Clover Corporation Limited
| ASX code: CLV | www.clovercorp.com.au | |
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| Share price ($) | 2.19 | |
| 12-month high ($ | 2.44 | |
| 12-month low ($) | 1.21 | |
| Market capitalisation ($mn) | 366.9 | |
| Price-to-NTA-per-share ratio | 9.5 | |
| 5-year share price return (% p.a.) | 39.1 | |
| Dividend reinvestment plan | No | |
| Sector: Materials | Company | Sector |
| Price/earnings ratio (times) | 47.7 | 13.2 |
| Dividend yield (%) | 0.8 | 4.4 |
Melbourne-based Clover, founded in 1988 as a family-owned company, develops value-added nutrients for use in foods or as nutritional supplements. Its key product is DHA, a form of omega 3. It sells this under the Nu-Mega and Ocean Gold range of tuna oils. It also markets nutritional oil powders, based on technology developed by the Commonwealth Scientific and Industrial Research Organisation. In addition, the company has developed technology that allows nutritional oils to be added to infant formula, foods and beverages. Overseas customers account for about half of company sales.
Latest business results (January 2019, half year)
Clover reported another excellent result, with expansion into new markets helping deliver a solid jump in profits. The infant formula market was especially strong, although the company reported that some customers were limiting their purchases in anticipation of legislative changes regarding the addition of DHA to infant products. Domestic sales actually fell. However, this was more than offset by surging demand elsewhere, with Asian sales up 39 per cent, European sales rising 53 per cent and American sales ahead by 42 per cent.
Outlook
Thanks to its excellent technology, Clover is now experiencing strong demand for its DHA products, especially from the infant formula market. It is a beneficiary of fast-growing Chinese demand for foreign-produced formula, and Asian sales are now more than a third of total turnover. European sales remain low but have the potential to increase significantly as new EU legislation goes into force in 2020, requiring a minimum DHA content in infant formula. China too may introduce similar legislation. The company has established a warehouse in the Netherlands, with a full-time sales agent, in readiness for growth in Europe. It is also developing new products, aimed especially at the American health and sports nutrition markets. Developments include a new vegan encapsulated product, organic products, powdered drinks and health bars. Clover has taken a 35 per cent stake in Melody Dairies, a New Zealand company that is planning to build a new spray dryer facility at Hamilton, New Zealand, for converting liquids into powders. When completed, late in 2020 or early in 2021, Clover will have the right to access 35 per cent of the operational time of this facility, which is expected to lower production costs for selected products and boost profit margins. It has also raised capacity at its Melbourne plant. With exports growing strongly the company is a beneficiary of a weak dollar.
| Year to 31 July | 2017 | 2018 |
| Revenues ($mn) | 47.9 | 63.0 |
| EBIT ($mn) | 5.0 | 10.8 |
| EBIT margin (%) | 10.4 | 17.2 |
| Gross margin (%) | 24.2 | 29.0 |
| Profit before tax ($mn) | 5.0 | 10.6 |
| Profit after tax ($mn) | 3.6 | 7.6 |
| Earnings per share (c) | 2.20 | 4.59 |
| Cash flow per share (c) | 2.55 | 5.02 |
| Dividend (c) | 1 | 1.75 |
| Percentage franked | 100 | 100 |
| Interest cover (times) | ~ | 57.2 |
| Return on equity (%) | 11.6 | 21.5 |
| Half year to 31 January | 2018 | 2019 |
| Revenues ($mn) | 31.0 | 34.3 |
| Profit before tax ($mn) | 4.4 | 6.2 |
| Profit after tax ($mn) | 3.2 | 4.5 |
| Earnings per share (c) | 1.93 | 2.71 |
| Dividend (c) | 0.5 | 0.63 |
| Percentage franked | 100 | 100 |
| Net tangible assets per share ($) | 0.19 | 0.23 |
| Debt-to-equity ratio (%) | ~ | 3.1 |
| Current ratio | 4.6 | 4.2 |