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Is this infant formula company the next a2 Milk Company?

James Mickleboro
Man asking financial questions

It has now been one month since the Nuchev Limited (ASX: NUC) share price landed on the ASX boards following its successful IPO.

In light of this, I thought I would check in and see how the goat milk infant formula company has performed since its listing at $2.60 per share.

How is the Nuchev share price performing?

The Nuchev share price has been a very strong performer since its IPO in December.

On Thursday the company’s shares rose 4% to $3.60. This means it is now up $1.00 or over 38% since landing on the ASX boards.

Why are investors buying Nuchev’s shares?

Investors appears to have been buying shares in the hope that it becomes the next A2 Milk Company Ltd (ASX: A2M) or Bubs Australia Ltd (ASX: BUB).

Whether or not it will achieve this, only time will tell, but it certainly does have a lot going for itself.

Nuchev is an infant formula company that was founded by Ben Dingle in 2013. Mr Dingle is the co-founder of Synlait Milk Ltd (ASX: SM1), which is best known as the processing partner of A2 Milk Company.

Its primary products are its Oli6 branded goat milk infant formula range. It sells these across multiple sales channels in Australia, China, and Hong Kong.

The Oli6 product has been formulated specifically for the needs of infants and children. Management notes that the potential health benefits of the range are supported by scientific laboratory research published by RMIT University researchers.

How big could it grow?

At present Nuchev has a market capitalisation of ~$160 million, based on its 45 million shares outstanding.

This is only a fraction of the size of its global market opportunity. According to its prospectus, the global goat milk infant formula market is expected to grow at a compound annual growth rate of 16.6% from $6.3 billion in 2018 to $13.6 billion in 2023.

Nuchev is specifically targeting the Chinese goat milk infant formula market, which is growing even quicker and expected to be worth $9.2 billion by 2023.

If the company can win a decent slice of this market then there could be plenty of upside for its shares. Though, it might be worth waiting to see how it has performed in the December quarter before making a move.

The post Is this infant formula company the next a2 Milk Company? appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020