered fairly valued, strictly from a P/B standpoint. A company with a high P/B ratio could mean the stock price is
overvalued, while a company with a lower P/B could be undervalued.1
• Based on the observations, Blackmores shares may be overvalued, where as the share prices for Bega and Fonterra could be seen as within its value.
2017 2018 2019 2020 2021
Bega Price to Book (PBV) Ratio 2 2.17 1.24 1.17 1.41
Blackmores Price to Book (PBV) Ratio 9.23 12.7 7.51 4.75 3.75
Fonterra Price to Book (PBV) Ratio 1 1 1 1 0.99
0
2
4
6
8
10
12
14
Price to Book (PBV) Ratio
Bega Price to Book (PBV) Ratio Blackmores Price to Book (PBV) Ratio Fonterra Price to Book (PBV) Ratio
13. Debt to Equity Ratio
• Debt to equity ratio measures the amount of the total debt capital with respect to the total equity capital. A value of 1 on this ratio indicates an equal amount of
debt and equity capital. Higher debt to equity (more than 1) indicates higher leverage and hence one needs to be careful. Lower than 1 indicates a relatively
bigger equity base with respect to the debt. The formula to calculate Debt to Equity ratio is: [Total Debt/Total Equity]
• Based on the observations, Blackmores has a sound Debt to Equity with Bega Cheese close behind. Fonterra has high Debt to Equity which would imply the
Company is mostly financed by Debt.
2017 2018 2019 2020 2021
Bega Debt to Equity (DE) Ratio 0.84 0.92 0.80 0.75 0.97
Blackmores Debt to Equity (DE) Ratio 1.30 1.40 1.36 0.83 0.48
Fonterra Debt to Equity (DE) Ratio 1.46 1.85 1.90 1.67 1.52
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Debt to Equity (DE) Ratio
Bega Debt to Equity (DE) Ratio Blackmores Debt to Equity (DE) Ratio Fonterra Debt to Equity (DE) Ratio
14. Return on Equity (ROE)
• Helps the investor assess the return the shareholder earns for every unit of capital invested. RoE measures the entity’s ability to generate profits from the
shareholders investments. RoE shows the efficiency of the company in terms of generating profits to its shareholders.
• Also note, if the RoE is high, it means a good amount of cash is being generated by the company, hence the need for external funds is less. Thus, a higher ROE
indicates a higher level of management performance.
• Based on the observations, Bega Cheese has recovered well after 2019 and is offering better returns compared to the other 2.
2017 2018 2019 2020 2021
Bega Return on Equity (ROE) 26.82% 7.06% 5.65% 2.74% 10.13%
Blackmores Return on Equity (ROE) 33.24% 36.30% 26.57% 5.80% 9.68%
Fonterra Return on Equity (ROE) 8.00% 6.20% 5.6% 6.6% 6.6%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Return on Equity (ROE)
Bega Return on Equity (ROE) Blackmores Return on Equity (ROE) Fonterra Return on Equity (ROE)
15. Price to Sales Ratio
• Uses Sales instead of earnings to value investments. The earnings figure may not be true as some companies might be experiencing a cyclical low in their
earning cycle. Additionally due to some accounting rules, a profitable company may seem to have no earnings at all, due to the huge write offs applicable to that
industry. So, investors would prefer to use this ratio. This ratio compares the stock price of the company with the company’s sales per share
• Based on the observations, Fonterra Shareholders Fund does not have any P/S since the company does not produce any goods and hence does not have sales.
2017 2018 2019 2020 2021
Bega Price to Sales Ratio (P S) 0.81 0.94 0.71 0.63 0.84
Blackmores Price to Sales Ratio (P S) 2.38 4.08 2.54 2.51 2.41
Fonterra Price to Sales Ratio (P S) 0 0 0 0 0
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Price to Sales Ratio (P S)
Bega Price to Sales Ratio (P S) Blackmores Price to Sales Ratio (P S) Fonterra Price to Sales Ratio (P S)
16. Current Ratio
• Measures the capability of a business to meet its short-term obligations that are due within a year. The ratio considers the weight of total current assets versus total
current liabilities. It indicates the financial health of a company and how it can maximize the liquidity of its current assets to settle debt and payables. A rate of
more than 1 suggests financial well-being for the company. There is no upper end on what is “too much,” as it can be very dependent on the industry, however, a
very high current ratio may indicate that a company is leaving excess cash unused rather than investing in growing its business.
• Based on the observations, all 3 companies have sound financial well-being .
2017 2018 2019 2020 2021
Bega Current Ratio 3.07 1.69 1.55 1.34 1.22
Blackmores Current Ratio 1.81 1.73 2.03 2.28 2.23
Fonterra Current Ratio 1.29 1.16 1.17 1.43 1.29
0
0.5
1
1.5
2
2.5
3
3.5
Current Ratio
Bega Current Ratio Blackmores Current Ratio Fonterra Current Ratio
17. Dividend Yield
• The Dividend Yield is a financial ratio that measures the annual value of dividends received relative to the market value per share of a security. The dividend yield
formula calculates the percentage of a company’s market price of a share that is paid to shareholders in the form of dividends
• Used to determine the cash flows attributed to an investor from owning stocks or shares in a company. Therefore, the ratio shows the percentage of dividends for
every dollar of stock.
• Blackmores did not payout dividends in 2020. Fonterra Shareholder Fund has the highest dividend yield.
2017 2018 2019 2020 2021
Bega Dividend Yield 1.54% 1.48% 2.30% 2.25% 1.70%
Blackmores Dividend Yield 2.82% 2.14% 2.45% 0 0.97%
Fonterra Dividend Yield 6.47% 2.01% 0 1.30% 5.34%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Dividend Yield
Bega Dividend Yield Blackmores Dividend Yield Fonterra Dividend Yield
18. Investment Checks
Bega Cheese Blackmores Fonterra Shareholders
Fund
Strong company background
Governance
Sustainability
Corporate Social Responsibility
Future Growth
Strong financial background
Earnings Per Share (EPS)
Price to Earnings (PE) Ratio
Price to Book (PBV) Ratio
Debt to Equity (DE) Ratio
Return on Equity (ROE)
Price to Sales Ratio (P/S)
Current Ratio
Dividend Yield
Beta
19. Investment Options
Option 1 - Equal Distribution # of Shares Beta Weighted Beta Share Value Dividend Return
Bega 33 0.44 0.147 $111.54 $3.47
Blackmores 33 0.48 0.16 $2,502.72 $34.65
FSF 33 0.11 0.037 $95.04 $5.28
Total 0.343 $2,709.30 $43.40
Portfolio Beta 0.343
Portfolio Yield 1.602%
Option 2 - More shares in FSF # of Shares Beta Weighted Beta Share Value Dividend Return
Bega 25 0.44 0.110 $84.50 $2.63
Blackmores 25 0.48 0.120 $1,896.00 $26.25
FSF 50 0.11 0.055 $144.00 $8.00
Total 0.285 $2,124.50 $36.88
Portfolio Beta 0.285
Portfolio Yield 1.736%
Option 3 - More shares in BKL # of Shares Beta Weighted Beta Value Dividend Return
Bega 25 0.44 0.110 $84.50 $2.63
Blackmores 50 0.48 0.240 $3,792.00 $52.50
FSF 25 0.11 0.028 $72.00 $4.00
Total 0.378 $3,948.50 $59.13
Portfolio Beta 0.378
Portfolio Yield 1.497%
Option 4 - More shares in BGA # of Shares Beta Weighted Beta Value Dividend Return
Bega 50 0.44 0.220 $169.00 $5.25
Blackmores 25 0.48 0.120 $1,896.00 $26.25
FSF 25 0.11 0.028 $72.00 $4.00
Total 0.368 $2,137.00 $35.50
Portfolio Beta 0.368
Portfolio Yield 1.661%
Shares Share Price DPS
Bega Cheese (BGA) $3.38 $0.105
Blackmores (BKL) $75.84 $1.05
Fonterra Shareholders Fund (FSF) $2.88 $0.16
Assumption is that we keep a portfolio of 100 shares
FSF Shares Only
Shares 100
Share Price $ 2.88
Beta 0.11
DPS $0.16
Share Value $288.00
Dividend Return $16.00
Total Yield $304.00
Return % 5.26%
BKL Shares Only
Shares 100
Share Price $75.84
Beta 0.48
DPS $1.05
Share Value $7,584.00
Dividend Return $105.00
Total Yield $7,689.00
Return % 1.37%
BGA Shares Only
Shares 100
Share Price $3.38
Beta 0.44
DPS $ 0.105
Share Value $338.00
Dividend Return $10.50
Total Yield $348.50
Return % 3.01%
20. Recommendation
• Based on the fundamental and technical analysis, it can be observed that all 3 stocks are stable and well preforming, and have
beta of less than 1
• Fonterra Shareholder Fund shares are the least volatile when compared to Blackmores and Bega Cheese stocks. It is the
highest performing with a rate of 5.26%
• To reduce the risk, stocks can be diversified which would reduce the overall beta. Based on the analysis, having majority
shares in Fonterra 50%, 25% in Blackmores and 25% in Bega Cheese will result in an overall portfolio beta of 0.285 and
combined portfolio yield of 1.736%. This compared to the Commonwealth Government Indexed Bond which has a return of
1.70% would provide lower risk with slightly higher return.
21. References
• 1. ASX. (2022). ASX. Retrieved July 20, 2022, from https://www2.asx.com.au
• 2. Investopedia. (2022). Investopedia. Retrieved July 20, 2022, from https://www.investopedia.com
• 3. Market Index. (2022). Market Index. Retrieved July 20, 2022, from https://www.marketindex.com.au
• 4. NerdWallet. (2022). NerdWallet. Retrieved July 20, 2022, from https://www.nerdwallet.com
• 5. Taylor, R., Ross, S. A., Bird, R., Westerfileld, R. W., & Jordan, B. D. (2002). Essentials of Corporate
Finance (5 ed.).
• 6. Yahoo Finance. (2022). Yahoo Finance. Retrieved July 20, 2022, from https://finance.yahoo.com
