Bubs Australia Ltd (ASX: BUB) shares have risen 16% in early trading after the goat infant formula company made an announcement.
Bubs was founded in 2006 by Kristy Carr and was listed on the ASX in January 2017. Its infant formula is based on goat milk and it also sells organic baby food. Bubs recently acquired NuLac Foods, Australia’s largest producer of goat milk products, it also guarantees exclusive supply of local goat milk from Australia’s largest herd of milking goats
Why Bubs shares are up 16%
Bubs said it is partnering up with Beingmate China, which is a leading domestic infant nutritional company. It has a market capitalisation of nearly $1.3 billion on the Shenzhen Stock Exchange and had reported revenue of $520 million in FY18.
The two businesses have a memorandum of understanding to form a joint venture for the marketing and distribution of Bubs entire portfolio of infant formula and organic baby food products in China.
If the venture goes ahead it could accelerate Chinese growth because Beingmate’s existing distribution network covers, 30,000 Mother and Baby stores.
The other benefit of the agreement is that Beingmate can provide expertise on Chinese regulatory compliance and product registration.
Bubs CEO Kristy Carr said: “Beingmate is particularly strong in driving distribution via China’s lower tier cities which are benefiting from China’s new multi-child family policy, and so there are higher expectations for addressable market growth than in the Tier 1 cities where the costs to entry are high.”
The joint venture is expected to cost up to RMD 10 million to establish, which translates to around $2.1 million.
Is Bubs a buy?
This is exciting news for Bubs and its shareholders, but who knows if it will have the same success as A2 Milk Company Ltd (ASX: A2M). Once it hits cashflow neutral or it starts making a profit it could be very interesting.
For now, I’m just an interested follower of Bubs. If you’re looking ASX shares generating international growth, the two rapid growth shares in the free report below could be considerations.
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