Jamieson Wellness Inc

Jamieson Wellness Inc (TSX: JWEL) is engaged in the business of manufacturing, distributing, and marketing branded natural health products, including vitamins, minerals, and supplements.

Key Highlights:

• Impressive Financial Metrics: The company reported solid operational growth over the years, which indicates operational resiliency. The company’s revenue grew at a CAGR of ~11.6% during FY16 to FY19, while adjusted EBITDA grew at a CAGR of ~17.5% at the same time.

Source: Company Reports

• Solid growth in Earnings and Dividend Payment: The company has reported solid growth in net earnings over the years and also enhanced its dividend payment at the same time, which is commendable.

Source: Company Reports

• Positive Outlook: The outlook for the health and wellness industry remains robust, which is likely to support the company’s future sales growth. With increasing consumer demand for wellness products, the company is likely to deliver higher traction from its international segment.                 

Industry Growth (Source: Company Presentation)

Q3FY20 Financial Highlights:

• JWEL announced its quarterly results, wherein the company posted revenue of CAD 105.565 million, as compared to CAD 88.558 million in the previous corresponding period (pcp). The growth was driven by 17.7% y-o-y growth in Jamieson Brands revenue along with 25% y-o-y growth in Strategic Partners revenue.
• Earnings from operations stood higher at CAD 17.804 million, as compared to CAD 13.265 million in pcp, thanks to the higher revenue, partially offset by higher cost of sales and marginally higher selling, general and administrative expenses.
• Net income stood at CAD 12.144 million, significantly higher than CAD 4.928 million in pcp.
• The company reported a cash balance of CAD 3.144 million, while total assets stood at CAD 607.822 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Valuation Methodology (Illustrative): Price to Earnings based

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Risks: Change in the consumer behavior due to fall in income might affect the financial performance of the group.

Stock Recommendation:

The quarter was marked by strong sales growth in both domestic and international Jamieson Brands, driven by positive momentum for immunity and general health supplements. The company reported robust demand across Eastern Europe and the Middle East etc. We expect the same trend to continue in the foreseeable future, which is likely to drive the company’s performance. Moreover, the Management has a positive view on China, as the country’s FDA allows foreign brands into its domestic market through new product licensing regulations, which is a key positive and offers tremendous prospect. We have valued the stock using Price to Earnings based relative valuation approach and arrived at a target price offering single-digit upside potential (in % terms). We have considered peers like Recipe Unlimited Corp, MTY Food Group Inc etc. Hence considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock at the closing price of CAD 38.00 on November 13, 2020.

JWEL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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