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Date : 01/06/2021

Bega Cheese Ltd Shares falls further down on ASX. Is it the right time to buy?

Bega Cheese as the name suggests engages in processing, manufacturing and distributing dairy and associated products. It operates through two segments: Bega Cheese and Tatura Milk. The Bega Cheese segment manufactures natural cheese, processed cheese, powders and butter and packages cheese products. The Tatura Milk segment manufactures and packages cream cheese, powders and nutritionals. Bega Cheese is one of the oldest companies in Australia and was founded back in 1899 and is headquartered in North Bega, Australia.

Bega Cheese shares got off to a fantastic start in 2021 and the BGA shares posted a 52-week high of $6.60 a share back in March 2021. They had a fantastic half year result, acting as a catalyst during this period. In 1H FY2021 Bega Cheese generated EBITDA of $65.8 million, an increase on the prior comparative period of $26.5 million. The half-year reported profit after tax was $21.7 million, being an increase of $13.2 million or 154% on 1H FY2020. The business continued to grow its Australian and international branded business, high value nutritional powders and lactoferrin sales. Underpinning the performance was a profitable sales mix and an increase in margin against the prior comparative period. Bega Cheese also announced an interim fully franked dividend of 5.0 cents per share for 1HFY2021.

Since hovering at highs of around $6.6 a share, BGA shares have slid in the past few weeks. During the past month alone, Bega Cheese has returned close to -10% to shareholders. Given the pullback, BGA shares have certainly caught the eye of several investors. It is currently trading at $5.75 a share and at a trailing P/E of 38x. If you’re watching BGA shares closely, it is worth noting that Bega Cheese’s business can be cyclical due to the peaks and troughs in dairy prices and seasonal conditions and this always weighs in on investor sentiment.

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