MFB - My Food Bag

[Basil]

See post #406. Dividend increase very much on the cards when they have repaid all their debt. End of FY27 they should be debt free or very close.
I remain with the view they have coped with the deepest recession in decades very well.
Disc: Small position, just on 2% of my portfolio.

[Dolcile]

Does anyone know what the $3.5m of deferred revenue relates to? It has appeared in the interim result without any explanation.  I looked back at the previous interim report and there was nothing to be seen there. 

Seems like a big number in the context of the operating cash flow.

[Dolcile]

I'm not following Winner.   The interim report has deferred revenue of 3.5m v 10k at 30 June.   Huge difference. 

[Habitz]

Showing deferred revenue liability is correct if the product hasn't been delivered. The co had 85m sales over six months, 3.5m equates to one week of income which sounds about right to me.

[Dolcile]

But why is there $3.5m at Sept and virtually zero at June?

[Habitz]

But why is there $3.5m at Sept and virtually zero at June?

Is that something they will answer if you email the co, I'd be interested to hear their response. Most likely reason it's a timing thing, where balance date fell at the end of a cycle

[winner (n)]

Is that something they will answer if you email the co, I'd be interested to hear their response. Most likely reason it's a timing thing, where balance date fell at the end of a cycle

They invite queries to

For investor relations queries:
Louise Newsome
ir@myfoodbag.co.nz

[winner (n)]

But why is there $3.5m at Sept and virtually zero at June?

You worried it may have 'inflated' H1 cash flows and have a negative impact on H2 cash flows or something?

Probably some simple explanation so just ask them

[OnwardsNupwards]

there is a simple explanation.  see the annual report note 1

"Payment for the goods is typically received up to a week in advance of delivery. The payment received in advance of delivery is recognised in the Statement of Financial Position as a liability (deferred revenue) until the goods are delivered to the customer." 

MFB ships goods I think once a week - around the weekend (ours get delivered on a Sunday).  AFter that day, they're recognise the week's sales as revenue as they've been sent to the customer.  but in the week leading up to that point, they will not yet have prepared the kits and despatched them yet, so they can't claim they revenue yet.  all those orders which have been received but not fulfilled yet will be treated as deferred revenue. 

so if the financial period end falls close to and just before the day of despatch, deferred revenue will be high in that period.  MFB has lots of orders from customers, but it hasn't finished processing the orders so all the money is shown as deferred revenue.   but if the financial period end falls just after the weekend, deferred revenue will be lower because not many customers have ordered but not received their meal kits.

[Stoploss]

Managed to reinvest the Divvy this week .
Hopefully a good 2026 ahead .
I'm looking for circa  40 cents before selling any .

[Basil]

Food prices have been declining for the last few months so that should help their margin. https://www.interest.co.nz/economy/136543/statistics-nzs-selected-price-indexes-show-food-prices-dropped-04-november-lowering

[winner (n)]

Food prices have been declining for the last few months so that should help their margin. https://www.interest.co.nz/economy/136543/statistics-nzs-selected-price-indexes-show-food-prices-dropped-04-november-lowering

More like going up more slowly

A better measure more relevant to MFB is what input prices are doing ....like this Grocery Supplier Cost Index

Mind you based on the Global Food Price Index there might be some relief from mid of next year


https://static.infometrics.co.nz/Content/Grocery-Supplier-Cost-Index/Grocery-Supplier-Cost-Index-Note-2025-11.pdf

[winner (n)]

Food prices have been declining for the last few months so that should help their margin. https://www.interest.co.nz/economy/136543/statistics-nzs-selected-price-indexes-show-food-prices-dropped-04-november-lowering

They are prices consumers are paying. I understand meal kits are included in the index

So you are essentially saying in the context of MFB  'selling prices have been declining last for the last few months so that maybe NOT good for their margins'

My MFB 'price watch' has no price rises (list price) since July ...but promotional has been getting keener and keener ....and more of it.

[Stoploss]

They are prices consumers are paying. I understand meal kits are included in the index

So you are essentially saying in the context of MFB  'selling prices have been declining last for the last few months so that maybe NOT good for their margins'

My MFB 'price watch' has no price rises (list price) since July ...but promotional has been getting keener and keener ....and more of it.

Maybe they've increased the promotional spend to really take it to H/F, be a great day when they pull stumps ....

[Basil]

Thanks Winner you make some good counter points to my thesis which is appreciated.
Firstly, this is a nursery, (baby) sized position for me and will either grow / or be added too significantly to become something meaningful or be sold in due course.

The metrics were more compelling where I bought 400K just under 20 cents but even at 24 cents the PE of 9.2 and gross yield of 9.25% makes it a sound hold to see what happens.

The thesis behind my purchase was that they appear to have built a base in their operations that appears to be sustainable given we have traversed what is inarguably a severe stress test with consumer confidence and cost of living pressures at unprecedented lows for a considerable period of time and that future dividends would be used to put food on my table, (literally) with using them for a subscription. The metrics are very sound and you're paying nothing whatsoever for the possibility of future growth in income and therein lies the attraction of MFB.

Leaving aside how they price their subscriptions and letting them do the weekly grind at an operational level, (they are doing more deals direct with farmer suppliers so your useful wholesale price index info might not be as problematic as it appears at face value), what I see is a company that's shown decent resiliency across the bottom of the economic cycle.  Latest half year result was okay in the circumstances.

What was very clear in discussions both during the last annual meeting and afterwards, is the Directors are determined to build more resiliency into their business model by eliminating debt and they're making very good progress.

Based on my analysis this morning they have reduced debt by an average of $1.96m over the last 5 half yearly reports, call it $4m per annum to be down to only $5.5m as at 30 September 2025.  Clearly they are on track to be debt free by 31 March 2027 which is only ~ 15 months away.

What are they going to do with that $4m per annum in cash after that ?  Note, the current level of dividends giving a 9.25% gross yield consumes almost exactly $4m per annum so there is the potential for the current annual dividend to double in FY28 to 3.2 cps.  That 9.25% gross yield could double to 18.5%.  I'm not saying it will, but it appears it could and that's based on financial performance across the bottom of the economic cycle.  What if the economy recovers a bit and consumers spend a bit more ?  There's also earnings growth just through eliminating that debt.

I think this is an interesting income stock with genuine potential for increasing income from FY28.  Its never going to be a rock star company but in terms of its ability to put food on your table in more ways than one including by way of dividends, I think its interesting and has genuine potential.  Even the current yield is quite appealing so shareholders are being paid very well while they wait and see what happens.

Happy to have a "nursery" sized stake and might add to it in due course.