ATM - A2 Milk Corporation Limited

[bohemian]

This is a great read by Nanogirl in this article. She explains what A2 milk is and why it's becoming increasing more evident that A2 a healthier product. I am happy share holder.

[winner69]

Does anyone know the answer to the following:
- how many tonnes of formula is A2 currently producing?
- how many tonnes of formula is Synlait producing in total for all its customers?

Sad to read you have left Sharetrader because of yhe environment created by the actions of STMOD
http://www.sharetrader.co.nz/showthread.php?10436-Views-on-the-Moderation-on-this-Forum-(started-by-STMOD)

So this is your last post here.

I'll miss you and I am sure many others will as well.

Take care

[iceman]

Sad to read you have left Sharetrader because of yhe environment created by the actions of STMOD
http://www.sharetrader.co.nz/showthread.php?10436-Views-on-the-Moderation-on-this-Forum-(started-by-STMOD)

So this is your last post here.

I'll miss you and I am sure many others will as well.

Take care

Ditto winner69- KW will be sorely missed

[Yoda]

What no more KW ? that's insane. Posts have been awesome , and have helped many grow in knowledge. If there is a way around this .......
you have helped me heaps esp with your "When to buy and Sell" thread. Have a great Christmas KW

[okay]

Interesting Article

http://www.smh.com.au/business/half-baby-formula-bought-from-aussie-supermarkets-being-sent-overseas-20151214-glnmd2.html

Of particular interest this paragraph:

Fairfax Media has obtained the past three years of supermarket scan data from IRI Aztec, which collates point-of-sale information from Coles, Woolworths and Metcash supermarkets.


That data shows sales have surged by $200 million since 2012, providing a windfall for supermarkets and suppliers.


The data showed a2 Platinum, which is doubling its production (http://www.smh.com.au/business/a2s-infant-formula-sales-surge-330-in-four-months-20151116-gl0o60), has surged past Bellamy's to be the No. 1 premium brand of infant formula sold in Australia, and No. 2 in overall sales behind Danone's Nutricia.

[Bjauck]

Only a month after the upgrade in forecast for platinum...another one comes along https://www.nzx.com/companies/ATM/announcements/275355 Like waiting for buses, they all come together.

[fiasco]

Amazing, I wouldn't be surprised if this changed come Feb. Early xmas present, wait for the ASX to open and this thing might meet new highs today!

[fiasco]

Taken from the Hotcopper thread:

Comsec and Recognia put a buy on A2M last night

CommSec Technical Report

The a2 Milk Co Ltd forms bullish "Symmetrical Continuation Triangle" chart patternDec 17, 2015
Recognia has detected a "Symmetrical Continuation Triangle (Bullish)" chart pattern formed on The a2 Milk Co Ltd (A2M:ASX). This bullish signal indicates that the stock price may rise from the close of 1.03 to the range of 1.22 - 1.26. The pattern formed over 17 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: The price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend. A Symmetrical Continuation Triangle (Bullish) shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.

7764

[h2so4]

KW gone?
Oh deary deary me!

[Joshuatree]

Her choice to go and do other things.I too have appreciated her wisdom sharing and strong opinions and debates.. I think her threads of wisdom are still here last i looked.
I can pass on any messages.PM me.
What a wonderful start to the day ,G E R O N I MOOOOOOOOOOOOOOO:t_up:

[RGR367]

Taken from the Hotcopper thread:

Comsec and Recognia put a buy on A2M last night

CommSec Technical Report

The a2 Milk Co Ltd forms bullish "Symmetrical Continuation Triangle" chart patternDec 17, 2015
Recognia has detected a "Symmetrical Continuation Triangle (Bullish)" chart pattern formed on The a2 Milk Co Ltd (A2M:ASX). This bullish signal indicates that the stock price may rise from the close of 1.03 to the range of 1.22 - 1.26. The pattern formed over 17 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: The price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend. A Symmetrical Continuation Triangle (Bullish) shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.

7764

You don't need such "trend lines" when plain gut-o-meter :pwill tell you.
My greedy self put more than a third of what I've gotten since early this year to be sold for $1.25 on the last week of last month. It sat there with a notice from ASB yesterday that it will be expiring soon. And BOOM it just got sold this morning and thanking ASB for giving it up instead for $1.35. Milk sure sells a lot this day :t_up:

[black knat]

New Zealand's newest NZ$1b company.....

[fiasco]

You don't need such "trend lines" when plain gut-o-meter :pwill tell you.
My greedy self put more than a third of what I've gotten since early this year to be sold for $1.25 on the last week of last month. It sat there with a notice from ASB yesterday that it will be expiring soon. And BOOM it just got sold this morning and thanking ASB for giving it up instead for $1.35. Milk sure sells a lot this day :t_up:


I had an average of 1.16, then it dropped and I sold at 1.05, after the Fed confirmation I went back in but annoyingly at 1.10. But now not such a silly idea!

However, be interested to hear thoughts on the current pricing?

Seeweed, well done! You and a few others have stuck through a very long period of patience and well rewarded.

[h2so4]

Her choice to go and do other things.I too have appreciated her wisdom sharing and strong opinions and debates.. I think her threads of wisdom are still here last i looked.
I can pass on any messages.PM me.
What a wonderful start to the day ,G E R O N I MOOOOOOOOOOOOOOO:t_up:

Tell her to get back on sharetrader and keep doing what she was doing.

[westcoasters]

Yes a long but interesting wait... I had never bought any shares in any company until this one, in at .12c now at an average at .36c. Very happy and like I try to teach my kids, all good things come to those who wait. Thanks a2 we knew you could do it. Merry Christmas everyone.

[Joshuatree]

Wowwestcoaster ATM your first stock awesome! Yes the "sitting" on a stock you believe in the way to go. Im slowly getting better at this.

A2M on the Asx up as high as $1.40 ,currently A$1.29 up 25.5% 7.35 million shares thru.

[Bjauck]

Yes a long but interesting wait... I had never bought any shares in any company until this one, in at .12c now at an average at .36c. Very happy and like I try to teach my kids, all good things come to those who wait. Thanks a2 we knew you could do it. Merry Christmas everyone. Congratulations on your timing and "paper" profits, unless you have already sold up. You have done well. However, sometimes waiting does not pay off. I think the key is to know when to wait and when to exit in order to invest your capital more propitiously.

[westcoasters]

Congratulations on your timing and "paper" profits, unless you have already sold up. You have done well. However, sometimes waiting does not pay off. I think the key is to know when to wait and when to exit in order to invest your capital more propitiously.

Not selling unless there is a takeover if I can help it..
The only things that worry me about this company is being a target for malicious scandal.. I hope they are diligent in the appointment of every staff member and of course the dodgy research funded by fonterrors mates. Am I worried for nothing?

[h2so4]

Congrats west coaster.

[westcoasters]

Congrats west coaster. Thank you.. Happy Holidays :)

[jonu]

Congratulations on your timing and "paper" profits, unless you have already sold up. You have done well. However, sometimes waiting does not pay off. I think the key is to know when to wait and when to exit in order to invest your capital more propitiously.

What did Kenny Rogers wheeze out? "You got to know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run"

[see weed]

I had an average of 1.16, then it dropped and I sold at 1.05, after the Fed confirmation I went back in but annoyingly at 1.10. But now not such a silly idea!

However, be interested to hear thoughts on the current pricing?

Seeweed, well done! You and a few others have stuck through a very long period of patience and well rewarded.
Thanks.Tried to buy 15000 before open at 1.12c. So put order up to $1.35 to be at the top of the queue to get them at $1.12, but someone else got them and I ended up paying $1.35. So quickly sold them at $1.36 five minutes later plus spp shares.

[Ginger_steps_]

What did Kenny Rogers wheeze out? "You got to know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run" Yes, but if Bellamys provides any guidance to a2 potential SP growth over the next year - running now could mean losing out on a further 100% SP rise... Im choosing to "Hold em" - this company is going from strength to strength!

[theace]

Thanks.Tried to buy 15000 before open at 1.12c. So put order up to $1.35 to be at the top of the queue to get them at $1.12, but someone else got them and I ended up paying $1.35. So quickly sold them at $1.36 five minutes later plus spp shares.:D

Should have held out for $1.50+ as it is now!!!

[stoploss]

Thanks.Tried to buy 15000 before open at 1.12c. So put order up to $1.35 to be at the top of the queue to get them at $1.12, but someone else got them and I ended up paying $1.35. So quickly sold them at $1.36 five minutes later plus spp shares.:D
Nobody else got them the match was 1.35 on the open ..,

[Leftfield]

Yes, but if Bellamys provides any guidance to a2 potential SP growth over the next year - running now could mean losing out on a further 100% SP rise... Im choosing to "Hold em" - this company is going from strength to strength!

Agree - early days.

Also happy to pick ATM in 2015 Stock picking comp (me shadowing Xerof's picks) Nice to make a late run, although it would take a miracle to upset Moosie!

[nextbigthing]

Macs DCF looking about right Winner. You might need to revisit PEB and CRP soon.
Well done Mac, Seeweed etc al

[see weed]

Did anyone notice the share price starting to rise two days before todays announcement?, after 2 or 3 weeks of slowly drifting down. Now all we have to do is wait for the dust to settle, then jump in again. How low will it go over the Christmas holidays and into the new year $1.20? $1.25? or maybe back to $1.05....$1.10?

[whatsup]

On the move again, in Aust they ( punters ) are picking $2 b4 the interim ann, big call but there is momentium building now on 12 million shares traded already today.

[theace]

On the move again, in Aust they ( punters ) are picking $2 b4 the interim ann, big call but there is momentium building now on 12 million shares traded already today.

Going up like a rocket .... wonder if it'll come crashing down!

[blobbles]

Going up like a rocket .... wonder if it'll come crashing down!

Check out the aussie sentiment with Bellamy's over there. With mining/energy stocks down in recent times they are looking for the next big thing and currently dairy is it. With most of their milk powder bought and shipped to China, I can see why they are excited (over excited?) about the oppourtunity. ATM's proposition is far more compelling than Bellamy's, ability to ramp up supply and already with their toes in multiple markets mean that ATM should be a greater value proposition.

$2 by Christmas is a distinct possibility at this rate. As I have been holding for over 1.5 years now and recognised the oppourtunity early on, its good to see it finally being valued by others.

As a point of interest, if you ever want to see the interplay between markets for a dual listed stock, this is a good one to watch at the moment :-)

[whatsup]

On the move again, in Aust they ( punters ) are picking $2 b4 the interim ann, big call but there is momentium building now on 12 million shares traded already today.
This buying is relentless and IMHO most of the buying today is coming out of Aust ,what do they know that we don't appreciate , HMMMM !

[Bjauck]

This buying is relentless and IMHO most of the buying today is coming out of Aust ,what do they know that we don't appreciate , HMMMM !
Good investent it may well be, but perhaps a lot of the current demand is as a result of Fear Of Missing Out (FOMO) and in Australia there are more funds to back the currents of sentiment.

[Ginger_steps_]

Shaping up to be a VERY VERY Merry Christmas - congrats to all holders / believers! I was thinking this morning that traders must be making a squillion out of this stock at present - but it seems those holding on longer term will be coming out on top :t_up:

[stoploss]

Shaping up to be a VERY VERY Merry Christmas - congrats to all holders / believers! I was thinking this morning that traders must be making a squillion out of this stock at present - but it seems those holding on longer term will be coming out on top :t_up:

Spare a thought for Freedom Foods - good grief .........

[whatsup]

Spare a thought for Freedom Foods - good grief .........

Stop can you please give more info, S P , history, where listed, cheers.

[fungus pudding]

Stop can you please give more info, S P , history, where listed, cheers.
Google is your friend. F foods sold 10% of a2 for 63 milk or something like that.

[Bjauck]

Stop can you please give more info, S P , history, where listed, cheers.
FNP.ASX (Australia SX)
SP down about 5% in last 12mths
SSH re: ATM https://www.nzx.com/companies/ATM/announcements/273596
Freedom sold tranche for 73c per share https://www.nzx.com/companies/ATM/announcements/272112

[see weed]

ATM has even overtaken the great Moose on stocktastic. In4abuck now in the lead. What a horse race. What is the last day of Com?

[whatsup]

Google is your friend. F foods sold 10% of a2 for 63 milk or something like that.

Thanks, I seem to remember the C Raisings that struggled to complete @ .10 circa so couldn't blame them if they participated at that price !

[Joshuatree]

Last day the mkts are open i assume. Go for it in4abuck Woohoo!! Arrriiiibbbaaa ARIBA for that bottle yours truly has for da winner:t_up:

[see weed]

Spare a thought for Freedom Foods - good grief .........
My condolences to Freedom, did they sell out the whole 100%?:mellow:

[stoploss]

My condolences to Freedom, did they sell out the whole 100%?:mellow:

Yep last lot @ AUD .85 and said "recent significant share price appreciation in a2MC has led the Group to form the view that theopportunity cost arising from the market value of the funds now employed in the holding would nowbe better utilised by being applied to activities and businesses in respect of which the Group haseither 100% ownership or significant ownership and control interests. "
Must have had something decent to apply the funds to , as that's certainly some opportunity cost !!!!!

http://stocknessmonster.com/news-item?S=FNP&E=ASX&N=892133

[Sideshow Bob]

Was at the dentist in Dunnos yesterday, and not sure what radio station was listening to while having my teeth polished, and there was an ad on the radio for Synlait milk, looking for A2 suppliers, or at least farmers looking to change to convert - due to unprecedented demand.

Congrats holders! :t_up: (me after getting teeth polished and seeing the share price this morning)

[MPC]

One of the most exciting stocks to watch at the moment. Dual listed and loads of interest in Oz so best to have a look at HOtcopper to get a better idea of what is going on.
Disc, Bought at 1.17 and 1.60, LT hold with a couple of little sideline profit takes hopefully.

Cheers,
MPC

[nextbigthing]

Anybody brave enough to pick where this is going to stop in the near term?

[whatsup]

anybody brave enough to pick where this is going to stop in the near term?

a $ 5.00 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[RGR367]

a $ 5.00 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

:scared::t_up: Why not aim for the sky eh? You're probably that one on queue selling some at $5. Good on you. We might join you at that slot very very soon. :D

[see weed]

Anybody brave enough to pick where this is going to stop in the near term?
Funny you mention that. As I was leaving the a2 meeting, going down the lift from the 27th floor, was talking to a couple of the earlier shareholders who got their shares for about 10c or so. The figure of $2 was mentioned by the end of next year. Looks like....Are we their yet.... yes a year early:t_up:

[blobbles]

Must say as a holder that it's getting far too frothy... $1.4 billion company at forward looking PE of over 45...

Sure there is great potential but let's not lose our heads...

[Joshuatree]

Its a really sexy, hot ,crema stock in Aus still, the number 1 stock or close to, talked about on H/c for quite some time now so lots of traders and FOMO jumper ins. Whether to sell into the momentum before their span of attention is exhausted and they move on and bet on buying back later, or sitting on it and ignoring the fear and greed and thinking longer term depends on ones age and investment/ trading style.Congrats to all holding and a wealth of health and a lindauer Summer or three.:t_up:. Special thanks to KW who helped my decision to hang in on this stock.

[MPC]

I had to take a little profit today at 1.99, paid for xmas pressies. Loads of interesting chat about this share and I will be keeping my core holding through the expected downs and hopefully larger ups. Best wishes,

MPC

[see weed]

Must say as a holder that it's getting far too frothy... $1.4 billion company at forward looking PE of over 45...

Sure there is great potential but let's not lose our heads...
I was thinking the same at $1.40. Just a bit of trivia...over 615,000,000 ATM shares traded on the NZX since 1/6/15. Merry Christmas and happy A2's:cool:

[Snoopy]

PE is share price / eps , with eps measured from net profit. There is no net profit forecast for FY2015. The year just gone produced at net profit of $11,000. Based on the number of shares on issue being 660m this gives eps of:

$0.0011/660 = 0.0000016cps

Based on a share price of 60c, the PE was 36,000,000 (36 million)


Looks like you guys need some assistance in calculating PE ratios. The above calculation was based on the FY2014 results. The FY2015 results include a one off $1.681m charge related to listing on the ASX. I wouldn't count that as part of a normalised result.

So actual ongoing earnings for FY2015 were -$1.137m + 0.7($1.681m) = $0.04m, or $40,000.

In fairness ATM were forecasting zero underlying earnings, so I guess in that context the result was quite good.

No. of share on issue is 723.3m

So eps is currently: $0.04m/723.3m = 4,000,000c/723,300,000 shares = 0.00553c/share

At $2, this gives a PE ratio of: 200/0.00553 = 36,000

That is a big improvement on last years 36 million I grant you. But 36,000 is more than a little north of 45!

SNOOPY

[kura]

Snoopy, Think the PE would be different if you based the profit on guidance they issued a week or so ago !

Disc: Got in a few days ago, up 20% already ( suspect increase a touch excessive )

[blobbles]

Looks like you guys need some assistance in calculating PE ratios. The above calculation was based on the FY2014 results. The FY2015 results include a one off $1.681m charge related to listing on the ASX. I wouldn't count that as part of a normalised result.

So actual ongoing earnings for FY2015 were -$1.137m + 0.7($1.681m) = $0.04m, or $40,000.

In fairness ATM were forecasting zero underlying earnings, so I guess in that context the result was quite good.

No. of share on issue is 723.3m

So eps is currently: $0.04m/723.3m = 4,000,000c/723,300,000 shares = 0.00553c/share

At $2, this gives a PE ratio of: 200/0.00553 = 36,000

That is a big improvement on last years 36 million I grant you. But 36,000 is more than a little north of 45!

SNOOPY

Dude. I did say "forward looking", I mean next year's guidance based on today's SP.

Actually it should be 39 (1.98x723m)/37m.

I think of more interest today was the notice that Geoff Babidge selling a million at 1.68m.

If the CEO is selling, I am thinking about it too...

[blobbles]

Can I also claim victory in my Snoopy contrary indicator considering someone was trying to convince us to sell at about 50c?

:-P

[mfd]

Looks like you guys need some assistance in calculating PE ratios. The above calculation was based on the FY2014 results. The FY2015 results include a one off $1.681m charge related to listing on the ASX. I wouldn't count that as part of a normalised result.

So actual ongoing earnings for FY2015 were -$1.137m + 0.7($1.681m) = $0.04m, or $40,000.

In fairness ATM were forecasting zero underlying earnings, so I guess in that context the result was quite good.

No. of share on issue is 723.3m

So eps is currently: $0.04m/723.3m = 4,000,000c/723,300,000 shares = 0.00553c/share

At $2, this gives a PE ratio of: 200/0.00553 = 36,000

That is a big improvement on last years 36 million I grant you. But 36,000 is more than a little north of 45!

SNOOPY

Does a PE ratio tell you much when the company has historically been taking the profits from Australia and using them to build new markets? If all the earnings are being re-invested, doesn't leave much for the ratio. I find it quite interesting that given that strategy and the recent $43 million capital raising, they're now forecasting EBITDA > $33 million. Perhaps they're now earning more than is needed to get going in America, or the pick up from formula has been too sudden to allocate elsewhere.

Share price has been a bit of a rollercoaster though, I've sold out about a third of mine which I picked up in the 60s, mostly because it's become too big a chunk of my portfolio.

[Joshuatree]

Quick popularity check on A2M on H/C.Still number one most talked about stock re 100 % higher than next closest(FAR energy). Trend is your friend till the bend at the end but never forget Mothers finest.;)

[see weed]

Some people have made a hell of a lot of money in the last couple of weeks. Still can't believe it is going up up up. UP a dollar in one week! When is it going to stop? I am too scared to buy anymore and too scared to sell.:mellow:

[skid]

I know the trend is your friend and I wouldnt be selling while this craziness is going on -but does any one else think this is getting just a bit ridiculous?

[silverblizzard888]

I don't have any shareholding in ATM, but from what I see that has happened if that ATM is being rerated from a company valued on its cashflows and profits to being a growth company. So expect 10 times revenues which forecast 300 million so i would not be surprised if this pops above $3.50.

If you consider
2013: 94 million
2014: 110million
2015: 150 millon

and

2016: 300-315million.

Revenue is doubling next year, thats super growth and for a company with a moat like A2 thats pretty big.

[see weed]

Thanks.Tried to buy 15000 before open at 1.12c. So put order up to $1.35 to be at the top of the queue to get them at $1.12, but someone else got them and I ended up paying $1.35. So quickly sold them at $1.36 five minutes later plus spp shares.


Bugger...Got that one wrong.

[Nasi Goreng]

I get what you are saying SB, who knows where this ends up? The big difference between ATM and most growth companies is that they are a good company with high distribution costs. A tech or even pharmaceutical company who might normally trade at 10xR would have much lower distribution costs and higher GM.

But throw all of that out of the window, for holders this could be the best game of musical chairs since XRO.

[Nasi Goreng]

Typo... Food company with high distribution costs.

[Joshuatree]

Just have a look on H/C and you will see the spruiking/pumping day trading ,backup the truck influencing going on. It will end in tears for many.Here on S/T we can keep p erspective usually.

[silverblizzard888]

I don't have any shareholding in ATM, but from what I see that has happened is that ATM is being rerated from a company valued on its foreseeable future cashflows and profits to being a growth company. So expect 10 times revenues which forecast 300 million so i would not be surprised if this pops above $3.50. (next year)

If you consider
2013: 94 million
2014: 110million
2015: 150 millon

and

2016: 300-315million.

Revenue is doubling next year, thats super growth and for a company with a moat like A2 thats pretty big.

If you look at current valuations it is valuing at 1.6 billion, not far off the current 150million revenue times 10.

[Joshuatree]

Contagion spreading to Beston foods BFC

[Thor]

For holders and non holders it might pay to look at this again to keep your emotions in check:

http://thefelderreport.com/wp-content/uploads/2014/01/investor-sentiment-wheel.jpg

[black knat]

I am still holding a reasonible size parcel of shares having sold half at 1.26. Is there anyone on here who has valuation justifing the current price or higher? I don't ... so should sell I guess - but am free carried.

[Joshuatree]

Contagion spreading to Beston foods BFC
Eat your hear out Australian Dairy AHF :eek2:up 97% today

[Ginger_steps_]

I don't have any shareholding in ATM, but from what I see that has happened is that ATM is being rerated from a company valued on its foreseeable future cashflows and profits to being a growth company. So expect 10 times revenues which forecast 300 million so i would not be surprised if this pops above $3.50. (next year)

If you consider
2013: 94 million
2014: 110million
2015: 150 millon

and

2016: 300-315million.

Revenue is doubling next year, thats super growth and for a company with a moat like A2 thats pretty big.

If you look at current valuations it is valuing at 1.6 billion, not far off the current 150million revenue times 10.

If this stock hits $3.50 Sir - I will send you a nice bottle of scotch (because Im in a great mood and 350 sounds just swell). I believe there are a few quite possible events which could send a2's SP into the stratosphere over the next few years, I mean - we are talking biotech milk here people! Keep up the excellent work a2!

[Ginger_steps_]

The Aussies on Hot copper really do not understand a2's IP... will try to enlighten a few after work - unless any of you beat me to it. I guess as shareholders we can help this company out by "marketing" it to / educating the aussie investors.

[Trigger]

The Aussies on Hot copper really do not understand a2's IP... will try to enlighten a few after work - unless any of you beat me to it. I guess as shareholders we can help this company out by "marketing" it to / educating the aussie investors.

Good luck with that Ginger. Don't be surprised if you get shot down over there for letting facts get in the way of a good story. Some of the posting has been unbelievably shallow. :eek2:

[Joshuatree]

Yeah id leave it be; they're doing a fab job , momemtumwise :t_up:

[NT001]

The Aussies on Hot copper really do not understand a2's IP... will try to enlighten a few after work - unless any of you beat me to it. I guess as shareholders we can help this company out by "marketing" it to / educating the aussie investors.

I've already had a go at that and it just got lost in amongst all the ridiculous hype on HC. It's pointless. ll they see is "infant formula into China" which I pointed out is a market vulnerable to government regulatory intervention, vigorous competition out of Europe and the risk of commercial scams etc. The recent rocketing SP is based on comparisons with BAL that are not really valid. Even for a long term substaantial holder like myself who sees ATM as ultimately a $5 or $10 share, what's happened recently is crazy. I also pointed out (in reply to concerns by one contributor on HC) that the risk to ATM/A2M is not from competitors like Nestle invading the A2 milk market, because a2MC has that covered by IP/trademarks and it just ain't possible anyway in practical terms. Anyone investing in a2MC without understanding that its value lies primarily in the uniqueness of its product and the IP which covers it is in risky territory. My post pointing out these issues drew zero response.

[mayday]

I've already had a go at that and it just got lost in amongst all the ridiculous hype on HC. It's pointless. ll they see is "infant formula into China" which I pointed out is a market vulnerable to government regulatory intervention, vigorous competition out of Europe and the risk of commercial scams etc. The recent rocketing SP is based on comparisons with BAL that are not really valid. Even for a long term substaantial holder like myself who sees ATM as ultimately a $5 or $10 share, what's happened recently is crazy. I also pointed out (in reply to concerns by one contributor on HC) that the risk to ATM/A2M is not from competitors like Nestle invading the A2 milk market, because a2MC has that covered by IP/trademarks and it just ain't possible anyway in practical terms. Anyone investing in a2MC without understanding that its value lies primarily in the uniqueness of its product and the IP which covers it is in risky territory. My post pointing out these issues drew zero response.

Fair enough NT. IMO, still A2MC is very likely to be taken over in the near future (because of the possession of IP) before it reaches $10 apiece :)

[Joshuatree]

http://www.smh.com.au/money/food-fo...ities-in-the-dining-boom-20151016-gkbfj9.html (http://www.smh.com.au/money/food-for-thought-investment-opportunities-in-the-dining-boom-20151016-gkbfj9.html)

[RGR367]

I've already had a go at that and it just got lost in amongst all the ridiculous hype on HC. It's pointless. ll they see is "infant formula into China" which I pointed out is a market vulnerable to government regulatory intervention, vigorous competition out of Europe and the risk of commercial scams etc. The recent rocketing SP is based on comparisons with BAL that are not really valid. Even for a long term substaantial holder like myself who sees ATM as ultimately a $5 or $10 share, what's happened recently is crazy. I also pointed out (in reply to concerns by one contributor on HC) that the risk to ATM/A2M is not from competitors like Nestle invading the A2 milk market, because a2MC has that covered by IP/trademarks and it just ain't possible anyway in practical terms. Anyone investing in a2MC without understanding that its value lies primarily in the uniqueness of its product and the IP which covers it is in risky territory. My post pointing out these issues drew zero response.

Yeah, crazy as it is, the market is beyond satiation at this point. My sell order will get hit for sure at $2.50 anytime now. Lucky are those who got heaps and still holding on :) :D

[silverblizzard888]

If this stock hits $3.50 Sir - I will send you a nice bottle of scotch (because Im in a great mood and 350 sounds just swell). I believe there are a few quite possible events which could send a2's SP into the stratosphere over the next few years, I mean - we are talking biotech milk here people! Keep up the excellent work a2!

That’s mighty generous of you Sir, regardless of that or not when this stock hits above $3.50 next year I think I'll personally just be happy for you full-stop.

For now it should consolidate within the $2 range and start pacing up as we get closer to June (financial year unless prior announcements), unless this market becomes very bullish and realises it quicker. Regarding the next few years I think they have great potential, but I never trouble myself to predict that far.


The Aussies on Hot copper really do not understand a2's IP... will try to enlighten a few after work - unless any of you beat me to it. I guess as shareholders we can help this company out by "marketing" it to / educating the aussie investors.
I think Hotcopper has a mixed number, some who do understand it but no longer talk about it as much and those traders who are new to the stock and feel it’s a industry boom again rather than a unique moat by the company. All people understand is that baby formula is big and that if it sells formula, then that’s the formula for success.
The unique moat around A2 milk is that it locks customers in through the better product approach both psychologically in the mind that drinking A1 would be damaging to your body after what you know of A2 and physically that this milk actually works, except they just need better science results to further prove it.

Even this video: https://www.youtube.com/watch?v=Z_T_OBGf3QE
Explains simply how it works and why it works, if they can educate consumers then its going to gain a lot of traction in the US.

I don't think many people are being flexible about their approach especially those who have only seen this stock move like a snail year after year and have the mentality this is a temporary rise. Yes it’s a shock to the system that all of a sudden this stock has gathered pace, but with that comes more awareness of what this stock truly is. Its earning between 10-15% margins in cash flow from revenue, given the rate this business grows thats big stuff and can match the tech firms out there.

How many stocks have you seen grow their revenue 100% especially at this size? That growth is more than Xero, but unlike Xero they are profitable and their retention rate will be a lot higher.

[airedale]

Just looking for reasons to explain the SP, perhaps that board member who was on the Coca-Cola board?? Maybe it is the "next thing". How is that for a bit of hot copper style ramping?:)
Discl: still holding most of mine.

[silverblizzard888]

Just looking for reasons to explain the SP, perhaps that board member who was on the Coca-Cola board?? Maybe it is the "next thing". How is that for a bit of hot copper style ramping?:)
Discl: still holding most of mine.

Proven company, proven product and management that seems quite competent in their strategy and belief.

Its as simple as 10 times revenue. Current 150 million revenue = 1.5 billion market cap, but soon to be 300 million = 3 billion market cap
The closer we get to June the more it will continue to go up.

[skid]

Proven company, proven product and management that seems quite competent in their strategy and belief.

Its as simple as 10 times revenue. Current 150 million revenue = 1.5 billion market cap, but soon to be 300 million = 3 billion market cap
The closer we get to June the more it will continue to go up.

Until now? Is the stampede doing a turnaround?--Its been a dream run but this may be the time to consider some profit taking.
In my opinion we are out of the domain of fundamentals and into market sentiment(the psychology of investor behavior) DYOR

[silverblizzard888]

If you look until the 18 Dec announcement the market was not so bullish, but once the new upgrade came in it reaffirmed that previous guidance was conservative and that the company was going to achieve an extraordinary growth in revenues. The valuation is that it will revert to a growth company now, while in the past growth was growing at a steady pace and profits and cash flow seemed more relevant. Taking some profits is always a wise move because markets are unpredictable to anyone and judging by the price fluctuations today there seems to be a lot of profit takers. Based on what I've seen in companies and my study into valuations my projection is this company can enter a 3 billion valuation next year as long as they execute once the June financial year ends.

[Leftfield]

Been a great run so I sold 10k at 2.47 today. Balance well and truly FREE for a long term hold as I'm living testimony to how ATM can benefit an irritable digestive system (as well as keeping my wallet v happy!)

[Joshuatree]

Great timing there LF ,$2.06 finish. Spruikometer tells us top stock A2M 700 posts followed by AHF Australian dairy 317.Next closest BUD 123.

[okay]

With the introduction of Platinum baby formula to A2's stable clearly being an outstanding success, would it not make sense to capitalise on this momentum and follow Bellamy's lead and introduce follow up A2 baby food products?

With the extra cash these products will generate at good margins they can have a real good crack at the US and UK.

[janner]

Now I am not saying that ATM is not a good company..

However..

Massive daily increases in just a few chosen companies reminds me of1987..

Be careful out there !!!..

[Ginger_steps_]

With the introduction of Platinum baby formula to A2's stable clearly being an outstanding success, would it not make sense to capitalise on this momentum and follow Bellamy's lead and introduce follow up A2 baby food products?

With the extra cash these products will generate at good margins they can have a real good crack at the US and UK. have a look at your nearest supermarket shelf (if in aussie) - they have 3 formula products.

[Ginger_steps_]

That’s mighty generous of you Sir, regardless of that or not when this stock hits above $3.50 next year I think I'll personally just be happy for you full-stop.

For now it should consolidate within the $2 range and start pacing up as we get closer to June (financial year unless prior announcements), unless this market becomes very bullish and realises it quicker. Regarding the next few years I think they have great potential, but I never trouble myself to predict that far.


I think Hotcopper has a mixed number, some who do understand it but no longer talk about it as much and those traders who are new to the stock and feel it’s a industry boom again rather than a unique moat by the company. All people understand is that baby formula is big and that if it sells formula, then that’s the formula for success.
The unique moat around A2 milk is that it locks customers in through the better product approach both psychologically in the mind that drinking A1 would be damaging to your body after what you know of A2 and physically that this milk actually works, except they just need better science results to further prove it.

Even this video: https://www.youtube.com/watch?v=Z_T_OBGf3QE
Explains simply how it works and why it works, if they can educate consumers then its going to gain a lot of traction in the US.

I don't think many people are being flexible about their approach especially those who have only seen this stock move like a snail year after year and have the mentality this is a temporary rise. Yes it’s a shock to the system that all of a sudden this stock has gathered pace, but with that comes more awareness of what this stock truly is. Its earning between 10-15% margins in cash flow from revenue, given the rate this business grows thats big stuff and can match the tech firms out there.

How many stocks have you seen grow their revenue 100% especially at this size? That growth is more than Xero, but unlike Xero they are profitable and their retention rate will be a lot higher.

Thanks for your input Silver - I hadn't seen that video yet. The burning question I have is - will you be buying?!
Lets hope a2 were being conservative with their last profit upgrade. Furthermore, lets keep an eye on China, in 9 months there will more likely than not be a flood of new babies - if a2's milk supply is increased....... In the words of Will Smith "tick tick tick tick BOOOM!!"

[silverblizzard888]

Thanks for your input Silver - I hadn't seen that video yet. The burning question I have is - will you be buying?!
Lets hope a2 were being conservative with their last profit upgrade. Furthermore, lets keep an eye on China, in 9 months there will more likely than not be a flood of new babies - if a2's milk supply is increased....... In the words of Will Smith "tick tick tick tick BOOOM!!"

I do plan to buy if the price is reasonable and when I have available funds, I think I could still justify $2.50 as it still for me offers a margin of safety (big value investor here). For now a lot of my funds are locked up in Australian stocks, and the only NZ stocks I could justify selling for now would be Vmob, but next year that could well be a 3 bagger so won't give that up for ATM which would likely be a 2 bagger for me at this stage. I'm overweight in IQE have bought at the lower end and even now could offer a easy 2 bagger along with possible dividends. I'm all about where the return is highest. I was in ATM for a while and exited during the takeover offer as I was feeling the same frustration as Freedom Foods was, that the company wasn't pulling any strong numbers in especially when I saw other dairy companies outpacing them, but wow they sure caught me by surprise, that 100% growth is truly impressive. The next question is if they deliver can they follow it up with similar numbers.

[Ginger_steps_]

I do plan to buy if the price is reasonable and when I have available funds, I think I could still justify $2.50 as it still for me offers a margin of safety (big value investor here). For now a lot of my funds are locked up in Australian stocks, and the only NZ stocks I could justify selling for now would be Vmob, but next year that could well be a 3 bagger so won't give that up for ATM which would likely be a 2 bagger for me at this stage. I'm overweight in IQE have bought at the lower end and even now could offer a easy 2 bagger along with possible dividends. I'm all about where the return is highest. I was in ATM for a while and exited during the takeover offer as I was feeling the same frustration as Freedom Foods was, that the company wasn't pulling any strong numbers in especially when I saw other dairy companies outpacing them, but wow they sure caught me by surprise, that 100% growth is truly impressive. The next question is if they deliver can they follow it up with similar numbers.

Thanks for your response Silver. Yes lets hope they can keep rolling with the growth - a2's management have not let me down thus far.

[skid]

That big upgrade was a direct result of the management led by the old CEO--It will be interesting to see how the new CEO carries the torch.
Obviously alot of groundwork has already been laid,but the next few results will reflect how the new captain of the ship is doing.
In terms of the SP--its been a fascinating study of human behavior.
When I was invested in NAN there was a similar scenario.

[silverblizzard888]

Mr Markets been a bit bi-polar the last two days. Looks like institutions have been offloading to balance the books for the year to keep weightings in place. Market has had a big profit taking day, looks like this is where it holds for 2015. As Warren Buffett says in the short run the market is voting system and in the long run it is a weighting system, let 2016 roll in and seem where this can go.

[skid]

These kind of stampedes almost always overshoot--I think most who have been around knew it was getting crazy.
Its hard to value a company on that sort of behavior.
It will be interesting to see if the euphoria turns to trash talk on HC--I think the dust still needs to settle a bit.
If it had gone up a bit slower to where it is now ,everyone would be drooling,but now that momentum has changed there still may be some adjustment to come(sell and buy lower?)---Aside from those who bought at the top ,there still should be some happy campers though.
Some will come back from their break-turn on their computers and celebrate,maybe not even realizing at first where it went up to.

[Snoopy]

Dude. I did say "forward looking", I mean next year's guidance based on today's SP.

Actually it should be 39 (1.98x723m)/37m.

I think of more interest today was the notice that Geoff Babidge selling a million at 1.68m.

If the CEO is selling, I am thinking about it too...

$37m is the upper bound of the $33m-$37m 'Operating EBITDA' range quoted in the market update of 18th December. Look further down the page on that news release and you will see that 'Operating EBITDA' is a non GAAP measure that equates to EBITDA before non recurring and intercompany charges.

The $33m-$37m figure appears to be the 'Operating EBITDA' for the entire company for FY2016. I can't find an equivalent figure in AR2015 for FY2015. So how much of an improvement this 'Operating EBITDA' represents over FY2015, I am not sure. The gist of the update is that the profit upgrade has come from higher than expected 'A2 platinum' infant formula sales in China. Last year 'China and Asia' contributed EBITDA of $1.774m ( AR2015 p100). But that figure is I think 'after intercompany charges', so the direct year on year comparison is obfuscated.

Now, I agree that non-recurring one off effects ( $1.681m - relating to the restructuring of A2 milk UK, Note 12 ) should not be included in EBITDA when judging operational performance. But intercompany charges? These I believe represent the intellectual property on the books and relate to expenses already incurred by the parent company. You can manipulate the operational performance of your divisions, depending on how these costs are allocated. But I don't believe these costs can be ignored.

Look at p17 of the FY2015 annual report. 'Operating EBITDA' for Australia and New Zealand was $30m over FY2015. Now go to page 100 of AR2015 and you will see that EBITDA for Australia and New Zealand was only $5.724m. $5.724m was the real divisional EBITDA result for ANZ, hugely less than the $30m hyped figure earlier in the report text.

Interest costs are likely to be minimal (the 'I' bit), as the company has no term debt. But depreciation and amortisation (the DA bit) over the whole company are listed as $1.949m for FY2015. As a first guess you could assume that figure is similar for FY2016. And you need to subtract that from your EBITDA figure to get an estimated FY2016 net profit.

The definite thing we have been told is that overall 'Operating EBITDA' is forecast to go from $22m to $33-$37m. But what does that say for 'EBITDA' and 'Net Profit'? I am not sure that A2 have given shareholders enough information to get a meaningful answer. But I am almost certain the projected PE for FY2016 is very much larger than your '39' Bobbles.

SNOOPY

[percy]

According to ANZ Securities there are 723,300,065 shares on issue.At a share price of $1.90 the market capitalisation works out at
$1,374,270,124.
That market cap is only $20mil less than all the following put together;CVT,STU,SKL,SCL,TIL and SEK.

[skid]

According to ANZ Securities there are 723,300,065 shares on issue.At a share price of $1.90 the market capitalisation works out at
$1,374,270,124.
That market cap is only $20mil less than all the following put together;CVT,STU,SKL,SCL,TIL and SEK.

Translation= its a popular share atm and people have been throwing lots of cash at it--(whoops $1.86--add another 29mil less)--a few days before and it would have easily beat them all (market cap)

I find when momentum shifts that often a few days break has a stabilizing affect though.

[blobbles]

Have been researching ATM a bit more over the break....

Clearly there is huge demand coming from China with demand currently outstripping supply, this means the current 100% growth rate could be exceeded next year too. Remember that there will be a large boom of milk powder demand in the latter half of next year for the following 2 years from China. With ATM positioned at the top of the market there, this should provide a massive boost for ATM which we are only beginning to see.

My feeling here is if we start valuing ATM as a growth company, we can start using revenue multiples. Clearly they are pumping free money into new markets, which means they would likely be hitting 50m EBITDA this year.

My current pick is 8x revenue, $2.4 billion company, around $3.30 SP. Would be good to see Miners FCFF analysis. But with potentially doubling of revenue next year and maybe even the year after, we would have a billion dollar plus revenue company in 2 years only based on demand for milk powder in China and current fresh milk sales. If the other markets (US in particular) begin gaining traction, we could be looking at more. Likely that could mean a conservative $100m EBITDA company in 2 years. That's 10c dividends, with high growth.

One thing is clear now - a year ago we were worried that ATM would not be able to replicate their Australian success in another market. They just proved they can do it twice. This makes it far more compelling that they can do it again.

At roughly $2 or less, I am now keen on ATM long term and will be buying more on dips.

High growth, massive potential. These are the sort of investments I love!

[Joshuatree]

Me too but is there a bottleneck coming up where supply of A2 can't meet demand?

[blobbles]

Me too but is there a bottleneck coming up where supply of A2 can't meet demand?

Maybe short term, but herds can be sorted relatively quickly. I have heard a month being bandied around as time required to separate out the A2 only producing cows from others (genetic test of tail hairs, separation of individual cows). As ATM pay a premium over normal milk, there is a big incentive for farmers to switch. As such supply issues should be short term only.

[kizame]

Have been researching ATM a bit more over the break....

Clearly there is huge demand coming from China with demand currently outstripping supply, this means the current 100% growth rate could be exceeded next year too. Remember that there will be a large boom of milk powder demand in the latter half of next year for the following 2 years from China. With ATM positioned at the top of the market there, this should provide a massive boost for ATM which we are only beginning to see.

My feeling here is if we start valuing ATM as a growth company, we can start using revenue multiples. Clearly they are pumping free money into new markets, which means they would likely be hitting 50m EBITDA this year.

My current pick is 8x revenue, $2.4 billion company, around $3.30 SP. Would be good to see Miners FCFF analysis. But with potentially doubling of revenue next year and maybe even the year after, we would have a billion dollar plus revenue company in 2 years only based on demand for milk powder in China and current fresh milk sales. If the other markets (US in particular) begin gaining traction, we could be looking at more. Likely that could mean a conservative $100m EBITDA company in 2 years. That's 10c dividends, with high growth.

One thing is clear now - a year ago we were worried that ATM would not be able to replicate their Australian success in another market. They just proved they can do it twice. This makes it far more compelling that they can do it again.

At roughly $2 or less, I am now keen on ATM long term and will be buying more on dips.

High growth, massive potential. These are the sort of investments I love!

Hi Blobbles, if I may ask what made you come up with 8x revenue?

How things have changed,it was a worry whether they would sell product now a worry whether they can supply in the short term haha,
but what a great worry to have.

don't hold sadly.

[skid]

Just keep in mind it has to be not only a demand for milk powder but for the A2 specialty version which of course cost more--will the numbers be prepared to pay the extra price?
Once that is established it will be far easier to come up with multiples.

Dont hold..sadly at last months SP
not so sadly at last weeks highs :)

[stoploss]

Just keep in mind it has to be not only a demand for milk powder but for the A2 specialty version which of course cost more--will the numbers be prepared to pay the extra price?
Once that is established it will be far easier to come up with multiples.

Dont hold..sadly at last months SP
not so sadly at last weeks highs :)

Strong start to 2016 on the ASX currently equivalent of around 193 cents . ( the day and year are but young ! )

[Ginger_steps_]

I was expecting a much bigger pullback after - strong demand for A2M on the ASX today. As overvalued as it may be, $2.50+ is looking like a real possibility by FY. Come on a2 - find us a miracle solution to the supply issue!

[Sideshow Bob]

Did someone pull their profile? About 10 pages of posts have disappeared.....

[Snoopy]

$37m is the upper bound of the $33m-$37m 'Operating EBITDA' range quoted in the market update of 18th December. Look further down the page on that news release and you will see that 'Operating EBITDA' is a non GAAP measure that equates to EBITDA before non recurring and intercompany charges.

The $33m-$37m figure appears to be the 'Operating EBITDA' for the entire company for FY2016. I can't find an equivalent figure in AR2015 for FY2015. So how much of an improvement this 'Operating EBITDA' represents over FY2015, I am not sure. The gist of the update is that the profit upgrade has come from higher than expected 'A2 platinum' infant formula sales in China. Last year 'China and Asia' contributed EBITDA of $1.774m ( AR2015 p100). But that figure is I think 'after intercompany charges', so the direct year on year comparison is obfuscated.


Information in the FY2015 results presentation (p3) shows how 'Operating EBITDA' and 'Group EBITDA' are related.



EBITDA BreakdownFY2014FY2015


Australia and New Zealand (Operating)$18.7m$30.0m


China and Other Asia (Operating)-$3.3m-$3.1m


UK and USA (Operating)-$4.3m-$12.1m


Corporate & Other (Operating)-$7.5m-$10.0m


EBITDA Total (Group)$3.6m$4.8m



'Operating EBITDA' (excluding Corporate and Other) for FY2015 total was therefore: $30.0m -$3.1m - $12.1m = $14.8m

This means that the operating EBITDA forecast for FY2016 of $33m to $37m, following the two profit upgrades, looks like being 120% to 150% higher than FY2015. That increase is welcome. Although even more welcome is the successful capital raising over 2015 that means ATM will not run out of money in 2016 after all. It is highly likely that actual net profit will -still- be minimal in FY2016. Because of the capital raising this isn't a problem. Spending all profits to develop markets has long been in accordance with the ATM business development plan.

However it does mean that a projected PE ratio in the high 30s could be around three orders of magnitude out. A PE of 39,000 for ATM in FY2016, not 39, looks much more likely.

SNOOPY

[GizyGold]

Bubble had started to burst on this the other day, director sold out some shares, world market turmoil overnight.... perhaps worth a short.

Good luck with shorting the hottest stock on the market at the moment. wouldnt be surprised if we see a $3 by year end. Even Fonterra looking the goods. Key with A2 is to get more dairy farmers to convert & supply Synlait.

[Snoopy]

$18.7m is the EBITDA earnings from Australia before licence fees and less investment in new market development of $7.5m and the undeclared 'corporate costs' which reduce EBITDA to $3.6m. So licence fees and corporate costs must be:

$18.7m - ($7.5m + $3.6m) = $7.6m

If we assume that 1/4 of corporate costs relate to Australia, while the other 3/4 go to developing China, UK and USA, then underlying EBITDA for Australia is:

$18.7m - ($7.5m + 0.25($7.6m))= $9.3m

Since Australia is the only developed market we can assume that all the Depreciation and Amortization relates to that market. We also assume zero interest costs.

So NPBT = $9.3m - $1.9m = $7.4m

Tax that result at 30% and you get NPAT of $5.18m. There are 660m shares on issue. So this gives earnings per share of:

$5.18m / 660m = 0.00785cps

A reasonable growth multiple might be 20 if ATM finds itself an Australian only brand in the future.
So fair value for ATM Australia is.

20 x 0.00785 = 15.7c


The above estimate was for the Australian arm of ATM only, assuming the global expansion plan fails. All based on FY2014 published results. This was never a prediction. Just a calculation of what could happen if the rest of the world expansion went pear shaped.

So time to redo the above calculation using FY2015 results for future comparative purposes. Note that there are several changes in my approach, different to how I did things last year.

Time to revisit the value of by far the most profitable division of A2 milk so far - Australia and New Zealand. For this I use the 'Segment Information' that starts on p100 of AR2015.



EBITDA (Australia & New Zealand)$5.724m


plus 1/4 of EBITDA (Corporate & Other)$0.821m


plus Reversal of one off EBITDA loss (ASX Listing)$1.681m


less Net Interest Charge $0.000m


less Depreciation & Amortization$1.949m


TOTAL EBT$6.277m



Using the Oz 30% tax rate, because the operating profits we are most interested in come from Australia.

NPAT = (1-0.3) x $6.277m = $4.394m

Using the number of fully and partly paid shares on issue at year end , 660m, and a PE of 20 (a figure I judge as suitable for a high growth food company restricted to Australasia) we can calculate the 'per share' value of the company as follows:

$4.394m/ 660m = 0.00668cps x 20 = 13.3c

SNOOPY

[Snoopy]

Does a PE ratio tell you much when the company has historically been taking the profits from Australia and using them to build new markets? If all the earnings are being re-invested, doesn't leave much for the ratio. I find it quite interesting that given that strategy and the recent $43 million capital raising, they're now forecasting EBITDA > $33 million. Perhaps they're now earning more than is needed to get going in America, or the pick up from formula has been too sudden to allocate elsewhere.


The PE ratio for ATM is not important in the sense that it is ATM company policy to reinvest all profits in market development. You are quite right about this mfd. I only mentioned PE again because someone else did, and I don't think they got their calculation right. The American investment is still slated to be $20m over three years (one year already gone).

Most of the pick up in formula seems to be in China. This was still a loss maker last year. So the pick up in formula sales will initially go towards reducing those losses rather than creating windfall profits IMO.

SNOOPY

[Ginger_steps_]

a2 has gained more shelf space, and a more favourable shelf position - for their formula at Coles. My local store has gone from a 2 tin width to a 6 tin width, and from the knee height shelf to eye height. Can't complain with that! Looking forward to seeing how a2 goes in NZ once they take back the distribution license.

[Joshuatree]

Thanks Snoopy and may yu have a wealth of health year and may Iron ore and steel prices recover enough for ARI to emerge like shiny metal blue new phoenix.
ATM up 6 to $2.98 and down 8c on ASX to $1.795 i guess readjusting to exchange rates (i haven't looked).

Forgot to add spruikometer today
A2M no 3 297
DSH poor ole Dicky Smith no 2, 333(half a beast:)
UNS Unilife tops 430

[Leftfield]

Thanks Snoopy for your attempt to put a value on ATM. Methinks until we get some firm figures for the first half year FY16, we will be purely guessing. For me it is much more than the Australian story. How is ATM going in UK? China? USA? What are the plans other markets particularly NZ (when it regains its distribution rights?) Any new products? Yoghurts? New licenses?

Another thing very hard to value is the IP wrapped around this company. I suspect it is extremely under valued.

That said, can ATM have another stellar year like last year? It's ssooo hard to say and although I'm holding (and happy) at this stage I've held off picking ATM in the 2016 stock picking comp. Only time will tell is that is wise or stupid! Roll on 2016.

[Snoopy]

Thanks Snoopy for your attempt to put a value on ATM. Methinks until we get some firm figures for the first half year FY16, we will be purely guessing. For me it is much more than the Australian story. How is ATM going in UK? China? USA? What are the plans other markets particularly NZ (when it regains its distribution rights?) Any new products? Yoghurts? New licenses?

Another thing very hard to value is the IP wrapped around this company. I suspect it is extremely under valued.


Left Field, what I did was look at a worst case scenario of never being able to generate a profit outside of Australia. I do not believe this is a likely scenario, but shareholders need to bear in mind that it could happen. The value I calculated is therefore a pessimistic view of what could happen should things outside of Australia go wrong. It is not a 'valuation' in the conventional sense. My calcs do include some contribution from new product lines in Australia.. The PE of 20 I was using is pretty high for a single market food company, so includes a lot of growth domestically in Oz.

What my calcs do show is that a lot of success in markets outside of Australia (all unprofitable as I write this) is already built into the share price. But this has been the case for some time, so is not a new revelation.

I would suggest to you that the company IP has no separate value, outside of ATM's ability to use their own IP to expand into new markets. ATM seems to want to keep the A2 brand in house, not sell the name to someone else to use. And there's nothing wrong with that approach IMO.

SNOOPY

[Leftfield]

Thanks Snoopy. Appreciated. It's a v hard company to value at the moment. I like your realism as it strips away rose tinted views of ATMs prospects. Yesterday's SP level around $NZ1.90 in the face of weak overseas markets (China, Europe, USA) was interesting and the NZ ATM chart trends still look encouraging pending more news.

The unknown to me is the rabid interest shown in Aus as witnessed by Hot Copper forum posts. Watching BAL on the ASX shows that such forums can be anything but rational!.

[Baa_Baa]

Surprising this hasn't been discussed, maybe I've missed it. "A2 Milk's Babidge, other shareholders cash in on high share price" http://www.nbr.co.nz/article/a2-milks-babidge-other-shareholders-cash-high-share-price-b-183425?utm_source=newsletter&utm_medium=email&utm_campaign=NBR%2520Last%2520Call%2520-%2520Holiday%2520Review%2520Edition

[Minerbarejet]

Surprising this hasn't been discussed, maybe I've missed it. "A2 Milk's Babidge, other shareholders cash in on high share price" http://www.nbr.co.nz/article/a2-milks-babidge-other-shareholders-cash-high-share-price-b-183425?utm_source=newsletter&utm_medium=email&utm_campaign=NBR%2520Last%2520Call%2520-%2520Holiday%2520Review%2520Edition
Yes, would have thought certain factions would be screaming blue murder by now.

[NT001]

Surprising this hasn't been discussed, maybe I've missed it. "A2 Milk's Babidge, other shareholders cash in on high share price" http://www.nbr.co.nz/article/a2-milks-babidge-other-shareholders-cash-high-share-price-b-183425?utm_source=newsletter&utm_medium=email&utm_campaign=NBR%2520Last%2520Call%2520-%2520Holiday%2520Review%2520Edition

Some have interpreted this as an indication that Babidge sees the SP as grossly over-valued and is "cashing in" while he can, but I don't necessarily buy that. He has sold only a small portion of his stake and there can be many reasons for this, including the fact he has several million partly paid shares, and may see this as a suitable opportunity in a volatile market to fully pay them off.

[Baa_Baa]

Some have interpreted this as an indication that Babidge sees the SP as grossly over-valued and is "cashing in" while he can, but I don't necessarily buy that. He has sold only a small portion of his stake and there can be many reasons for this, including the fact he has several million partly paid shares, and may see this as a suitable opportunity in a volatile market to fully pay them off.

There's always reasons I guess why a CEO would sell their holdings in a company, I just thought it was strange that the NBR article was almost apologetic and not a mention here, when for other companies the CEO selling would be a red-light. Maybe the red-light has already gone off with the pullback from the recent steep rise to new highs. Still nothing said here, interesting.

[Snoopy]

Still trying to get a real feel for the A2 financials, mainly because I struggle to get any DCF to give me anywhere near 90 cents / $1

Is this slide really meaningful (from annual results preso) - like say for Australia is the intercompany charges and license fees of $14.2m a real cost or just a lot of smoke and mirrors to confuse mere mortals like me. Upon consolidation it probably has no impact and A2 have put this disgram in to try to show how much money is made in each segment.

Reading all this stuff it appears as A2 say that 'investment for growth' was $7.5m - does that imply normalised earnings were about $7.5m pre-tax then?

Trying to reinterprate the slide highlighted by Winner in the FY2014 results presentation (p4). Australia and New Zealand are now recognised together. So for future reference we need to combine the separate Australia and New Zealand results into one:



NZAustraliaTotal


Operating EBITDA-$7.6m$18.7m$11.1m


Intercompany Charges & Licence Fees-$10.6m$14.2m$3.6m


Segment Profit$3.0m$4.5m$7.5m



Very annoyingly the format for the 'ANZ' segment in the FY2015 presentation is far less detailed. There is comparative information that relates to FY2014 of course.

Again from the FY2015 presentation, on p4 the Operating EBITDA of 'ANZ' is listed as $18.7m for FY2014. That figure does not stack up against the implied FY2014 presentation figure of $11.1m. Returning to the FY2015 presentation, looking at FY2014 results, and taking off 'Corporate and Other' EBITDA of $7.5m gives a net operating EBITDA for FY2014 of:

$18.7m -$7.5m = $11.2m

This is the number we are after, within the margin of error. It really is difficult to compare year on year results when the company obfuscates them like this.

SNOOPY

[Snoopy]

It really is difficult to compare year on year results when the company obfuscates them like this.


Continuing the obfuscation theme, let's look at what is happening in the UK and the USA. If FY2014 UK stood on its own. USA only started in FY2015. Now the UK and the USA are bracketed together. So what do the comparative figures say this time about both markets?



UK (FY2014 Pres.)UK & USA FY2014 Result, FY2015 Pres.)


Operating EBITDA-$4.3m-$4.3m


RevenueN/A$1.0m


Intercompany Charges & Licence Fees-$2.1mN/A


Segment Profit-$2.2mN/A



Unless I have this wrong (and I may have) it looks like the Australian and New Zealand 'Operating EBITDA 'results have been changed retrospectively in FY2015 (see my previous post) so they include intercompany charges and licence fees. However the UK result has not been changed in the same way and remains as bare 'Operating EBITDA'.

It is very disappointing to see the result presentation (apparently) changed for 'ANZ' year on year but not changed for the UK segment in the same way. The intercompany charges and licence fees (*) for the UK in FY2014 (actually the UK segment doesn't receive any licence fees so it must be all intercompany charges) seem to have vanished! It is very difficult for investors to follow what is happening year on year with these kind of reporting inconsistencies.

SNOOPY

(*) from FY2015 report (p15)

Inter-company charges include:
a/ royalties,
b/ licence fees and management fees payable to the Parent,
c/ marketing and herd testing costs payable by the Parent

[skid]

Yes, would have thought certain factions would be screaming blue murder by now.

Rumor has it that he visited David Darling for wine and cheese and really liked his new deck:)

[trader_jackson]

Rumor has it that he visited David Darling for wine and cheese and really liked his new deck:)

Yes, where is the news article explaining why the directors of ATM are selling large percentages of their shares? They must be building very large decks as well!

[tomblu]

Surprising this hasn't been discussed, maybe I've missed it. "A2 Milk's Babidge, other shareholders cash in on high share price" http://www.nbr.co.nz/article/a2-milks-babidge-other-shareholders-cash-high-share-price-b-183425?utm_source=newsletter&utm_medium=email&utm_campaign=NBR%2520Last%2520Call%2520-%2520Holiday%2520Review%2520Edition

It was noted by nextbigthing as referenced by GizyGold on 5/1/16, however I cannot find nextbigthing's original post ...

http://www.sharetrader.co.nz/images/misc/quote_icon.png Originally Posted by nextbigthing http://www.sharetrader.co.nz/images/buttons/viewpost-right.png (http://www.sharetrader.co.nz/showthread.php?p=602350#post602350)
Bubble had started to burst on this the other day, director sold out some shares, world market turmoil overnight.... perhaps worth a short.

[nextbigthing]

Good luck with shorting the hottest stock on the market at the moment. wouldnt be surprised if we see a $3 by year end. Even Fonterra looking the goods. Key with A2 is to get more dairy farmers to convert & supply Synlait.

The 'hottest stock on the market at the moment' has fallen from $2.50 to $1.74 in just a few days, a fall of 30%
Thanks for your good luck wishes, I would like to use your services again in the future :)

[Joshuatree]

Hee. Meanwhile the Spruikometer has A2m no 1 top of the pops today,but now all the dissecting, wailing and expert opinions and down right bitching has started yep from positive to negative is the theme.Watch out down below!!:cursing::blink:

[Snoopy]

Continuing the obfuscation theme

It is now time to take a look at the 'China' segment (FY2014) which has been renamed 'China & Other Asia' for FY2015. taking the results for FY2014 as represented in both the FY2014 and FY2015 presentations, what can we learn?



China (FY2014 Pres.)China & Asia FY2014 Result, FY2015 Pres.)


Operating EBITDA-$3.3m-$3.3m


RevenueN/A$4.1m


Intercompany Charges & Licence Fees-$1.5mN/A


Segment Profit-$1.8mN/A



The fact that incorporating 'Other Asia' into the result retrospectively dioesn't change it is suggestive of the fact that 'Other Asia' effectively did not exist in FY2014. Can anyone shed any light on what 'Other Asia' means in FY2015?

The calculation of the segment profit, as represented in the above table is as follows:

-$3.3m - (-$1.5m) = -$1.8m

Note the double negative creating a positive. This means the segment result is a smaller loss than the EBITDA operating loss. It also means that the segment result can be changed at will by management. All managment has to do is vary the internal 'Intercompany Charges & Licence Fees' and, within reason, they can create whatever 'segment result' they like.

I don't know why the old 'Intercompany Charges & Licence Fees' have been absorbed in the new NZ and Australian division, yet seemingly just forgotten about in the 'UK and North America' and 'China and other Asia' divisions.

SNOOPY

[skid]

I was just thinking of the parallels between Chinas economy (in the last 5 years)and ATM (in the last month or so)--both have taken a nosedive but are still substantially higher than before.
I believe Australia's manic appreciation is sorting itself out and we will find a more ''true value'' and then we can go from there.

I think the company is great,but the market(lead by the Ozzies has been out of kilter) so this is by no means a slag of the company.

I guess its worth noting that milk powder sales in China could be affected ,but who knows at this stage.

[Snoopy]

I don't know why the old 'Intercompany Charges & Licence Fees' have been absorbed in the new NZ and Australian division, yet seemingly just forgotten about in the 'UK and North America' and 'China and other Asia' divisions.


More on the disappearing 'Intercompany Charges & Licence Fees'.

Turn to note 3.1 in AR2014 and 'Licence Fees'' are quoted as a $20.571m dollar item at company level. Turn to note 3.1 in AR2015 and all references to 'Licence Fees' have disappeared!

Odd until you see that A2 is no longer reporting at the 'Company Level' to shareholders. They now only report at the 'Group level'. As a result of this change 'licence fees', which really look like an internal tool to restate profit levels amongst divisions to 'management deemed acceptable numbers' have apparently been dropped (?)

SNOOPY

[winner69]

Snoopy - you (along with others) will never make much sense from a2 segment analysis. Save the effort for other stuff

Just believe the A2 story - a story that says its a billion dollar company and one day maybe a 3 billion company

[Joshuatree]

29cent swinger today ; back up in a milky sway.

[Snoopy]

Snoopy - you (along with others) will never make much sense from a2 segment analysis. Save the effort for other stuff

Just believe the A2 story - a story that says its a billion dollar company and one day maybe a 3 billion company


Not quite ready to give up yet Winner. I like the product and am accepting of the company strategy, while noticing the lessons learned along the way. However, just like when you ran some numbers yourself last year, I can't make the investmant case stack up. Mind you, this kind of 'growth investing' isn't my forte. So I probably have some lessons to learn.

I have done some rethinking over the last two days, and I think I need to tweak my analytical approach.

I intend to go back to the FY2014 result, because this is the base case I am using for all subsequent results.


I can take it one step further than that.

$18.7m is the EBITDA earnings from Australia before licence fees and less investment in new market development of $7.5m


After scrawling back through the FY2014 material the only reference I can find to this 'investment in new market development' (growth) of $7.5m is your post 2339 Winner. I had assumed that this was money set aside to development new A2 product categories in Australia. Yet after re-reading the results, this $7.5m figure looks more likely to relate to an $7.527m EBITDA loss incurred in developing the British and Chinese markets during FY2014.

We all know the A2 business model: generating free cashflow from Australia to fund the growth of other markets. But if I look at an Australia only future for A2, my base valuation case, this spending suddenly becomes optional. So I should not have considered this in my 'Australia only' valuation.



If we assume that 1/4 of corporate costs relate to Australia, while the other 3/4 go to developing China, UK and USA,


The above assumption I think is still sound.



Since Australia is the only developed market we can assume that all the Depreciation and Amortization relates to that market.


Looking on page 69 of AR2014, $1,234m of depreciation relates to Australia and $0.658m relates to New Zealand. However, as from 2015 these two markets have been combined for reporting purposes.

SNOOPY

[Snoopy]

I can take it one step further than that.

$18.7m is the EBITDA earnings from Australia before licence fees and less investment in new market development of $7.5m and the undeclared 'corporate costs' which reduce EBITDA to $3.6m. So licence fees and corporate costs must be:

$18.7m - ($7.5m + $3.6m) = $7.6m

If we assume that 1/4 of corporate costs relate to Australia, while the other 3/4 go to developing China, UK and USA, then underlying EBITDA for Australia is:

$18.7m - ($7.5m + 0.25($7.6m))= $9.3m

Since Australia is the only developed market we can assume that all the Depreciation and Amortization relates to that market.

So NPBT = $9.3m - $1.9m = $7.4m

Tax that result at 30% and you get NPAT of $5.18m. There are 660m shares on issue. So this gives earnings per share of:

$5.18m / 660m = 0.00785cps

A reasonable growth multiple might be 20 if ATM finds itself an Australian only brand in the future.
So fair value for ATM Australia is.

20 x 0.00785 = 15.7c

At 63c, ATM has an awfully long way to fall to get back to fair value. There is some chance, say 25%, that ATM will become an Australia only company in a few years. So such a scenario needs to be factored in to what ATM is worth.


This time I will use the segmented information used on p69 of AR2014. This (I think!) avoids all the confusion introduced with intercompany charges and licence fees that seem to have confused me before.



EBITDA (Australia)$4.517m


plus EBITDA (New Zealand)$3.004m


less Net Interest Charge $0.000m


less Depreciation & Amortization$1.900m


TOTAL EBT$5.621m



Using the Oz 30% tax rate, because the operating profits we are most interested in come from Australia.

NPAT = (1-0.3) x $5.621m = $3.935m

Using the number of shares on issue at the time , 660m, and a PE of 20 ( a figure I judge as suitable for a high growth food company restricted to Australasia) we can calculate the 'per share' value of the company as follows:

$3.935m/ 660m = 0.00596cps x 20 = 11.9c

SNOOPY

[Snoopy]

$3.3m + $4.2m = $7.5m is the HY2015 EBITDA earnings from Australia before licence fees and less investment in UK market development of $4.2m and the declared 'corporate costs' which reduce EBITDA by $5.2m.

If we assume that 1/4 of corporate costs relate to Australia, while the other 3/4 go to developing China, UK and USA, then underlying EBITDA for Australia is:

$7.5m - (0.25($5.2m))= $6.2m

Since Australia is the only developed market we can assume that all the Depreciation and Amortization relates to that market.

So NPBT = $6.2m - $0.9m = $5.3m

Tax that result at 30% and you get NPAT of $3.71m. There are 660m shares on issue. So this gives 'annualised' earnings per share of:

2X $3.71m / 660m = 1.124cps

A reasonable growth multiple might be 20 if ATM finds itself an Australian only brand in the future.
So fair value for ATM Australia is.

20 x 0.01124 = 22.5c

At 56c, ATM is priced well in excess of Oz market only fair value. So there is a large amount of blue sky built into the share price already.

The plan is to spend $20m in the US over three years ( $US20m/(3 x 0.75) = NZD8.9m per year). They could only do that with current resources if the UK becomes self sustaining (loss in UK for HY2015 of $NZ4.1m). Not enough money to go around (only $9.9m in the bank as at December 2014 ). Cash resouces will be completely drained this year! The likelihood of a cash issue is getting stronger and stronger. ATM will be bankrupt within months if it doesn't do it.

My advice: Don't touch this until the cash issue is announced.


Once again I take a consistent (but slightly different) retrospective approach to assess share value. This is mainly based on the segmented results as listed on p17 of the interim report



EBITDA (Australia & NZ)$4.876m


plus 1/4 of EBITDA (Corporate & Other)$0.039m


plus One off Australian Listing Charge$0.762m


less Net Interest Charge $0.000m


less Depreciation & Amortization$0.912m


TOTAL EBT$4.765m



Annualising that 6 monthly result gives an annualised EBT of:

2 x $4.765m = $9.530m

Using the Oz 30% tax rate, because the operating profits we are most interested in come from Australia.

NPAT = (1-0.3) x $9.530m = $6.671m

Using the number of shares on issue at the time , 660m, and a PE of 20 ( a figure I judge as suitable for a high growth food company restricted to Australasia) we can calculate the 'per share' value of the company as follows:

$6.671m/ 660m = 0.01112cps x 20 = 22.2c


SNOOPY

[Baa_Baa]

@Snoopy any way you look at it on pure FA the SP is way ahead of itself. Or you may be working with bogus reporting numbers? Do you need to incoporate a growth factor to interpret the SP? Or is PE20 the factor? It's not too late to drop this from the 2016 comp if it looks like the year will be playing catch up to reality.

[winner69]

Snoops me old mate - how about this

Guidance F16 is $39m ebitda, say $25m NPAT. Essentially this is Aus/Asia - yes?

So Aus/Asia business at your 20 PE is $500m, 75 cents/share

UK/America going to be gangbusters i'm told - so double the 75 cents and you get a total business valuation of $1.50

Maybe current price not too far off a reasonable valuation.

Believe the story

[kura]

It seems like attempting to do fundamental analysis on a growth company is extremely difficult & almost irrelevant. How do you put a value on growth potential ??

Would fundamental analysis on XRO tell me anything different from my gut feel ? ( Disc: my gut keeps me away from XRO , but at least ATM makes profits)

[Snoopy]

This time I will use the segmented information used on p69 of AR2014. This (I think!) avoids all the confusion introduced with intercompany charges and licence fees that seem to have confused me before.



EBITDA (Australia)$4.517m


plus EBITDA (New Zealand)$3.004m


less Net Interest Charge $0.000m


less Depreciation & Amortization$1.900m


TOTAL EBT$5.621m



Using the Oz 30% tax rate, because the operating profits we are most interested in come from Australia.

NPAT = (1-0.3) x $5.621m = $3.935m

Using the number of shares on issue at the time , 660m, and a PE of 20 ( a figure I judge as suitable for a high growth food company restricted to Australasia) we can calculate the 'per share' value of the company as follows:

$3.935m/ 660m = 0.00596cps x 20 = 11.9c


Time to revisit the value of by far the most profitable division of A2 milk so far - Australia and New Zealand. For this I use the 'Segment Information' that starts on p100 of AR2015.



EBITDA (Australia & New Zealand)$5.724m


plus 1/4 of EBITDA (Corporate & Other)$0.821m


plus Reversal of one off EBITDA loss (ASX Listing)$1.681m


less Net Interest Charge $0.000m


less Depreciation & Amortization$1.949m


TOTAL EBT$6.277m



Using the Oz 30% tax rate, because the operating profits we are most interested in come from Australia.

NPAT = (1-0.3) x $6.277m = $4.394m

Using the number of fully and partly paid shares on issue at year end , 660m, and a PE of 20 (a figure I judge as suitable for a high growth food company restricted to Australasia) we can calculate the 'per share' value of the company as follows:

$4.394m/ 660m = 0.00668cps x 20 = 13.3c

SNOOPY

[Snoopy]

@Snoopy any way you look at it on pure FA the SP is way ahead of itself. Or you may be working with bogus reporting numbers?


I would hope that accounting standards are tough enough to disallow the possibility that results are bogus!



Do you need to incoporate a growth factor to interpret the SP? Or is PE20 the factor? It's not too late to drop this from the 2016 comp if it looks like the year will be playing catch up to reality.


A PE of 20 incorporates quite a lot of growth in a single market sense. It would not account for the successful 'roll out' of A2 in several international markets though.

SNOOPY

[Snoopy]

It seems like attempting to do fundamental analysis on a growth company is extremely difficult & almost irrelevant. How do you put a value on growth potential ??


Kura, fundamental analysis relies on taking data from an existing business and trying to extrapolate what that data might mean for profits in the future. Australasia is the only market which has been profitable for more than one year. So if you want more than one data point, the Australasian Segment is the only place to look.

Next you would have to consider whether the Australian roll out model can be repeated in overseas markets. My gut feel? Because of the Australian Supermarket Duopoly it is much harder to get a beachhead on supermarket shelves in Australia. However once a product is on the shelves at one chain (say Coles) then any sales success will likely see Woolworths follow up putting the same thing on their own shelves quickly! How does this relate to overseas (beyond Australasia) expansion for A2?

I would say that initial expansion overseas would generally be easier, as it is more likely that A2 will be able to persuade at least one niche chain to stock the product. However, because competitors would not see the same need to follow the fortunes of every little market player, market growth will probably take longer than in Australasia.

If therefore you accept that the Australasian market has a value per share of 13.3c, this tells you that the A2 share price is already factoring in equal success in around ten other equally sized markets around the world. Put another way, unless A2 is successful in 10 more markets the size of Australasia, we can expect the value of A2 shares in the long term to decrease. Consequently I would argue that this type of fundamental analysis is very useful. While A2 as a product is likely to succeed, it is almost certain as an investor today that you will lose money in the long term if you invest in the A2 company today. This isn't becasue the A2 company managment is poor (it isn't). It is because shareholder expectation is too high. This is why A2 senior managment, like Babbage, are selling their shares.

My FA is showing a big red flag here that you should not invest. I call that very useful information indeed!



Would fundamental analysis on XRO tell me anything different from my gut feel ? (Disc: my gut keeps me away from XRO , but at least ATM makes profits)


Check the accounts again. A2 was loss making in FY2015, and there has been no guidance given for a positive NPAT in FY2016.

SNOOPY

[Trigger]

Put another way, unless A2 is successful in 10 more markets the size of Australasia, we can expect the value of A2 shares in the long term to decrease.

Or one market ten times the size of Australia, though that would likely be a more efficient form of expansion, albeit riskier. Or other permutations of same.

Looking forward to see what guidance is next offered by the company in regard to their developing markets.

Good analysis thanks Snoopy.

Trigger

[Snoopy]

Snoops me old mate - how about this

Guidance F16 is $39m ebitda, say $25m NPAT. Essentially this is Aus/Asia - yes?

So Aus/Asia business at your 20 PE is $500m, 75 cents/share


Winner, did you see the explanatory note contained on page 99 of AR2015, regarding the Segment allocation of profits?

"•The Australia and New Zealand segment receives external revenue from milk, cream and infant formula sales, and royalty and licence fee income."

(my bold: I note that other regions do not receive royalty and licence fees!)

"•The China and other Asia segment receives external revenue from milk and infant formula sales. This segment is responsible for the infant formula supply chain to all markets."

Does this not point to both the comparative segmented sales in 'Australasia' and 'China and other Asia' being overinflated? Infant formula sales in particular are all put through the China/Asia division. So any growth in other markets will have to exclude this high margin fast growing product line! That makes growth significantly harder in the emerging UK and USA markets.



UK/America going to be gangbusters i'm told - so double the 75 cents and you get a total business valuation of $1.50

Maybe current price not too far off a reasonable valuation.

Believe the story.


Not saying it isn't possible. Just that an awful lot of water that has yet to flow under the bridge has already been banked by avaracious shareholders.

SNOOPY

[Leftfield]

"•The Australia and New Zealand segment receives external revenue from milk, cream and infant formula sales, and royalty and licence fee income."

(my bold: I note that other regions do not receive royalty and licence fees!)

"•The China and other Asia segment receives external revenue from milk and infant formula sales. This segment is responsible for the infant formula supply chain to all markets."

SNOOPY

It is relatively common for other 'International Companies' to shift charges and costs from country to country to gain maximum commercial, tax and exchange advantages.

Early stages for ATM, and v hard to draw regional comparisons as it seems to be growing and learning v fast.

[NT001]

not[/I] invest.

I don't know where Snoopy gets his information on A2MC bosses selling their shares and the reasons for their doing so. I haven't seen much to back this up apart from notice by one individual, the CEO, that he has sold a very minor part of his holding with no details as to the reason. It seems to me there are a few cynics around who believe they can mind-read.

As to the future of A2 shares, I don't pretend to understand TA or FA, but have some understanding (which very few investors seem to) of the difference between A2 and its competition, and the underlying science. A lot of market experience to date is almost irrelevant because the company has been prohibited from properly explaining the benefits of A2, or to be more precise, the potential health risks of its competition - standard milk which contains A1 protein.

This will change as more scientific findings emerge. For example, results of a recent clinical trial carried out in China using s substantial cohort of human subjects are due for publication soon and there is little doubt they will show conclusively that a significant proportion of consumers who suffer digestive and associated medical ill-effects from drinking milk containing the A1 protein can drink A2 milk without such problems. An earlier preliminary trial conducted at Curtin University was scoffed at by critics on the grounds that it was too small-scale to be conclusive. If my guess is correct, the Chinese trial will carry much greater weight because of its larger scale and because the subjects are Chinese, who are a huge market and appear to have more difficulty with cows milk than Europeans.

This is just one step in the process of backing up the A2 (or anti-A1) case scientifically. Scientists round the world are increasingly publishing independent clinical results indicating other risks associated with A1 dairy (eg in relation to autism and sudden infant death syndrome). As these become more corroborated and better-known, they will create an expanded demand for A1-free dairy products. This won't be an overnight process, and A2 investors should ideally be prepared for the long haul, but it is happening even though it is not measurable in terms of TA.

A2's success in Australia has been largely due to shoppers discovering for themselves that they and their kids have fewer health problems when they switch to A2. It's largely due to word of mouth, not health claims by the company, whereas in India, one of the world's biggest dairy markets, where there is vigorous public discussion of this issue with frequent articles in the media quoting scientists on technical details, there is growing pressure on the government to ban the sale of A1 milk and the breeding of cows that are not pure A2. In countries like Australia and NZ, the US, UK and Europe consumer awareness will also grow despite attempts by the likes of Fonterra and Dairy Australia to fight back.

Some criticise the use of TA to calculate the SP value of a developing company, but I believe an even greater difficulty is to estimate the future science, politics and consumer perception of A1-A2.

[kura]

Complete change of subject, I confess to playing Warcraft (WOW ) a woman in my guild is from USA, she described the state she is from as the "Dairy Capitol of the World" Don't ask me what state it was, all I can say is that borders on Canada.
She had never heard of this little country called NZ & was astounded when I told her that we were big in Dairy.

Disc: She was a mean PVP player, would hate to go up against her.

[Snoopy]

It is relatively common for other 'International Companies' to shift charges and costs from country to country to gain maximum commercial, tax and exchange advantages.

Early stages for ATM, and v hard to draw regional comparisons as it seems to be growing and learning v fast.


I am not criticising ATM for incorporating the 'infant formula supply chain ' globally into the Asia/China division. We have to remember that ATM is still a realtively small company in staff and operational terms. It wouldn't make sense to separate out all the supply chain quality control and manufacturing functions between all the even smaller divisions of ATM. China seems pretty strict on quality control of infant formula. So meeting Chinese standards for import is probably good enough for other global markets. It all makes sense.

My point was more mathematical. If all the manufacturing and quality control functions for infant formula are done through Asia/China, even on an arms length basis, this means less (in this case none) of those functions will be incorporated within the 'A2 UK' and 'A2 USA' reporting segments.

By the same token 'A2 UK' and 'A2 USA' will be paying royalties to the NZ parent, while 'A2 Australasia' effectively pays royalties to itself.

These two indepoendent facts diminish the size of 'A2 UK' and 'A2 USA' going forwards. On a segment basis they have to run harder to achieve the same level of profitability that 'A2 Australasia' has.

Taken on an overall company view, where costs and production functions are allocated doesn't matter. But looked at on a divisional basis, and A2 are quite clear that it is the Australasiian division that is driving global growth, it does matter. 'A2 UK' and 'A2 USA' have been structured to be fundamentally less profitable. That probably saves some tax for ATM going forwards (NZ company tax rates less than UK and USA?). But it also means that divisional profitability, both in the UK and the USA, is likely to be less than some shareholders expect given their potential market growth.

SNOOPY

[Leftfield]

Taken on an overall company view, where costs and production functions are allocated doesn't matter. But looked at on a divisional basis, and A2 are quite clear that it is the Australasiian division that is driving global growth, it does matter. 'A2 UK' and 'A2 USA' have been structured to be fundamentally less profitable. That probably saves some tax for ATM going forwards (NZ company tax rates less than UK and USA?). But it also means that divisional profitability, both in the UK and the USA, is likely to be less than some shareholders expect given their potential market growth.

SNOOPY

Thanks Snoopy - I understand your point of view and agree.

I also point out that it is still very early stages in this company, and it would be nice in the future to see more transparency to allow us to make better regional comparisons.

[777]

Complete change of subject, I confess to playing Warcraft (WOW ) a woman in my guild is from USA, she described the state she is from as the "Dairy Capitol of the World" Don't ask me what state it was, all I can say is that borders on Canada.
She had never heard of this little country called NZ & was astounded when I told her that we were big in Dairy.

Disc: She was a mean PVP player, would hate to go up against her.


Probably Wisconsin.

[tomblu]

2015: NZ had just over 5,000,000 dairy cows, Wisconsin had 1,271,000

[dobby41]

Complete change of subject, I confess to playing Warcraft (WOW ) a woman in my guild is from USA, she described the state she is from as the "Dairy Capitol of the World" Don't ask me what state it was, all I can say is that borders on Canada.
She had never heard of this little country called NZ & was astounded when I told her that we were big in Dairy.

Says more about her world view than anything else.
If the state is the biggest dairy in the US then, by US definitions, it must be the biggest in the world.

[NT001]

California is by far the biggest milk producing state in the US, with output 50% higher than Wisconsin, which is no.2 (2014 figures). But Wisconsin calls itself America's Dairyland. And California's dairy industry is somewhat under threat because of chronic drought, to which no solution is in sight.

[Bjauck]

Says more about her world view than anything else.
If the state is the biggest dairy in the US then, by US definitions, it must be the biggest in the world. Perhaps NZ is world famous....in NZ, just to paraphrase a NZ drink's advertising slogan. NZ built up its dairy industry supplying the UK, not the USA, so I think an American's lack of knowledge of NZ dairy is understandable. Wisconsin has a population of about 5.7m (compared to NZ 4.5m and California's 38.8m). So dairy is identified with Wisconsin as it is an important industry there.

[dobby41]

Perhaps NZ is world famous....in NZ, just to paraphrase a NZ drink's advertising slogan. NZ built up its dairy industry supplying the UK, not the USA, so I think an American's lack of knowledge of NZ dairy is understandable. Wisconsin has a population of about 5.7m (compared to NZ 4.5m and California's 38.8m). So dairy is identified with Wisconsin as it is an important industry there.

If NZ wasn't on the US map for dairy they wouldn't have any import restrictions would they?
NZ certainly isn't the worlds largest dairy producer but they are top in exports are they not?
Not that any of this matters to ATM though the ability of other countries to ramp up A2 milk production is probably quite high.

[Snoopy]

I don't know where Snoopy gets his information on A2MC bosses selling their shares and the reasons for their doing so. I haven't seen much to back this up apart from notice by one individual, the CEO, that he has sold a very minor part of his holding with no details as to the reason. It seems to me there are a few cynics around who believe they can mind-read.


NT001, I was talking of Babbage selling down his holding from 6m shares in July 2015 to 3.5m shares today. That represents a 42% drop in his holding - not small by any standard I know. It is true that I have no evidence of any other managment selling down - you got me there. But I made the comment because with the CEO selling, that gives an implied permission for any other senior officer of the company to sell down too, with no questions asked.



As to the future of A2 shares, I don't pretend to understand TA or FA, but have some understanding (which very few investors seem to) of the difference between A2 and its competition, and the underlying science. A lot of market experience to date is almost irrelevant because the company has been prohibited from properly explaining the benefits of A2, or to be more precise, the potential health risks of its competition - standard milk which contains A1 protein.

This will change as more scientific findings emerge.


Not sure I agree with that. I think A2 have been very successful at getting their message out - especially in Australia. And there is plenty of information in the public domain for those who care to look. Let me pose the question another way.

If this Chinese trial with a higher number of people confirms the results of an earlier trial with less people, what do you expect to happen to A2 sales?

My point is we are talking about a food here, not a medicine. For those who believe they, or their baby, will benefit from A2, they can do so now at relatively low cost. If you are having digestive system problems with regular milk, why would you not try A2 right now? The product is on the shelf. The cost of a personal trail is relatively low. There is no downside risk switching to A2. Why not just try it out now?

What difference will the positive results of a larger trail make? Maybe someone's doctor might feel more comfortable suggesting A2 as a dietary modification? But where is the extra supply going to come from should demand suddenly boom? It could take years to build up larger A2 herds. Meantime potential customers might be lost to Soy Milk. Where is the upside for A2 profits in the short to medium term with the potential release of the upcoming research paper?

Is your expectation of the results of a more rigorous testing program even on the radar of the general consuming public? Do consumers even care what scientists think? In China, some rich consumers believe that by eating ground up parts of a Tiger's anatomy, it will increase their virility. The fact that there is no scientific evidence to support this, doesn't stop them buying such a potion at a premium price and ingesting it.

SNOOPY

[dobby41]

But where is the extra supply going to come from should demand suddenly boom? It could take years to build up larger A2 herds.

This is an area I have wondered - one that seems to get glossed over.

[Ginger_steps_]

This is an area I have wondered - one that seems to get glossed over.

It takes years to build up an a2 herd - It takes days/weeks to separate a herd, as a base from which to begin building the a2 herd. Add a farm gate price premium, and already booming demand - why wouldn't farmers jump on it? The wheels are in motion http://milktheopportunity.synlait.com

[Joshuatree]

Wow a lot of demand there Gs, thanks. Heres hoping clandestine missions switching A2 cows ( and ear tags) out of herds at night don't eventuate.

[NT001]

As regards building up A2 herds, GS is right - it's not difficult to create an all-A2 herd almost overnight by separating out those in existing herds. Switching eartags etc would not work. Each cow would have to be tested and verified as pure A2, and the milk from each herd is tested rigorously and often, so the infiltration of just one non-A2 cow would be detected quickly and I assume the herd would be barred from supply until the "culprit" was identified and excluded. The herd's milk would not be entirely wasted - it would just go into the standard A1-A2 mix - but the owner would lose his premium, so it would be in his interest to guard against that sort of hank-panky.

[NT001]

NT001, I was talking of Babbage selling down his holding from 6m shares in July 2015 to 3.5m shares today. That represents a 42% drop in his holding - not small by any standard I know. It is true that I have no evidence of any other managment selling down - you got me there. But I made the comment because with the CEO selling, that gives an implied permission for any other senior officer of the company to sell down too, with no questions asked.SNOOPY

My math differs from yours, Snoopy. In July, Babidge's family trust had 6m fully paid and 5m partly paid shares which totalled 11 million. He then sold 1 million fully paid shares at 72 cents to help pay off a loan facility. His declaration of holdings following that sale showed him as still having 5 million partly paid and 5 million fully paid shares.

https://www.nzx.com/files/attachments/222913.pdf

In December he sold a further 1 million shares at an average of around 168 cents, taking his total stake to 9 million shares, at which point the company said the transaction took place in a period when sales by executives and directors were not restricted. Yet there were no reported sales by others as far as I'm aware, even though the SP rose almost 50 percent beyond that.

A few days ago Babidge sold a further half million shares. By my reckoning he has sold 2.5 million shares since July, not 3.5 million, and this is just over 20% of his original stake, not 42%, taking his stake down from 11 million to 8.5 million shares. And there is nothing whatever to suggest he sold down because he considered shareholder expectations were too high. Only 1.5m shares were sold after the big pre-Christmas SP rally.

As to your other questions about what I expect to come out of the Chinese clinical trial, I honestly wouldn't know precisely, but if the result is favourable its value in promoting the health/medical difference between A2 and A1 won't necessarily be limited to China. I personally think too much attention is being focused on China, which is an unpredictable and volatile market, and am more interested in the US, about which we haven't heard much as yet. a2MC already has TV ads running in the US which highlight the digestive issues.

Sure there's been nothing to stop Australian consumers trying A2 milk, but there's been a huge legal barrier against the company making any health claims to push their product, in Aussie or anywhere else. People keep saying "show us the science", so it will hopefully be harder for the knockers to question A2's scientific credibility.

Cheers

[NT001]

NT001, I was talking of Babbage selling down his holding from 6m shares in July 2015 to 3.5m shares today. That represents a 42% drop in his holding - not small by any standard I know. It is true that I have no evidence of any other managment selling down - you got me there. But I made the comment because with the CEO selling, that gives an implied permission for any other senior officer of the company to sell down too, with no questions asked.SNOOPY

My math differs from yours, Snoopy. In July, Babidge's family trust had 6m fully paid and 5m partly paid shares which totalled 11 million. He then sold 1 million fully paid shares at 72 cents each to help his family trust pay off a loan facility. His declaration of holdings following this sale showed him as still having 5 million partly paid and 5 million fully paid shares.

https://www.nzx.com/files/attachments/222913.pdf

In December he sold a further 1 million shares at an average of around 168 cents each, at which point the company said the ransaction took place in a period when sales by executives and directors were not restricted. Yet there were no sales by others, even though the SP rose almost 50 percent beyond that.

A few days ago he sold a further half million shares. By my reckoning he has sold 2.5 million shares since July, not 3.5 million, which is just over 20% of his total stake, not 42%. And there is nothing whatever to suggest he sold down because he considered shareholder expectations were too high. Only 1.5m shares were sold after the big pre-Christmas SP rally.

As to your other questions about what I expect to come out of the Chinese clinical trial, I wouldn't know precisely, but if the result is favourable its value in promoting the health/medical difference between A2 and A1 won't necessarily be limited to China. I personally think too much attention is being focused on China, which is an unpredictable market, and am more interested in the US, about which we haven't heard much as yet. a2MC already has TV ads running in the US which highlight the digestive issues.

[Bjauck]

I am surprised that Directors in ATM have not sold more of their shares. The price had had a stellar rise (and the price had got away with itself) and they could have sold shares whilst still retaining a stake in the company and remaining optimistic for the prospects of the company.

[Snoopy]

My math differs from yours, Snoopy. In July, Babidge's family trust had 6m fully paid and 5m partly paid shares which totalled 11 million. He then sold 1 million fully paid shares at 72 cents each to help his family trust pay off a loan facility. His declaration of holdings following this sale showed him as still having 5 million partly paid and 5 million fully paid shares.

https://www.nzx.com/files/attachments/222913.pdf

In December he sold a further 1 million shares at an average of around 168 cents each, at which point the company said the transaction took place in a period when sales by executives and directors were not restricted. Yet there were no sales by others, even though the SP rose almost 50 percent beyond that.

A few days ago he sold a further half million shares. By my reckoning he has sold 2.5 million shares since July, not 3.5 million, which is just over 20% of his total stake, not 42%.


Read my post again NT001. I said Babbage sold his holding down to 3.5 million shares. I didn't say he sold 3.5million shares. By implication he started with 6m and sold 2.5m so that 3.5m remain. We agree on this point.

As far as the extra 5m partly paid shares go, these I believe are part of his Long Term Incentive plan. These are options which will not be exercised should things turn pear shaped. I don't regard options that Babbage has not put his own money on the line for as 'skin in the game'. So I stand by my point that Babbage has sold:

2.5m / 6.0m = 42%

of his ATM - fully paid -shares since last July. I consider A2 company financed partly paid shares should be ignored in this calculation.



As to your other questions about what I expect to come out of the Chinese clinical trial, I wouldn't know precisely, but if the result is favourable its value in promoting the health/medical difference between A2 and A1 won't necessarily be limited to China. I personally think too much attention is being focused on China, which is an unpredictable market, and am more interested in the US, about which we haven't heard much as yet. a2MC already has TV ads running in the US which highlight the digestive issues.


Interested in your view on how the Chinese trial result may help US market development. Thanks.

SNOOPY

[kizame]

Thought this was interesting,just to get perspective.

http://www.investopedia.com/articles/active-trading/010716/stocks-bubbles-could-burst-2016.asp?utm_source=stock-watch&utm_medium=email&utm_campaign=SWW-1/12/16&utm_term=stock-watch

[Yeshiva]

I must say that I'm awfully impressed by the recent announcements and share price rise in this company. And, if you think about the potential for a premium milk brand selling to 100 million more chinese babies (this is apparently what will happen now that China has changed its one child policy), then a multi $billion valuation is entirely possible for this company one day. This is a true success story.

[Snoopy]

Thought this was interesting,just to get perspective.

http://www.investopedia.com/articles/active-trading/010716/stocks-bubbles-could-burst-2016.asp?utm_source=stock-watch&utm_medium=email&utm_campaign=SWW-1/12/16&utm_term=stock-watch

In PE terms A2 is a lot more expensive than Amazon or Netflicks. I guess holders should wait for the a2 share price trend to break before heading for the exits if you follow invesopedia's advice. All I can say is that I've been around the markets a while now, and only once have I seen any share more overvalued than this. I think the potential is there for the share price to drop one dollar in a single day, even as the business continues to operate successfully. And if it did guess what? I still wouldn't buy any. Consider all shareholders warned!

SNOOPY

[Ginger_steps_]

In PE terms A2 is a lot more expensive than Amazon or Netflicks. I guess holders should wait for the a2 share price trend to break before heading for the exits if you follow invesopedia's advice. All I can say is that I've been around the markets a while now, and only once have I seen any share more overvalued than this. I think the potential is there for the share price to drop one dollar in a single day, even as the business continues to operate successfully. And if it did guess what? I still wouldn't buy any. Consider all shareholders warned!

SNOOPY Unless they beat guidance and increase supply - then current SP will look cheap. People are buying this stock for the growth prospects - not the present value, obviously.
I often wonder is you invest in anything snoopy? have a bit of fun - take a punt once in a while, believe the story (with research) and just not the numbers, every now and then! I would go crazy if i were to crunch the amount of numbers you do.... not that there is anything wrong with your methods.

[Snoopy]

Unless they beat guidance and increase supply - then current SP will look cheap. People are buying this stock for the growth prospects - not the present value, obviously.


GS I have calculated the present value at 13.3c. That contains limited allowance for growth, so is obviously unrealistically low. At $1.80 the market allowance for growth is.

180/13.3 = 1350%!

IMO that is staggeringly high,and building in a decade of aggressive growth as a certainty, when in fact any number of things may not go according to plan. You are going to need around ten times the number of cows as exist in the supply chain now just to supply for a start. The company must grow like this just to return shareholders their invested capital back today, with no return!

Beating guidance will not make the share look cheap. It has already gone too far for that. Peoiple may be buying. But CEO Babbage is selling Hence my warning to other shareholders.

SNOOPY

[kiora]

GS I have calculated the present value at 13.3c. That contains limited allowance for growth, so is obviously unrealistically low. At $1.80 the market allowance for growth is.

180/13.3 = 1350%!

IMO that is staggeringly high,and building in a decade of aggressive growth as a certainty, when in fact any number of things may not go according to plan. You are going to need around ten times the number of cows as exist in the supply chain now just to supply for a start. The company must grow like this just to return shareholders their invested capital back today, with no return!

Beating guidance will not make the share look cheap. It has already gone too far for that. Peoiple may be buying. But CEO Babbage is selling Hence my warning to other shareholders.

SNOOPY

I for one would rather heed your advice Snoopy if I where invested in this stock

[bobxia]

Hi SNOOPY, whenever I've done valuations for a company, I always put some real money to do a trade, as a reality check of my research work. So if I believe the company is cheap, then I will buy the shares, and vise versa. If I feel reluctant to play the real money, then I will not trust the research work done by myself. This approach seems working so far, as my NZX portfolio has been over-performing the NZX50 in the last 5 years.

I just wonder, if you believe A2 is worth only 13.3c, it appears no brainer to short-sell this company, at the current price. Are you willing to do the trade, as you will make a fortune if A2 drops to your valuation price?

[Baa_Baa]

I for one would rather heed your advice Snoopy if I where invested in this stock

Me too, Snoopy is a legend. I'd rather believe him, my charts and the CEO selling into over valued SP, than buy ATM. So I dropped it from my 2016 stock picks for those reasons.

[dobby41]

I find the ad on the radio spruiking the company saying how popular the product is etc interesting.
Sounds like a financial report the way it is delivered.
Worrying really.

disc - don't hold

[Snoopy]

Hi SNOOPY, whenever I've done valuations for a company, I always put some real money to do a trade, as a reality check of my research work. So if I believe the company is cheap, then I will buy the shares, and vica versa. If I feel reluctant to play the real money, then I will not trust the research work done by myself. This approach seems working so far, as my NZX portfolio has been over-performing the NZX50 in the last 5 years.

I just wonder, if you believe A2 is worth only 13.3c, it appears no brainer to short-sell this company, at the current price. Are you willing to do the trade, as you will make a fortune if A2 drops to your valuation price?

'Put up or shut up', eh. Ok your post expressed that general idea in a far more polite way. But you are right, Bobxia. I do deserve to be called on this one.

This shorting thing often is bandied around the forum. But it is not that easy to do in practice. I know the NZX allows shorting of some top ten shares. But for a small investor like me, I am not sure that shorting a share like ATM is possible on the NZX. I have certainly never heard of any individual on this forum who has done it. The ASX however, does offer more possibilities , now that 'A2M' is listed 'over there'.

Take a look at this:

http://www.shortman.com.au/stock?q=A2M

It does show that some limited shorting is happening. But it also shows that the percentage of shares shorted is 0%, IOW within the margin of error. So maybe I could do it? I would be interested in 'Sharetraders' who have actually shorted a less liquid share like ATM/A2M, exactly how they have gone about it.

I have never shorted a share myself so far, but this is for more philosophical reasons. Unlike share investing, share shorting is a zero sum game. I am not sure I would feel right using my analytical skills to profit from someone else's lesser skilled misery.

I can buy a share and hold it indefinitely, if I so choose. But if I short a share, I can can only sell what is in effect a put option at some future date, typically one or two years into the future. It is true I currently believe that A2 shares will undergo a significant correction. But I have never claimed to be able to predict the timing of this. It is quite possible that A2 shares could remain in a $1.80 to $2 band for two years. Thus my put option could remain out of the money for its whole life. Or put another way, the market could remain irrational longer than I can remain solvent.

If I could buy, say, a ten year put option for A2 milk then there is every chance I would do so. However, as far as I am aware I cannot do this. Very happy to be proved wrong on this one though.

SNOOPY

PS my 13.3c valuation is based on a2 milk retreating to Australia and New Zealand, pulling the pin on further global expansion. But it is also based on a PE of 20 which means I forecast solid growth in the home market for some years. As I have said before, I believe that view is vey likely too conservative. But it does provide a baseline of how to value A2 milk as it expands into other markets.

[airedale]

Hi Dobby, which radio station did you hear the ad?

[dobby41]

Hi Dobby, which radio station did you hear the ad?

The Sounds
Heard it just about everyday on the way to work and at other times.
Scary really.

[bobxia]

You raised a good point Snoopy, the market can be irrational, and the "timing" is not easy to predict. The timing may not be as important when you are trying to make a big call, e.g. you are calling for a big correction like more than 50%, rather than 2%.

If you worry to be wrong to short-sell for the first 1 or 2 years, you could try only bet a potion of your planned capital (like 30%) to start with, and add-on positions if price goes up. By doing this approach, you will be benefit regardless of the share price movements, i.e. you make profit if price goes down, or adding more positions at better levels if price goes up.

Eventually, you will make a big profit when the market becomes rational again, i.e. dropping back to the true valuation.

There are few ways to short this stock. Not sure who's your broker, but have a chat with your broker. They maybe able to borrow ATM (at your cost), and sell it for you. I can also give you my contact from Leveragedequities, who's a subsidiary of For barr and offer short-selling service. Let me know if you want the contact.

You are right, you can also short-sell A2M. You can simply open a CFD account with IG Market, and selling ASX stocks is very simple on their platform.

If you haven't done short-selling before, it can be a good experiment to do :) it will be interesting to see if your view changes when you have a position on.

[Harrie]

I have never shorted a share myself so far, but this is for more philosophical reasons. Unlike share investing, share shorting is a zero sum game. I am not sure I would feel right using my analytical skills to profit from someone else's lesser skilled misery.


That's about the most arrogant statement I have ever read on ST.


Happy to be a person with lesser intellectual ability for you to take money off and provide you with an option that the market can't do for you currently. I can undertake to provide you with an opportunity to put your money where your superior analytical skills lie by entering into a legally binding options contract giving you a 564% premium over your valuation in 5 years time. Lets enter into a contract where you agree to sell me 500000 ATM shares @0.75 in 5 years time. That should be a no brainer to you because based on your own analysis you would be selling me shares at $0.75 when the market at that point would be around 13.30 cents. So you would buy the 500000 shares on the market at a price less than $0.75 and I would have a legal obligation to buy these and settle with you for $375000. Alternatively if the sp is greater than $0.75 then you would cash settle me for the difference between the option price and the market price.

[Snoopy]

Snoopy wrote:
"I have never shorted a share myself so far, but this is for more philosophical reasons. Unlike share investing, share shorting is a zero sum game. I am not sure I would feel right using my analytical skills to profit from someone else's lesser skilled misery."
That's about the most arrogant statement I have ever read on ST.

Happy to be a person with lesser intellectual ability for you to take money off and provide you with an option that the market can't do for you currently. I can undertake to provide you with an opportunity to put your money where your superior analytical skills lie by entering into a legally binding options contract


I said nothing about skills equalling intellectual ability Harrie. That is entirely your construct. Skills tend to come from experiences both good and bad. Skills require application rather than 'superior intellectual ability'. I think I have been around this forum long enogh to claim some skills at least. Please don't read things into my statements that are not there.



Lets enter into a contract where you agree to sell me 500000 ATM shares @0.75 in 5 years time. That should be a no brainer to you because based on your own analysis you would be selling me shares at $0.75 when the market at that point would be around 13.30 cents.


You want to have a $375,000 contract bet with me do you, all on one speculative share?

The 13.3c valuation was based on Australia and New Zealand only, and based on FY2015 results. I never said it was my valuation of the company. So why will my valuation of the company be 13.3c in five years again? May I suggest you become a little less impulsive and brush up on your comprehension skills. I have no doubt you have the intelligence to do so :-).

SNOOPY

[bobxia]

In terms of the 10 year Put option idea Snoopy, you are right that there's no option market for A2 for that long. However, even there's such a market, you need to pay a big premium, as the volatility for A2 is high, which will be reflected in the option pricing. You may need to pay something like 40% or 50% (or even more) of the face value for a at-the-money option.

Given you are so bearish about this company, you probably believe A2 will not go up another 50% in the future. So there's a way that you can do an outright trade, but have the same effect as doing a put option. You can simply sell the stock, with a stop-loss level of 50% above the entry-price. This might be a better way, as you don't need to pay the expensive premium upfront, so more savings of opportunity cost.

May I ask, if you do decide to sell, what's your profit-target might be?

[Harrie]

The 13.3c valuation was based on Australia and New Zealand only, and based on FY2015 results. I never said it was my valuation of the company. So why will my valuation of the company be 13.3c in five years again? May I suggest you become a little less impulsive and brush up on your comprehension skills. I have no doubt you have the intelligence to do so :-).


I'm not sure I have met anyone that has developed analytical skills without having some intelligence Snoopy. Your skills definition is therefore just a thinly disguised way of demonstrating how much more intelligent you are than the rest of the unskilled contributors to ST.
Wasn't it you that put generous earnings multiple of 20 times on current earnings? Based on your own analysis at this multiple you should not expect to see the SP move much more than your 13.3c per share, that's why I have given you a wide berth of a 564% premium, ie I have already discounted some growth in the next 5 years based on your current valuation model. If we assume a 20% compound growth on your current valuation it would bring you up to a SP of 33c in 5 yrs, thus still providing a premium of around 130%. That's pretty generous I would have thought on my behalf to volunteer to take such a hit on an options contract!
My offer still stands.

[PartTimeTrader]

I don't know why people are being so overly sensitive. Anytime you are investing in a company without a proven track record of profits you are creating a valuation based on your faith in the company/product's long term earnings potential. There are going to be huge differences in valuations compared to valuations of long established companies where you can take an existing earnings history and factor in slight growth/decline in earnings over time.

I've put in 500k into NZX/ASX equities during this volatile Jan period. It's weighted 70% towards established businesses where I think the industry hasn't reached a declining phase yet or has small growth potential (its always easier to justify buying when market crashes as well). I've also put 30% towards a variety of biotech/tech type companies but they are spread quite widely between several high potential companies, several of them could turn out to be worthless in a few years time while others may return 1000%+. Anyone going heavily weighted on a single biotech/tech stock that hasn't proven itself yet is just gambling regardless of whether you are short/long on that stock.

*Disc I purchased 30k shares of A2 at 50cents, sold at $1.25 a few months later, it sucks seeing it go to $2 but I don't have any strong regrets.

[Snoopy]

I'm not sure I have met anyone that has developed analytical skills without having some intelligence Snoopy. Your skills definition is therefore just a thinly disguised way of demonstrating how much more intelligent you are than the rest of the unskilled contributors to ST.


Developing analytical skills does require a working level of intelligence: of course. It does not follow from this that 'skills' = 'intelligence'.

Not quite sure what you expected me to say in this context. If I take out a 'put option' on A2 shares, one party to that contract (say A) will be a winner and the other one (say B) will be a loser: yes?. No party would enter that contract without believing that they would be the winner. And the best way to stack the odds beforehand so that you are that winner is to up your skill level. You might say that whoever comes out the winner will have proved themselves the most skillful, whether that party ends up being 'A' or 'B'.

So I see nothing unusual in that, if I expect to win, then I can claim myself to be the more skillful. No doubt if you were on the opposite side of such a contract you would be thinking that it was you who was the more skillful. Come expiry time of the put option, we would both find out whose opinion was right. You will notice that I used the term 'lesser skilled' , (not 'unskilled' as you suggested) when referring to the other party on the losing side of the contract. If they lose, I don't think it is particularly offensive to call them 'lesser skilled' (in the context of that contract anyway.)

SNOOPY

[Snoopy]

NZ segment reveune for FY2012:$1.442m (from AR2012)
NZ segment reveune for HY2012:$1.668m (from HYAR2012)

Therefore 2HY2012 for NZ was "negative $226k"

No change of accounting standard I can see. How is this possible?

SNOOPY

P.S. Further references:

NZ segment reveune for FY2012:$1.442m (from AR2013)
NZ segment reveune for HY2012:$1.624m (from HYAR2013)

So it doesn't look like it was a misprint.

[Snoopy]

From the segment information:

Revenue Australia and New Zealand (2014): $106.866m (AR2015)
Revenue Australia Only (2014): $106.866m (AR2014)

So if you take the AR2015 report at face value, there was no New Zealand revenue at all in FY2014?

SNOOPY

[Snoopy]

May I ask, if you do decide to sell, what's your profit-target might be?


If you value the 'ANZ' part of A2 milk at 13.3c and A2 puts equal effort into their other three primary markets (China, UK, USA), then very crudely you could start by valuing the whole company at: 4 x 13.3c = 53c. Of course, this valuation assumes:

1/ All markets are at the same stage of development (not true)
2/ All markets are potentially of the same size and profitability (not true)

However it possible the erroneous assumptions in 1/ and 2/ will offset each other to some extent.

The other unknown is how long it will take to develop a beachhead into a profitable operation. For this reason, I think the most important thing to do is study the Australian operation which has already become commercially viable as a stand alone business.

The company first took control of supply and distribution of Milk oin Austalia on 1st December 2004. There were several false starts in other markets (first foray into USA, Korea). The next successful expansion, funded by cashflow from an established market (Australia) was during 2012, with the strategy of providing baby formula to China. So based on this one might deduce that on average it takes eight years to (successfully) develop one new market? Perhaps by 2020, China will be humming? More successful markets will increase the free cashflow avaiulable to penetrate other new markets. So maybe the development of the UK and USA markets will be able to be accelerated?

To summarize, I think it is realistic that A2 could quadruple the size of their operation by 2020. That would see the new core of A2 worth 53c, up from 13.3c today. Other markets in Europe and the rest of Asia could be tougher to penetrate. But maybe you could still double the base valuation of 53c to $1.06 in 2020 to take into account the other markets growth potential? Any way I look at it, all these figures are well short of the $1.80 share market price of late. If things go really well A2 could be worth more than $2 by 2025. Lots of cows to bred up before then of course! But all this tells me the share price today has got way ahead of itself.

SNOOPY

[warthog]

…But all this tells me the share price today has got way ahead of itself.

Don't you wish you could short NZX equities Snoopy?

(yes, the hog knows that there are some shorting opportunities in NZ but liquidity, etc., are issues).

[NT001]

Trying to predict the pace of a2MC's future growth based on its past growth rate is pretty tenuous. Anyone who has been following this company for a number of years should know that there have been a series of setbacks from which it has learnt a lot, the underlying science is becoming clearer and indisputable, anecdotal publicity and public awareness of A2's benefits have grown significantly, international demand for healthy food/beverages has expanded strongly, new markets have opened up, and the company's board and management have demonstrated a lot of savvy - in short, the commercial outlook now is way better than in the past.

Added to which, boosting A2 supply, which is portrayed by many commentators as a huge problem and some kind of achilles heel for a2MC, will not be fundamentally very difficult, especially after the big recent publicity at a time when dairy farmers worldwide are wondering how to make ends meet in a depressed global market for mixed A1-A2 milk.

I'd be surprised if the company isn't already quietly lining up a lot of NZ farmers and processing facilities in readiness for a rapid boost starting next year when it regains complete control of A2 milk marketing in this country. It's really not hard for thousands of NZ farmers to create pure A2 herds quite quickly by simply buying existing A2 cows from owners of mixed herds (which earn their owners no premium). Same in Oz and the US. And they'll do it once the company has its processing facilities and markets all lined up securely and is ready to offer its suppliers a premium.

OK, a massive boost in A2 supply may take a year or three, which day traders can't stand, but for those with a little patience the rewards will be there, just as they have been already for longer term investors.

[see weed]

Somethings brewing. Wonder if it has something to do with womans a2 breast milk on the news this morning. Or is it the insiders buy up before next announcement?

[fiasco]

Somethings brewing. Wonder if it has something to do with womans a2 breast milk on the news this morning. Or is it the insiders buy up before next announcement?

I suspect more than anything, it's the US and Asian indexes gaining some traction on Friday. Looks like it's slowly retreating back down. I think there will be sideways movement until 17 Feb, or either some selling or buying leading up to it.

[skid]

Yes ,I agree,there will be some selling or buying:)

[iceman]

Yes ,I agree,there will be some selling or buying:)

More likely to be both ;)

[sb9]

http://www.interest.co.nz/rural-news/79703/keith-woodford-calls-nz-dairy-farms-wake-what-happening-a2-milk-despite-nz-science

Another enlightening post by Prof Keith Woodford. Excellent read!!!

[whatsup]

ATM/A2M price now being driven from Aust -- read Day Traders & shorters. !!

[Joshuatree]

Yes.Been so for some time but has fallen from no 1 most discussed stock to currently 5 . Sold my last holdings a few weeks back; building cash my main strategy atm..

[Trigger]

Yes.Been so for some time but has fallen from no 1 most discussed stock to currently 5 . Sold my last holdings a few weeks back; building cash my main strategy atm..

JT...was your feeling that the news coming later in Feb was already priced in...or may surprise in an underwhelming way...or something else?

Cheers

Trigger

[sb9]

Apart from Chinese infant formula demand, I would be keenly looking out their progress in UK and US when they release numbers later this month.

Those two markets are future catalysts for this company.

[Trigger]

Apart from Chinese infant formula demand, I would be keenly looking out their progress in UK and US when they release numbers later this month.

Those two markets are future catalysts for this company.

Yes I am hoping we have made progress there also sb9. Either of those will be a juggernaut once they gain some traction. All will be revealed in a couple of weeks.

[Joshuatree]

JT...was your feeling that the news coming later in Feb was already priced in...or may surprise in an underwhelming way...or something else?

Cheers

Trigger

Yeah thats my thoughts Trigger; well priced in ,but i wouldn't put any weight in that. Ive double bagged plus and want some money off the table; ATM was sticking out in my portfolio (along with others). I may get another crack at ATM , i may not. Each of our investment situation's is unique and the risk off(selling at blue sky prices) and building cash is where I'm comfortable for the moment.

[Trigger]

Yeah thats my thoughts Trigger; well priced in ,but i wouldn't put any weight in that. Ive double bagged plus and want some money off the table; ATM was sticking out in my portfolio (along with others). I may get another crack at ATM , i may not. Each of our investment situation's is unique and the risk off(selling at blue sky prices) and building cash is where I'm comfortable for the moment.

Ok, understood thanks.

[Golfer01]

I believe the demand for their infant formula is far greater than what they (Synlait) can produce. In fact they've stated that.. Effectively I would be surprised if they've made any progress with other countries outside of Australia and China with infant formula because they can't fulfill their existing demand. Their milk powder business is growing rapidly but again hampered with production limitations. So it begs the question, what do they do to increase production (assuming they have the raw material)? I can't see them wanting to build a plant capable of manufacturing and canning costing in excess of $200m. They'll need to source existing facilities for manufacture. Is Synlait at maximum capacity? I understand A2 is now Synlaits biggest customer.... Would Synlait expand to accommodate increase production for A2? Would A2 look to Fonterra for manufacturing options? I would suspect Fonterra would have spare processing capacity? Interesting stuff. What I think you can bet on is that A2 is busily telling farmers to convert from A1 milking cows to A2 milking cows as better returns are on offer and tangible..

[Ginger_steps_]

I believe the demand for their infant formula is far greater than what they (Synlait) can produce. In fact they've stated that.. Effectively I would be surprised if they've made any progress with other countries outside of Australia and China with infant formula because they can't fulfill their existing demand. Their milk powder business is growing rapidly but again hampered with production limitations. So it begs the question, what do they do to increase production (assuming they have the raw material)? I can't see them wanting to build a plant capable of manufacturing and canning costing in excess of $200m. They'll need to source existing facilities for manufacture. Is Synlait at maximum capacity? I understand A2 is now Synlaits biggest customer.... Would Synlait expand to accommodate increase production for A2? Would A2 look to Fonterra for manufacturing options? I would suspect Fonterra would have spare processing capacity? Interesting stuff. What I think you can bet on is that A2 is busily telling farmers to convert from A1 milking cows to A2 milking cows as better returns are on offer and tangible..

I was under the impression that Synlaits new facility has ample capacity for increased production?? It would be a shame if their facility is already maxed out considering its less than 2 years old!

Anybody know what the cost of the a2/a2 tail hair costs per cow??

[see weed]

A bit of trivial stuff.....725,000,000 plus shares have traded since 2/6/15.....on the NZX.

[westcoaster]

I was under the impression that Synlaits new facility has ample capacity for increased production?? It would be a shame if their facility is already maxed out considering its less than 2 years old!

Anybody know what the cost of the a2/a2 tail hair costs per cow??


I read a couple of years back that it was $1 per test.

[westcoaster]

I am assuming you mean what is the cost the a2/a2 identification.
.
I read a couple of years back that it was $1 per test.

[stoploss]

Been a bit quiet on here ...Big late rally in Australia today to close @ 182 Aud so just over 2.00 NZ ...... They've got Monday to have fun as well ...

[kura]

Think late rally was in response to positive announcement by BAL on asx (kind of went up in sympathy )

[Sideshow Bob]

Article not specifically mentioning A2, but about the volumes of milk powder being airfreighted into China from Stayla.

http://viewer.zmags.com/publication/903cc139#/903cc139/28

[sb9]

Been a bit quiet on here ...Big late rally in Australia today to close @ 182 Aud so just over 2.00 NZ ...... They've got Monday to have fun as well ...

I think it works to be NZ 196 @.933 conversion rate if I'm not wrong.

Anyway back to more important things, Bellamy's have come up with big trading update and the sp swung after down to low $10 earlier in the day to finish high $12 and looks like it may not stop there come Monday. And they announce their interim results on 19th, but I guess today's announcement is pretty much close to that.

This only means big upsurge for ATM sp and they're due to announce 1H results on 17th.

It may be big call, but I'm picking we might see 3 in front of sp before end of April if today's trading and SSH notices by Regal are anything to go by.

Always pls DYOR, happy to hold my shares for long term...

Finally, feel very sorry for those shorters on ASX especially in relation to BAL, I think they were caught their pants down big time!!!!! Big lesson for them...

[NT001]

The Farmers Weekly article posted by Sideshow Bob is interesting, but even more so to my mind are the stories on the facing page that describe the dire position of UK dairy farmers right now. UK farmers must be getting desperate for any opportunity to earn a premium by producing milk that isn't just a low-end commodity. Most contributors on this thread seem obsessed by A2M's sales into China while writing off the company's efforts in the UK and USA, but there could be good things happening in those markets that may start to come to light on the 17th.

Meanwhile the ATM share price is being buffeted around mainly due to the false belief in Australia that it is closely comparable to Bellamys, which is currently undergoing a long overdue SP correction. Although both companies export milk formula to China, there are fundamental differences between them that many analysts and investors simply don't comprehend. ATM is in a vastly superior position for longterm growth. It has a different and unique product line and a more diversified global strategy, and is far better situated to ramp up its supply lines to meet increasing demand - despite the frustration of some investors that it hasn't been able to flood the Chinese market with product overnight.

[Ginger_steps_]

I am assuming you mean what is the cost the a2/a2 identification.
.
Yep - you understood me. I now realise how poorly that post was written - sorry, and thanks for your response. Wow $1 per test - that is amazing! Here i was thinking that there would be an upfront cost of $5K plus for farmers wanting their herd checked.

[NT001]

west coaster and ginger steps:

I'm sure you won't find any lab offering to test the a1-a2 status of a cow for $1. The main tester in NZ is GenomNZ, part of AgResearch. It doesn't advertise the cost of its A1-A2 tests, but I've seen quite a lot of net traffic mentioning costs of around $20 per cow, including for offshore cows. In the US, the University of California at Davis does it for about $25. That comes to quite a high cost to test a full herd, but if a farmer has got good breeding records of his cows he would be able to rule out quite a few of his stock without testing, based on details of its parents. Suppliers of bull semen provide info about its A1-A2 status. It's possible that Synlait helps its suppliers with the cost of testing - I just wouldn't know.

Most of NZ's top breeding bulls now are pure A2 because they're in the most demand. That's partly because A2 cows have a reputation for good milk output, and partly because smart farmers are reading the writing on the wall, that A2 is the way to go even though Fonterra is still refusing to endorse that view. Read Keith Woodford's blog articles on this, including the most recent at

http://www.interest.co.nz/rural-news...ite-nz-science (http://www.interest.co.nz/rural-news/79703/keith-woodford-calls-nz-dairy-farms-wake-what-happening-a2-milk-despite-nz-science)

which will be making a lot of farmers switch to A2 if they haven't already. In addition to the cost of testing his cows, there are also other costs if a farmer wants to convert his herd quickly to all-A2. For example, he needs to dispose of cows or calves that are not A2A2 and replace them with ones that are.

[Ginger_steps_]

west coaster and ginger steps:

I'm sure you won't find any lab offering to test the a1-a2 status of a cow for $1. The main tester in NZ is GenomNZ, part of AgResearch. It doesn't advertise the cost of its A1-A2 tests, but I've seen quite a lot of net traffic mentioning costs of around $20 per cow, including for offshore cows. In the US, the University of California at Davis does it for about $25. That comes to quite a high cost to test a full herd, but if a farmer has got good breeding records of his cows he would be able to rule out quite a few of his stock without testing, based on details of its parents. Suppliers of bull semen provide info about its A1-A2 status. It's possible that Synlait helps its suppliers with the cost of testing - I just wouldn't know.

Most of NZ's top breeding bulls now are pure A2 because they're in the most demand. That's partly because A2 cows have a reputation for good milk output, and partly because smart farmers are reading the writing on the wall, that A2 is the way to go even though Fonterra is still refusing to endorse that view. Read Keith Woodford's blog articles on this, including the most recent at

http://www.interest.co.nz/rural-news...ite-nz-science (http://www.interest.co.nz/rural-news/79703/keith-woodford-calls-nz-dairy-farms-wake-what-happening-a2-milk-despite-nz-science)

which will be making a lot of farmers switch to A2 if they haven't already. In addition to the cost of testing his cows, there are also other costs if a farmer wants to convert his herd quickly to all-A2. For example, he needs to dispose of cows or calves that are not A2A2 and replace them with ones that are.
Thanks NT - $1 did sound a bit too good, but perhaps there is some subsidy there from synlait / a2. I guess even at say $25 the price premium should pay the cost back in under a year.
Also, another good article from old Keith - I wonder how many farmers actually read his articles?! Hopefully the word filters through in good time - we need more a2 milk, and we need it yesterday.

[NT001]

Another very interesting analysis of the dairy sector by Keith Woodford, which once again would seem likely to make farmers hasten their herd conversion to A2.

https://keithwoodford.wordpress.com/2016/02/12/surviving-the-dairy-downturn/#more-1404

First, many farmers will be looking more closely at ways to earn more for their milk, such as by supplying A2. They'll be aware that next year is when a2MC is likely to make a decisive move in NZ, probably acquiring processing facilities in the North Island. Even in advance of that, it is discussing with Fresha Valley (a North Island outfit) ways to increase A2 milk production.

Secondly, many farmers will be looking at ways to reduce costs, and one way is by culling their herds in order to constrain feed costs. Herd culling is a step in the process of conversion to A2 that farmers would normally be reluctant to take. Fewer cows = less milk production in the first instance. But this crisis is an opportunity for those interested in herd conversion to cull non-A2 cows, while those who are not inclined to go the A2 way can sell A2 cows for good cash prices to those who are.

A crisis such as the industry is now facing can often be the catalyst for beneficial change. It so happens that this crisis coincides with a2MC's plans to expand production in NZ, which will most likely be focused in North Island areas such as Waikato.

[sb9]

Big buying going on to be in time before the results to be announced in a day on 17th, expect more activity once ASX starts trading.

[Ginger_steps_]

Another very interesting analysis of the dairy sector by Keith Woodford, which once again would seem likely to make farmers hasten their herd conversion to A2.

https://keithwoodford.wordpress.com/2016/02/12/surviving-the-dairy-downturn/#more-1404

First, many farmers will be looking more closely at ways to earn more for their milk, such as by supplying A2. They'll be aware that next year is when a2MC is likely to make a decisive move in NZ, probably acquiring processing facilities in the North Island. Even in advance of that, it is discussing with Fresha Valley (a North Island outfit) ways to increase A2 milk production.

Secondly, many farmers will be looking at ways to reduce costs, and one way is by culling their herds in order to constrain feed costs. Herd culling is a step in the process of conversion to A2 that farmers would normally be reluctant to take. Fewer cows = less milk production in the first instance. But this crisis is an opportunity for those interested in herd conversion to cull non-A2 cows, while those who are not inclined to go the A2 way can sell A2 cows for good cash prices to those who are.

A crisis such as the industry is now facing can often be the catalyst for beneficial change. It so happens that this crisis coincides with a2MC's plans to expand production in NZ, which will most likely be focused in North Island areas such as Waikato.

Just a thought. One of Keith's recent article pointed to the fact that there were very large farms in the states ready to change to a2 at the drop of the hat, one stating that they could be producing 1 million litres of a2 milk within a couple of weeks. Surely a2 would be looking into opportunities such as this to ramp up infant formula production while the iron is hot? Of course they would need to have another processing facility approved by the chinese - but surely this would be an excellent option to address current supply issues? Imagine the SP if a2 were to announce they were doubling production in 2H 16!! Keen to hear some views on why this may not be a good option?

[fiasco]

Probably assisted by Challenger taking a bigger position also. What's are the key points you're looking to get from the 17th ann sb9?

Hopefully, they provide additional context around how UK and US are performing, along with how they are going to proceed with growing supply.

[sb9]

Probably assisted by Challenger taking a bigger position also. What's are the key points you're looking to get from the 17th ann sb9?

Hopefully, they provide additional context around how UK and US are performing, along with how they are going to proceed with growing supply.

My key points from 17th announcement would be to focus on below:

- Performance for 1H trading, how much higher than earlier earnings update
- Chinese IF (infant formula) market update and how much further potential still lie in there
- US expansion plans and how they are tracking
- UK market performance and any plans to launch IF into that region

[Snoopy]

Just a thought. One of Keith's recent article pointed to the fact that there were very large farms in the states ready to change to a2 at the drop of the hat, one stating that they could be producing 1 million litres of a2 milk within a couple of weeks. Surely a2 would be looking into opportunities such as this to ramp up infant formula production while the iron is hot? Of course they would need to have another processing facility approved by the chinese - but surely this would be an excellent option to address current supply issues? Imagine the SP if a2 were to announce they were doubling production in 2H 16!! Keen to hear some views on why this may not be a good option?

Since A2 is now priced on 'exponential growth', an operation ten times the size of what we see now, a mere doubling of production in 2H 16 would cause the A2 share price to collapse. A doubling of herd size is so far below what is required from here, there would be a stampede for the exit door!

SNOOPY

[whatsup]

ATM's ann this must be good to goodest up 6% so far today to $1.95 and there is a possibility that we could hit $2.00 again !

[sb9]

Inching close to that magic $2 mark and most likely to breach that, all in anticipation of what's in store tomorrow.

[whatsup]

atm's ann this must be good to goodest up 6% so far today to $1.95 and there is a possibility that we could hit $2.00 again !

$2.00 gone !!

[sb9]

$2.01, drum roll pls...:t_up::D

[Sideshow Bob]

Since A2 is now priced on 'exponential growth', an operation ten times the size of what we see now, a mere doubling of production in 2H 16 would cause the A2 share price to collapse. A doubling of herd size is so far below what is required from here, there would be a stampede for the exit door!

SNOOPY

I think to quote perhaps Warren Buffet, "the market can stay irrational longer than you or I can stay afloat"

But I love irrationality!! :t_up::p

[fiasco]

I'd be happy for a small rise tomorrow and nothing else!

[whatsup]

Mist be good news up over 10% so far today !

[Ginger_steps_]

Since A2 is now priced on 'exponential growth', an operation ten times the size of what we see now, a mere doubling of production in 2H 16 would cause the A2 share price to collapse. A doubling of herd size is so far below what is required from here, there would be a stampede for the exit door!

SNOOPY

They also have price rises up their sleeve which I expect to mentioned in tomorrows report.

[LAC]

Looks good

https://www.nzx.com/companies/ATM/announcements/277752

[stefan]

https://www.nzx.com/companies/ATM/announcements/277747

I don't think many people will be running to the door with results like that :t_up:

[Leftfield]

Overview - financial results for the 6 months ended 31 December 2015 (NZ$m)


Total revenue of $139.1 million, an increase of 86% over the prior corresponding period (pcp)
Substantial growth in sales of a2 Platinum® infant formula across Australia and New Zealand (ANZ) andChina with total revenue of $73.9 million, up 340% on pcp. This compares with previously advised sales
for the four months to 31 October 2015 of $38.0 million
Net profit after tax of $10.1 million, compared to $0.1 million in pcp
Group operating EBITDA1 of $18.7 million, representing a 472%2 increase on pcp. This result includes
expensing establishment costs in the USA and UK markets of $8.1 million, record operating performance
in ANZ and significant growth in China
Increased fresh milk performance in Australia with sales up 5% in AUD over the pcp
Accordingly, the full year forecast has been revised upward with Group revenue in the range of $335
million to $350 million and Group operating EBITDA forecast to be in the range of $45 million to $49million

[sb9]

Very solid performance overall at first glance, still reading the full report.

[Kirk]

Great report. Think we will get upto $2.50 again today. Aussie market is going to love this. Even with getting on BAl as they will piggy back this result

[fiasco]

Great performance, I knew the forecast would be revised again!

They seem to be tracking great with US and UK

[sb9]

These are key dates and points of their upgrade for me which are very telling for FY 2016 earnings:

17/11/15 - Revenue to be $285m - EBITDA to be $22m

18/12/15 - Revenue to be $300-$315m - EBITDA to be $33-$37m

17/02/16 - Revenue to be $335-$350m - EBITDA to be $45-$49m

Now you be the judge and I'm picking there will be another earnings update in a few months time.

[Trigger]

Firstly I am very happy with the report. Congrats to management and board for delivering wonderful eps growth year on year. And it does't look to be slowing either.

China now looks to have established itself as a key trading territory for the company.

Both UK and USA markets have developed more slowly than the company would like. More cash being thrown at marketing...am ok with that. Still don't really understand the "specialty milk" approach being taken in the US though.

Early reading over on HC indicates that today could turn into a feeding frenzy as far as the SP is concerned. That would be...terrible. :t_up:

Trigger

[Ginger_steps_]

"We experienced stockshortages, in particular during the first four months of thehalf. However we have increased our production schedulewith Synlait to meet increased demand."

I believe that is what the aussie market is looking for!! Have a great day!

[Joshuatree]

21% up .Congrats to believers

[tzbang]

Last time A2 shares were climbing up Synlait shares appeared to piggyback the ride.. do you think their successes are that closely linked?

[sb9]

It'll be interesting to see what happens to sp when ASX opens, might try $3???

Where's see weed these days, are you still in buddy....

[Nasi Goreng]

Last time A2 shares were climbing up Synlait shares appeared to piggyback the ride.. do you think their successes are that closely linked?

IMO SML undervalued with potential to get up to $4-5 in the next 12 months. I'm looking forward to seeing their earnings on 31st March which should reflect all of the growth in A2 platinum as well as extra production capacity brought online in last 6 months. Disc Holding SML.

[Nasi Goreng]

ATM now worth more than 50% of value of Air NZ and about 30% of value of Spark. Sheesh!

[winner69]

ATM now worth more than 50% of value of Air NZ and about 30% of value of Spark. Sheesh!

.....and by the end of the day more than Xero

More money in milk than beautiful accounting software

[blobbles]

Massive result, likely to hit the $350m mark, next year looking at $500m easy. As I thought, increasing supply in a relatively short time frame is not that hard.

Onward and upward! (my average buy price of 65c not looking too shabby!)

[silu]

Says something about my personality that I'm pissed off having halved my holding around $1.75 instead of being happy about today. Even with an avg share price purchase of 55c.

[sb9]

My minimum target price to sell is $5, the US and UK are just getting traction. Just imagine if they succeed in US big time, it'll be huge!!!

[777]

Out at an average of 252 this morning and now waiting to buy back. Looking good at the moment. Such a predictable market reaction.

[fiasco]

Wasn't quite predicting that to happen. Will wait it out now, sitting on healthy profit so want to see how things progress with BAL's announcement on Mon.

[sb9]

Wasn't quite predicting that to happen. Will wait it out now, sitting on healthy profit so want to see how things progress with BAL's announcement on Mon.

Blame it on the shorters on ASX, they're out in full swing at this one.

By the way, BAL results are announced this Fri not Mon.

[Beagle]

Out at an average of 252 this morning and now waiting to buy back. Looking good at the moment. Such a predictable market reaction.

Now that's what you call sweet timing !

[777]

Some large transactions in the high 250's and 260.

http://www.stocknessmonster.com/stock-trades?S=ATM&E=NZSE

Back in at 215. Will spend my profit on some more shortly.

[sb9]

45M shares traded so far on ASX compared to 13M shares on NZX, gives some perspective of trading across two markets.

[Bjauck]

Some large transactions in the high 250's and 260.

http://www.stocknessmonster.com/stock-trades?S=ATM&E=NZSE

Back in at 215. Will spend my profit on some more shortly.

Wow. A real roller coaster with the share price. It seems like today's traders are playing with a roulette wheel. I am glad my investment is for the long-haul. You sold out well but not so lucky with the your buy-in. The SP is now $1.99 down 2% from yesterday's close!

edit: and now already back to $2.06!