Investment group Forager Funds says Bellamy's is a strong example of the big peaks and troughs new businesses can face in the Chinese market.
The Tasmanian dairy company announced to the ASX that it would remain off the stock exchange until December 21, or until concludes a review into its finances.
Shares in Bellamy's fell by more than 40 per cent on the December 2, following __news that new Chinese regulations were crimping sales and depressing prices.
Steve Johnson, from investment group Forager Funds, said there was a lesson to be learned for the broader market and companies wishing to export to China, a market renowned for booms and busts.
"The huge issue here was just the expectation built into the share price," he said.
"It is still an amazing success story. This company was doing $30 million a year in sales just a few years ago, and it did $250 in the last year.
"The problem was investors started to extrapolate that success into the future."
Mr Johnson says it was common in the Chinese consumer market for there to be a surge in popularity for a new brand.
But he said it was common for that popularity to be fleeting.
"The whole economy is changing so quickly still. There are a lot of brands trying to establish themselves and for that exact reason.
"You can have something that's very hot one day and then the trend changes and the latest and greatest becomes something different."
Mr Johnson said he expected some investors might be put off investing in big growth stocks because of what had happened.
"I think they will be more sceptical and more conservative.
"I don't think the opportunity has gone away in China, and I don't think people will completely dismiss China as a market that we can export to.
"It is still a huge honeypot for Australian companies, but I think there will be more scepticism around how much we can extrapolate that growth into the future."
No comments:
Post a Comment