Fonterra has been copping heavy criticism over its strategy as the financial pressure facing farmer shareholders deepens.
The dairy slump has laid bare the co-operative's exposure to volatility in the pricing of commodity exports, especially whole milk powder.
But Fonterra deserves credit where it's due and Stock Takes reckons the firm's decision to launch its Anmum infant formula in New Zealand could pay big dividends for the value-added, brands business it wants to grow.
Fonterra announced it had started selling the brand - which is already sold in a number of Asian markets - locally this week.
The roughly $77 million Kiwi baby formula market is, of course, small fry. However, selling the brand here could help Fonterra win the big prize for Anmum - China, whose retail formula trade is worth about US$18 billion.
After a string of food safety scandals, Chinese parents are willing to shell out big bucks for the peace of mind premium imported baby milk brands provide.
Fonterra said last year that Anmum infant formula retails in China for around 288 yuan ($67) per 900g can. The same product is selling here for between $23.99 and $25.99.
Given the money they're spending and food safety concerns, Chinese families want to know they're buying a brand consumed by babies in its country of origin.
And they tend to do a lot of online research, especially around products for their children. Anmum not being sold in New Zealand would have counted against the brand.
That dynamic could go some way towards explaining why sales of A2 Milk formula have taken off in China, helping drive a more than 240 per cent rally in the stock over the past year.
A2 made the right call in launching its Platinum formula brand simultaneously in Australasia and China in 2013.
Driven largely by Chinese demand, A2 posted a 340 per cent jump in baby formula sales across Australia, New Zealand and China, to $73.9 million, in the six months to December 31.
Indeed, much of the Platinum formula sold across the Tasman is passing through the so-called grey channels for resale in China.
A2 Milk shares closed unchanged yesterday at $1.86.
Fonterra's Anmum infant formula was also launched in China in 2013, but the co-op has given precious little guidance on how the roll-out of the brand is progressing there.
It's counting on a distribution arrangement with Shenzhen-listed baby milk manufacturer Beingmate Baby & Child to help it crack the Chinese market.
As far as partnerships go, it's been an expensive one as it involved Fonterra spending 3.4 billion yuan ($754 million at the time) on an 18 per cent equity stake in Hangzhou-based Beingmate.
That spending has contributed to the increase in the co-op's debt-to-equity ratio to 49.7 per cent at the end of its last financial year, up from 42.3 per cent 12 months earlier.
Fonterra's farmer shareholders and investors in the company's listed fund should be anxious to see the Anmum China push bearing fruit.
Fonterra Shareholders' Fund units closed up 1c yesterday at $5.89.
The S&P/NZX 50 has staged quite a comeback since bottoming out in early February following the sell-off that smashed global markets during the opening weeks of the year.
And Forsyth Barr is tipping it to run a bit further still.
In a report by analysts Matthew Leach and John Hughes, the brokerage said it expected a "modest" 6.9 per cent total return from the benchmark index over the next 12 months.
That's made up of a target share price return of 2.2 per cent and a cash dividend yield of 4.7 per cent.
Forsyth Barr's total return expectations are slightly below market consensus of 7.5 per cent.
"Whilst the returns over the next 12 months are modest, we believe that there are still opportunities in the New Zealand market," the report said.
Forsyth Barr calls these opportunities "Quant Gems" - stocks with a 12-month estimated total return of more than 7.5 per cent, as well as solid earnings and positive analyst ratings.
The gems in the report are: Contact Energy, Fletcher Building, Heartland Bank, Mainfreight, Metro Performance Glass, Michael Hill International, Summerset Group, Tower and Trustpower.
The brokerage also outlined the firms it believes are fully valued in the report.
They included Argosy Property, Auckland Airport, Diligent Corporation, Freightways, Port of Tauranga, Spark, The Warehouse Group, Trade Me and Vector.
Shares in Steel & Tube Holdings took a pummelling yesterday after the company was found to be selling earthquake reinforcing mesh that was wrongly certified as being approved by an independent laboratory.
The NZX-listed stock plunged 8 per cent in early trading, before regaining ground to close down 8c yesterday at $2.29.
Steel & Tube has confirmed that all strength-testing of the mesh product had been completed in-house, Radio NZ reported.
It said the logo of Christchurch-based laboratory Holmes Solutions had been inadvertently left on certificates. The lab helped Steel & Tube develop a testing regime for the steel mesh four years ago.
Steel & Tube chief executive Dave Taylor told Radio NZ the firm had made a mistake and had apologised to Holmes Solutions.
The Commerce Commission said yesterday it was investigating Steel & Tube for potential breaches of the Fair Trading Act.