Treasure Chest: Bega Sell-Off Overdone

This story features BEGA CHEESE LIMITED, and other companies. For more info SHARE ANALYSIS: BGA

By Greg Peel

On Tuesday, Bega Cheese ((BGA)) admitted at its annual general meeting the company’s joint venture with Blackmores ((BKL)) to sell infant formula in China, launched in January, has failed to make inroads. As a result profit guidance has been cut.

Bega shares have since fallen 20%.

Saxo Group analysts believe the market has overreacted. Bega is one of few Australian listed pure-plays on the Asian protein trade and even fewer in the cheese business – feeding the emerging middle class of the Asian economies. Wealthier Asians are buying more meats and dairy.

On a technical basis, Tuesday’s sell-off represented a seven standard deviation move on 90-day volatility and the 14-day relative strength index (RSI) has also moved into oversold territory.

Saxo has taken a long position at $5.17 with a stop-loss order at $4.60 (noting risk of further capitulation) and profit targets at $6.00 and $6.50.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Click to view our Glossary of Financial Terms