Bubs share price smashes ASX All Ords following China deal

The Bubs Australia Ltd (ASX: BUB) share price finished the session on Wednesday up 4.04% to 52 cents.

It far outperformed the S&P/ASX All Ordinaries Index (ASX: XAO) today, which closed down 0.55%.

The bump follows news that Bubs has entered into a new joint venture with a Chinese manufacturer.

The deal will see the local manufacture of a new ultra-premium range of goat infant formula products exclusively for Chinese infants.

As we reported earlier, Bubs requested that its shares be placed in a trading halt before the market open on Wednesday.

The company then released a statement outlining arrangements for the joint venture.

What’s the deal?

In its statement, Bubs said it had entered into a binding master term sheet and trademark licence agreement with Heilongjiang Ubeite Dairy Group Co., Ltd (HUG) and related parties.

Under the deal, HUG will manufacture and distribute a new ultra-premium range of Bubs China label goat infant formula products.

HUG applied to renew its existing registration with China’s State Administration for Market Regulation (SAMR) today.

The renewal application aligns with China’s new national standards for China label infant formula products. The standards were updated in March 2021 and become effective in February 2023.

If approved, the registration will be used exclusively for the manufacture of Bubs products. The new ultra-premium range would likely be launched in 2H FY23.

What did the company say?

Bubs Founder and CEO, Kristy Carr said:

We are pleased to announce this important milestone for the Company to renew an existing registered SAMR brand slot for Bubs China label Goat infant formula products in partnership with a reputable Chinese infant formula manufacturer.

First time access to 80% of China’s $40 billion market

Bubs said if SAMR approved the registration, the company would get access to the remaining 80% of China’s A$40 billion infant formula market for the first time.

Carr said:

Bubs China label ultra-premium [products] … supports the most significant demand and market trend in China, whereby both the ultra-premium segment and the goat milk segment are experiencing rapid growth despite the total category volume decreasing due to a reduction in birth rates.

In FY22, Bubs English label infant formula sales to China grew 179%, delivering over $42 million in gross revenue.

Subject to SAMR approval, this new registration would enable Bubs China label infant formula products to be marketed and sold in the remaining 80% of China’s General Trade …

Bubs share price snapshot

Bubs shares are up 10.6% in the year to date and up 48.6% over the past 12 months.

The post Bubs share price smashes ASX All Ords following China deal appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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