ATM - A2 Milk Corporation Limited

[bull....]

growth rate is slowing , more expense coming

[longy]

gap will be filled at some stage

Does any body has a link (re info) on this gap which people often went on please?

[Ggcc]

There seems to be some strong support at $10.30-10.50

[bull....]

Does any body has a link (re info) on this gap which people often went on please?

go to bigcharts.com look up nz:atm

nice juicy hole in the chart , look up gap filling https://bioequity.org/statistics-do-stock-price-gaps-always-get-filled/ 91% gaps are filled

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=NZ%3Aatm&x=53&y=21&time=7&startdate=1%2F4%2F1999&enddate=2%2F12%2F2018&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=5&maval=5%2C39&uf=0&lf=1024&lf2=65536&lf3=4&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=10

[longy]

growth rate is slowing , more expense coming

Not sure... I thought they have loaded potential such as expanding in to S-korea, other part od States and partner up with Frontera... etc.

[NZSilver]

It will go lower once the asx opens

[couta1]

growth rate is slowing , more expense coming 70% increase on the prior corresponding period is not what you call slow, future potential is massive, marketing expenses will naturally increase as the company pushes into new markets.

[longy]

go to bigcharts.com look up nz:atm

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=NZ%3Aatm&x=53&y=21&time=7&startdate=1%2F4%2F1999&enddate=2%2F12%2F2018&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=5&maval=5%2C39&uf=0&lf=1024&lf2=65536&lf3=4&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=10

Thanks Bull...

[Nasi Goreng]

Ozzie open will be interesting, I'm not buying but if I was, I wouldn't touch it until at least 1pm.

[bull....]

70% increase on the prior corresponding period is not what you call slow, future potential is massive, marketing expenses will naturally increase as the company pushes into new markets.

pe was 62 odd yesterday if the growth rate projected isnt good enough to justify the current price then it must adjust to reflect lower growth rate

[777]

It will go lower once the asx opens


There again there may be a more mature approach to today's announcement.

[NZSilver]

There again there may be a more mature approach to today's announcement.

the Aussies on the ASX - I doubt it!

[RupertBear]

Couta1-then what is the fair value of this stock? it has reported just "under" a few million as per the "expectations" and to me it is still a fantastic NZ story...and also joining the MSCI .

I just cant understand the panic.

Disc:Sold out at 8.37 and regretting

You might be able to buy them back at $8.37 carrom :scared:

[trader_jackson]

Good for this to happen... imagine if they hadn't provided an update and just announced this stuff 'on the day'? Would be looking at larger than 20% drop I would think. At the end of the day, this is healthy to happen and keeps everybody with their feet on the ground.

[winner69]

Thanks Bull...

Interesting

So in hindsight going from $9 odd to $14 plus in such a short time was just plain stupid or whatever word you want to use

That’s the market for you eh

[Cricketfan]

There again there may be a more mature approach to today's announcement.

I wouldn't hold my breath. This seems to be the type of stock where reactions (both positive and negative) tend to be less than mature. I think you just have to expect it.

[ratkin]

Gross margin percentage for the full year is expected to remain broadly
consistent with 1H18, given the benefit of throughput efficiencies and
currency movements.

So margin are really falling but it has been masked by cost cutting and a favourable exchange rate

[dobby41]

Interesting

So in hindsight going from $9 odd to $14 plus in such a short time was just plain stupid or whatever word you want to use

That’s the market for you eh
There were people saying that the PE was getting silly - and others saying it was a long game and heaps of growth etc.
Seemed to me, as I read this along the way, that there was a lot of 'seeing what you wanted to see' in everything that came out here.

[winner69]

MSCI is sssooo yesterday!

It gave ATM holders a small thrill, however for any real thrill we need a trading update. I guess what MSCI means in the short term (always dangerous to use the word short!).... is less volatility.....but we will see. In the meantime we wait patiently.

Bolli bands looking encouraging for ATM so just a matter of time.

Well done SML and THL holders !

Bolli bands looking different now

[mfd]

Noone seems to have mentioned yet, first half revenue of 434.7 projects with 0 further growth to 652 over 9 months. We actually got 660 so suggests a 4% increase in revenue last 3 months Vs first 6 months. How big an impact did those Chinese holiday sales have? I still hold but well in the money from my last purchase. New markets might take a while to ramp up significantly.

[Nasi Goreng]

Still 3 months away from annual results. No trading update yet from A2 where last year they provided updates on 26th April and 16th June. Wondering how much is built into share price that A2 smash the forecasted numbers for this half. If they do, expect the share price to continue upward, if its inline, would you expect the share price to get hammered?

Disc: not holding.

Got my answer today.

[bull....]

Got my answer today.

yep to much growth built into the price

[ratkin]

There were people saying that the PE was getting silly - and others saying it was a long game and heaps of growth etc.
Seemed to me, as I read this along the way, that there was a lot of 'seeing what you wanted to see' in everything that came out here.

Yes, an accident waiting to happen, markets always hammer the highest growth stocks the hardest with even the slightest falter. pe of over 60 crazy
My worry is SML is also way too highly priced, having all my shares bought in the cheap years is good but still dont want to see a big fall

[sb9]

They usually under promise over deliver don’t they?

Come August, when they report their FY results you can bet that they would beat that number.

Everyone seem to forget to look at the long term bigger picture. Fonterra partnership, US market gaining traction, SEA market growing, Middle East market expansion and recently announced South Korea partnership.

Its just that market went bit crazy with valuation after the HY results announced. And basically valuation is now back to more realistic levels and long term growth still remains intact.

Watch the space....

[couta1]

yep to much growth built into the price The story for this company has only just begun. Sit tight holders.

[winner69]

Noone seems to have mentioned yet, first half revenue of 434.7 projects with 0 further growth to 652 over 9 months. We actually got 660 so suggests a 4% increase in revenue last 3 months Vs first 6 months. How big an impact did those Chinese holiday sales have? I still hold but well in the money from my last purchase. New markets might take a while to ramp up significantly.

H2 revenues still 60% up on prior corresponding period (+70% for H1)

Still pretty fantastic but obviously many were thinking fairytale stuff.

[mfd]

H2 revenues still 60% up on prior corresponding period (+70% for H1)

Still pretty fantastic but obviously many were thinking fairytale stuff.

Agreed, but the growth all came in the first half and will drop out of the yoy soon enough. Company does say revenue weighted to first half so maybe it's all fine and growth will continue. Must be a limit to what can be milked from China, need to see other markets like UK and USA pulling their weight.

[suse]

wow, it is cleopatra material out there at the mo.

#milkbath

[Lego_Man]

Forget about the gap fill - the whole pattern looks more like a giant island reversal, which is immensely bearish.

[sb9]

Roll back 12 months they said they would forecast to do $505mln for FY 17 and the actual came in at $549mln. Higher by $44mln with all the talk of supply shortage.

'nuff said, bring on August with actual numbers.

[BlackPeter]

Interesting - current match price in Australia is AU$11.80 - NZD 12.85! Either the Ossies didn't yet read the announcement, or they are a bit more mature in their investment approach ;);

Anyway - possible that the people who sold out today below $11 will regret their decision by the end of the day;

Discl: bought some more but prepared to ride out a wee dip down to Moosie's gap ($9.50 ..) ;);

[forest]

The Company is anticipating Group revenue in the range of NZ$900 million to NZ$920 million for the 12 months ended 30 June 2018. This takes into account the planned transition to new infant formula packaging during Q4.

Todays announcement suggest an impact of transition to new formula packaging during Q4.

It is not clear to me if without this transition the revenue in Q4 would have been more or less. Anybody has some insight in this?

[couta1]

Forget about the gap fill - the whole pattern looks more like a giant island reversal, which is immensely bearish. Downramping anyone.

[Ggcc]

Interesting - current match price in Australia is AU$11.80 - NZD 12.85! Either the Ossies didn't yet read the announcement, or they are a bit more mature in their investment approach ;);

Anyway - possible that the people who sold out today below $11 will regret their decision by the end of the day;

Discl: bought some more but prepared to ride out a wee dip down to Moosie's gap ($9.50 ..) ;);
I bought at 10.50 I hope you are right about this regret people may have. I do see this still heading towards $20 over the next two years. Fingers crossed

[couta1]

I bought at 10.50 I hope you are right about this regret people may have. I do see this still heading towards $20 over the next two years. Fingers crossed Yep, let's give our Aussie brothers and sisters the benefit of the doubt, after all they have a lot less sheep than us.

[777]

I hope Beagle hasn't run out on to the road and been hit by a car.

[couta1]

Just a wee reminder to holders, take a look at the 52wk BAL trading range, $5.04- $23.07,nuff said.

[JoeGrogan]

The shorters on the aussie open will be what i'm waiting for before i top up.

[RupertBear]

The story for this company has only just begun. Sit tight holders.

I am thinking you probably couldnt resist buying a few more couta! :cool:

[bull....]

The shorters on the aussie open will be what i'm waiting for before i top up.

alast time nz ran up only to test the lows again when aus opened .. see what happens

[Beagle]

Analyst average sales forecast for 2018 was $945m. They may go close to this but to be honest this was not the sort of trading update I hoped for.
I admit I was in the $1b+ camp. That said the SP reaction seems a bit overdone to me. Nothing too shabby at all with sales growth of 70% and its clear they're investing money in marketing growing their business over the long term going forward.

I'm not panicking but not buying either.

[carrom74]

You might be able to buy them back at $8.37 carrom :scared:

Actually Rupert--- couldn't resist and ended up buying a small lot at 1050....

I doubt it will reach 8.37 anyway:)

[RupertBear]

Actually Rupert--- couldn't resist and ended up buying a small lot at 1050....

I doubt it will reach 8.37 anyway:)


Good on you! I was thinking about topping up a wee few around that level as well but chickened out! Will see if it drops back again....;)

[winner69]

Agreed, but the growth all came in the first half and will drop out of the yoy soon enough. Company does say revenue weighted to first half so maybe it's all fine and growth will continue. Must be a limit to what can be milked from China, need to see other markets like UK and USA pulling their weight.

....but Q4 slaes are going to be 100% plus up on corresponding period

[winner69]

The Company is anticipating Group revenue in the range of NZ$900 million to NZ$920 million for the 12 months ended 30 June 2018. This takes into account the planned transition to new infant formula packaging during Q4.

Todays announcement suggest an impact of transition to new formula packaging during Q4.

It is not clear to me if without this transition the revenue in Q4 would have been more or less. Anybody has some insight in this?

Q4 sales going to be 100% plus up on last year

% increase in Q4 also about the same as achieved in Q3 (v pcps)

[couta1]

I am thinking you probably couldnt resist buying a few more couta! :cool: If it went under $10 then for sure but I bought 12k shares yesterday instead (Ouch)

[RupertBear]

If it went under $10 then for sure but I bought 12k shares yesterday instead (Ouch)

Bummer :( but it will go back up :)

[gbogo]

more on The Gap(s).. Gap 1 is shown by the blue line. Gap 2 is the red one. and there's a third Gap today (pink) but not so relevant as is has already been filled.

Gap 2 was filled in early April. Gap 1 is not yet filled and would suggest buying at $9.50, which is also where a lot of support would be found from previous sellers at that level.

hope this helps explain the comments a little more.

9671

[winner69]

more on The Gap(s).. Gap 1 is shown by the blue line. Gap 2 is the red one. and there's a third Gap today (pink) but not so relevant as is has already been filled.

Gap 2 was filled in early April. Gap 1 is not yet filled and would suggest buying at $9.50, which is also where a lot of support would be found from previous sellers at that level.

hope this helps explain the comments a little more.

9671

Todays GAP will get filled at full year announcment time when things were honky dory after all

[BlackPeter]

Todays GAP will get filled at full year announcment time when things were honky dory after all

You recon we need to wait that long ;)?

[couta1]

You recon we need to wait that long ;)? No only till May 31st.

[tipsy]

What a great buying opportunity! Gutted, we had a power cut at work, missed the 10.50, by the time I got home was already up over 11

[NZSilver]

Well after Asx opened I bought more on the NZX, I was surprised it didn't drop further on ASX open, many people must be buying on the weakness. Anyone who got in on the NZX earlier did well. The update 920 millions is steady as she goes growth. We were all hoping for that 950 mill -1.05 bill, didn't happen. This will return to 13-14's soon enough. MSCI buying will also help take up sell side.

[Leftfield]

Crikey what a day..... really feel for those who are hurting and who purchased at recent highs, but congrats to those like NZ Silver who purchased at todays discounted price.

Yesterday we were all wondering how the MSCI funds would get their portfolios..... well now we know. They have been able to scoop up heaps of shares today at greatly discounted prices. Today's opening 'gap' v yesterday looks very suspicious IMO.

I still rate ATM highly, and am still holding. Just needs some interesting news at the year end, like a potential listing in the USA and this things on fire again.

I also liked the last two lines of today's news release...

This information is to be included in an investor presentation to be given by the Company during an investor roadshow in Singapore and Hong Kong from 16 May 2018.

[couta1]

Crikey what a day..... really feel for those who are hurting and who purchased at recent highs, but congrats to those like NZ Silver who purchased at todays discounted price.

Yesterday we were all wondering how the MSCI funds would get their portfolios..... well now we know. They have been able to scoop up heaps of shares today at greatly discounted prices. Today's opening 'gap' v yesterday looks very suspicious IMO.

I still rate ATM highly, and am still holding. Just needs some interesting news at the year end, like a potential listing in the USA and this things on fire again.

I also liked the last two lines of today's news release...

This information is to be included in an investor presentation to be given by the Company during an investor roadshow in Singapore and Hong Kong from 16 May 2018. The MSCI funds can't get their portfolio until May 31st. Yes the trading update was given in preparation for investor presentations. The marketing spend will be about 40 mill more than last year so add that to today's guidance and you get 940-960 mill on an adjusted basis, not far off the 1 billion hoped for by many.

[sb9]

The MSCI funds can't get their portfolio until May 31st. Yes the trading update was given in preparation for investor presentations. The marketing spend will be about 40 mill more than last year so add that to today's guidance and you get 940-960 mill on an adjusted basis, not far off the 1 billion hoped for by many.

Re-posting my comment from earlier in the day, just to reiterate...

"Roll back 12 months they said they would forecast to do $505mln for FY 17 and the actual came in at $549mln. Higher by $44mln with all the talk of supply shortage."

Under promise and over deliver, that's been A2 management's modus operandi.

[winner69]

Looks like H2 npat will be about $85m v $98m in H1

So about $183m for full year ...double last year’s number

For those who love PE ratios EPS will be about 25 cents so at $11.25 trading on a (sort of forward looking) PE of 45

[777]

The MSCI funds can't get their portfolio until May 31st. Yes the trading update was given in preparation for investor presentations. The marketing spend will be about 40 mill more than last year so add that to today's guidance and you get 940-960 mill on an adjusted basis, not far off the 1 billion hoped for by many.

Are you not confusing profit rather than revenue?

[NZSilver]

Yes sb9 but only 15 days left until the end fy i think they would be fairly accurate and it would be a pretty bad look if they were not in that range this close. Still a very tidy result and basicalky same percentage increass between hy17 & fy17 rev @ about 11.5%, so same rev growth between halves on larger base numbers is very good.

[sb9]

Yes sb9 but only 15 days left until the end fy i think they would be fairly accurate and it would be a pretty bad look if they were not in that range this close. Still a very tidy result and basicalky same percentage increass between hy17 & fy17 rev @ about 11.5%, so same rev growth between halves on larger base numbers is very good.

15 days? Their FY end date is 30th June.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ATM/318046/279290.pdf

"Rome wasn't built in a day" Good things take time.

[winner69]

Back to 12 bucks by the end of the day ...not too bad

On a daily chart might not even be a GAP

[gbogo]

you guys keep on convincing yourselves that the fundamentals will make everything alright. they might. but Mr Market is trying to tell us something.

the bottom-pickers today did well but today's bottom sometimes becomes yesterday's top. Sadly, the more I get shouted down on this, the more I will think that is more likely.

[Pavan Sharma]

was always priced to fall one day, very hard to meet ridiculous expectations forever

[Lego_Man]

you guys keep on convincing yourselves that the fundamentals will make everything alright. they might. but Mr Market is trying to tell us something.

the bottom-pickers today did well but today's bottom sometimes becomes yesterday's top. Sadly, the more I get shouted down on this, the more I will think that is more likely.


Stars in their eyes
FOMO
Endowment Effect

[couta1]

you guys keep on convincing yourselves that the fundamentals will make everything alright. they might. but Mr Market is trying to tell us something.

the bottom-pickers today did well but today's bottom sometimes becomes yesterday's top. Sadly, the more I get shouted down on this, the more I will think that is more likely. I've learnt never to trust Mr Market in the short term, he or she is schizophrenic

[BlackPeter]

Stars in their eyes
FOMO
Endowment Effect

Do I sense some confirmation bias ;)?

[winner69]

I'm disppointed that Mark Lister from Craigs hasn't come out and said this is just a healthy correction

Punters need all the reassurance they can get .....especially when the headlines say that ATM collapse is so bad its bring down the whole NZX with it

[Beagle]

Some people talking on here of ridiculous PE's is something I find a little amusing. Historic PE is completely inappropriate for a company looking to double or more its EPS.
Average analyst forecast on 4 traders is for ~ 30 cps earnings this year and just on 40 cps next year. Market is always forward looking with growth companies.
Check out some of the forward PE's on other major NZX stocks all with far more modest growth rates than ATM and you'll find forward PE's of mid 30's are not unusual. Examples FPH, POT AIA
My target for half way through FY19 is for the company to be trading on mid - late 30's forward PE for FY19 earnings of 40 cps giving about $15 later this year.
The long term growth story is well and truly on track.

[winner69]

Some people talking on here of ridiculous PE's is something I find a little amusing. Historic PE is completely inappropriate for a company looking to double or more its EPS.
Average analyst forecast on 4 traders is for ~ 30 cps earnings this year and just on 40 cps next year. Market is always forward looking with growth companies.
Check out some of the forward PE's on other major NZX stocks all with far more modest growth rates than ATM and you'll find forward PE's of mid 30's are not unusual. Examples FPH, POT AIA
My target for half way through FY19 is for the company to be trading on mid - late 30's forward PE for FY19 earnings of 40 cps giving about $15 later this year.
The long term growth story is well and truly on track.

Latest announcements suggests F18 EPS will be ~25 cents

Does this lower f19 expectations as well

[Beagle]

Latest announcements suggests F18 EPS will be ~25 cents

Does this lower f19 expectations as well

I think you're possibly being a little conservative with FY18 eps. What's clear at this stage is they're prepared to invest serious money to grow the brand and company over time. Short term pain for long term gain ?
Analysts quite possibly will pull back their FY19 estimates a bit.

[winner69]

I think you're possibly being a little conservative with FY18 eps. What's clear at this stage is they're prepared to invest serious money to grow the brand and company over time. Short term pain for long term gain ?
Analysts quite possibly will pull back their FY19 estimates a bit.

Got my 25 cents from their sales and margin guidance and bumped marketing up to $82m and you get about $183n npat.

On their guidance you can’t get to 30 cents but as sb9 has reiterated several times today ‘under promise over deliver’ is their game.

Pretty big numbers whatever

[Beagle]

https://www.nbr.co.nz/article/a2-milk-shares-plunge-after-it-announces-70-sales-increase-jr-p-215671

Contains significant commentary and explanation around the rebranding of infant formula and its short term effect on sales. Serious investors should simply pay the $35 for behind the paywall access for the month to read it. I am sticking with 40 cps for FY19.

[longy]

If it went under $10 then for sure but I bought 12k shares yesterday instead (Ouch)

I could not resisted that and topped up some at 11.14 and some more at 10.39

We will see eh.

[hardt]

Had a fun time reading some of these reactions to a theoretical 5% miss on revenue consensus ( if they don't outperform their own guidance yet again )
Consensus for FY18 revenue used to be 750, bumped to 800, 820, 880 and latest leap up to ~950 was shown to be mostly on point, even if a part of the market was expecting upgrade cycles to continue this is solid announcement showing incredible growth on last year and continued market share growth in China and fresh milk in Aus..

Time is a friend to A2, 950m will be a distant memory come 2020... HODL

Come back in a few months.

[JeremyALD]

Let's remind us they are debt free and have a huge amount of savings too.

[Ggcc]

Well I am hoping that the shares I bought at $10.50 was the right decision..... $11.47 looks like the start tomorrow as it finished at au$10.54 tonight. Today even though I lost money I gained some back in this transaction... But I thought $10.50 was a bargain

[winner69]

Let's remind us they are debt free and have a huge amount of savings too.

Yep, $240m as at end of December .......probably $350m odd by June

That’s 50 cents a share in cash

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12052708

Pay special attention to what well regarded Harbour Asset management's analyst has to say about the short term sales impact of the rebranding is.

I think the market has well and truly overreacted to a minor sales expectation miss directly caused by this one off rebranding.

No worries, back to $13 as soon as this is understood better by analysts and investors.

For the time poor: "Harbour's Rimer said that had it not been for the rebranding, a2 Milk's projection would have beaten market expectations "handsomely".

[winner69]

That Herald article - The Harbour man might be right but the Devon man thinks a little differently -


A2's Milk's share price was sold down to a similar degree in March when news broke that international food giant Nestle had launched an A1 beta free infant formula in China, and today's price action may have been linked to that, said Devon Funds Management's managing director Slade Robertson.

"The announcement by a2 Milk today highlights that the competitive environment for this business has deteriorated as evidenced by the additional spend that it requires for marketing their product in China," Robertson said

[Beagle]

Devon entitled to their point of view. Harbour analyst just came back from a filed trip to China and I posted their report the other day and they are very happy with what they've seen on the ground.
Some of the extra marketing spend might be tied in with the new packaging. Harbour analyst said in behind the paywall article that the annual marketing spend was in line with their projections and forecast. I think Harbour are the ones doing the legwork here and putting boots on the ground with multiple trips to China whereas the Devon guy with a vastly inferior return on their funds is just joining what dots he sees from a distance.
Possibly a bit of confirmation bias from both analysts but I'd back Harbour over Devon any day of the week.

[hardt]

Increased Marketing spend is not, in no way a sign of deteriorating competitive environment... just about every year A2 have increased marketing spend over expectations to obtain a greater share of the market.
Perhaps when you want to keep the growth at anywhere near these levels you might need to market the hell out of it.

We will let Devon carry on underperforming.

[minimoke]

A very good reminder over teh past couple of days on why I am not a trader. i couldnt pick yesterdays highs, couldnt pick todays lows. Had a couple of bids in for more ATM and SML but neither wefe met. Never mind. Still happy with overall holding and profit to date and happy to continue holding

[Snoopy]

Yep, $240m as at end of December .......probably $350m odd by June

That’s 50 cents a share in cash

So to buy 50c in cash per share you have to lay out $11.30 (market closing price today). From a strict cash acquisition perspective, that sounds like a terrible deal.

And of course the reason A2 are 'debt free' is that they have only recently transitioned from a loss making start up. Loss making start ups are always 'debt free', because there isn't a snowballs chance in hell of any bank lending them any money!

SNOOPY

[hardt]

So to buy 50c in cash per share you have to lay out $11.30 (market closing price today). From a strict cash acquisition perspective, that sounds like a terrible deal.

And of course the reason A2 are 'debt free' is that they have only recently transitioned from a loss making start up. Loss making start ups are always 'debt free', because there isn't a snowballs chance in hell of any bank lending them any money!

SNOOPY

This loss maker somehow made a profit for 7 out of the last 10 years in business...
Enough funds and investors were backing A2 to allow for ample amounts of debt if required... not sure what you are on about there either.

[Arbroath]

Devon entitled to their point of view. Harbour analyst just came back from a filed trip to China and I posted their report the other day and they are very happy with what they've seen on the ground.
Some of the extra marketing spend might be tied in with the new packaging. Harbour analyst said in behind the paywall article that the annual marketing spend was in line with their projections and forecast. I think Harbour are the ones doing the legwork here and putting boots on the ground with multiple trips to China whereas the Devon guy with a vastly inferior return on their funds is just joining what dots he sees from a distance.
Possibly a bit of confirmation bias from both analysts but I'd back Harbour over Devon any day of the week.

Beagle did Harbour do lots of field trips to check out CBL before they lost $50m of their investors money? I treat all analysts with a grain of salt - some people are good and others aren't. Harbours performance has been good mainly because of A2 and one swallow, although it has been a big swallow, does not make a summer to blindly hang my hat on.

[winner69]

Weird thing about yesterday’s announcement was that there wasn’t anything really new - they had said at half year sales were going well, margins in H2 would be about the same as H1 and they would spend heaps more on marketing.

They did feel that analysts, like Sharetrader cheerleaders, were getting a bit too excited and so put some colour around the numbers to temper that enthusiasm

No surprises (to me anyway) - fits with my $180m to $190m npat forecast.

Interesting day though

[Ggcc]

Has anyone noticed that Ballamys also took a 10% hit yesterday. This stock has often been compared to Ballamys when charts were involved. Just interested and curious as to why they also went down so fast yesterday....

[couta1]

So to buy 50c in cash per share you have to lay out $11.30 (market closing price today). From a strict cash acquisition perspective, that sounds like a terrible deal.

And of course the reason A2 are 'debt free' is that they have only recently transitioned from a loss making start up. Loss making start ups are always 'debt free', because there isn't a snowballs chance in hell of any bank lending them any money!

SNOOPY Hey Snoopy, I guess you would have downgraded your $3 value for this stock after yesterday?

[NZSilver]

It's how it goes in the infant formula sector - sell down of BAL as market thought "BAL growth may be slowing too". Not that anyone's growth is slowing at all, just a few people expecting greater rev for second half for ATM. Still exceptional growth and huge potential going forward. This is the share market after all, take the opportunity and buy. This is surely one of the best companies with the most potential on the NZX and ASX. I can't read the future but I'm sure the current share price will look very reasonable in a few months and very cheap in a few years,

[winner69]

Has anyone noticed that Ballamys also took a 10% hit yesterday. This stock has often been compared to Ballamys when charts were involved. Just interested and curious as to why they also went down so fast yesterday....

Market more competitive than most thought ...just saying

[couta1]

It's really simple, yesterday's release was mainly in preparation for the investor days, old labels caused guidance to be less than many hoped for, upward trajectory mode activated.

[Beagle]

Beagle did Harbour do lots of field trips to check out CBL before they lost $50m of their investors money? I treat all analysts with a grain of salt - some people are good and others aren't. Harbours performance has been good mainly because of A2 and one swallow, although it has been a big swallow, does not make a summer to blindly hang my hat on.

That's a cheap shot. Growth companies are not exactly in over abundance on the NZX and CBL blind-sided a lot of people.
The record is Harbour have been right with ATM and Devon have been badly wrong. As a long time major shareholder in ATM I would think their analyst has Geoff Babbiage's number on his speed dial and the latter always happy to take the call. I for one am more than happy to take Harbour's analyst's explanation of repackaging at face value and I think the company is on track for 40 cps in earnings in FY19. That's puts ATM on a FY19 PE of just 28 at $11.30. If you can kindly direct me to another NZX stock that's growing faster on a similar PE I am all ears 9674
P.S. Beagle's far more attractive than basset's.

[Southern_Belle]

Market more competitive than most thought ...just saying

Without enemies around us we grow lazy.

An enemy at our heels sharpens our wits keeping us focused and alert

[dreamcatcher]

Has anyone noticed that Ballamys also took a 10% hit yesterday. This stock has often been compared to Ballamys when charts were involved. Just interested and curious as to why they also went down so fast yesterday....

Both ATM & BAL price drop had nothing to do with performance just a couple of funds accumulating and wanting a bigger profit. In BAL case a simple look at the ssh notices will tell you the answer................. On HotCopper they are laughing their heads off at the huge bonus granted yesterday for both stocks.

IMO

[couta1]

Both ATM & BAL price drop had nothing to do with performance just a couple of funds accumulating and wanting a bigger profit. In BAL case a simple look at the ssh notices will tell you the answer................. On HotCopper they are laughing their heads off at the huge bonus granted yesterday for both stocks.

IMO Yep, and who is going to provide the 80-100 million shares(My guess) on May 31st to the index funds that have to buy them for MSCI inclusion, the SP won't be what it is this morning, that's for sure.

[NZSilver]

Yep, and who is going to provide the 80-100 million shares(My guess) on May 31st to the index funds that have to buy them for MSCI inclusion, the SP won't be what it is this morning, that's for sure.

Approx numbers 25 mil shares traded on ASX yesterday, and 10 mil NZX yesterday which were relatively big volume days. 100 mil is a huge amount of buying. I can only see this going one way once that demand kicks in!

[Balance]

Both ATM & BAL price drop had nothing to do with performance just a couple of funds accumulating and wanting a bigger profit. In BAL case a simple look at the ssh notices will tell you the answer................. On HotCopper they are laughing their heads off at the huge bonus granted yesterday for both stocks.

IMO

Hotcopper?

Rampers and speculators paradise?

As long as you recognize what that site is all about!

[couta1]

Hotcopper?

Rampers and speculators paradise?

As long as you recognize what that site is all about! Pick out the wheat from the chaff, there are some well researched and knowledgeable posters on that site(I only read the A2 thread) so can't comment on the rest.

[Joshuatree]

Sure are and ive had some great wins from those quality posters on H/C, and made friends with a few too.

[dreamcatcher]

Hotcopper?

Rampers and speculators paradise?

As long as you recognize what that site is all about!

You may be correct but they cover my ASX holdings and like most shares DYOR

[Joshuatree]

FWIW my broker has just come out with a buy and a $14 1 year price target.

[Beagle]

FWIW my broker has just come out with a buy and a $14 1 year price target.

Thanks, $14-$15 is where I see it early 2019 too.

[Arbroath]

That's a cheap shot. Growth companies are not exactly in over abundance on the NZX and CBL blind-sided a lot of people.
The record is Harbour have been right with ATM and Devon have been badly wrong. As a long time major shareholder in ATM I would think their analyst has Geoff Babbiage's number on his speed dial and the latter always happy to take the call. I for one am more than happy to take Harbour's analyst's explanation of repackaging at face value and I think the company is on track for 40 cps in earnings in FY19. That's puts ATM on a FY19 PE of just 28 at $11.30. If you can kindly direct me to another NZX stock that's growing faster on a similar PE I am all ears 9674
P.S. Beagle's far more attractive than basset's.

Beagle its not a cheap shot at all. I'm merely pointing out that blindly following anyone is a dangerous game. I agree Harbour are one of the better professional managers in NZ but even they make mistakes, sometimes quite big ones so just because they love A2 doesn't make it good.

For the record I think A2 have executed amazingly well so far and I'd say the odds are that we get to $20 before it ever sees $9.00. I own some, like their prospects, and think the market over-reacted yesterday.

[dreamcatcher]

Today Goldman Sachs TP $13.80

[sb9]

Pick out the wheat from the chaff, there are some well researched and knowledgeable posters on that site(I only read the A2 thread) so can't comment on the rest.

Absolutely, some of them have very valuable insights and research. Just need to separate water from milk, so to speak...

[whatsup]

Once this years results are ann Im picking that there will be the first dividend which will appeal to instos who do / cannot hold due to no divi, watch the rerating then.

[Beagle]

Beagle its not a cheap shot at all. I'm merely pointing out that blindly following anyone is a dangerous game. I agree Harbour are one of the better professional managers in NZ but even they make mistakes, sometimes quite big ones so just because they love A2 doesn't make it good.

For the record I think A2 have executed amazingly well so far and I'd say the odds are that we get to $20 before it ever sees $9.00. I own some, like their prospects, and think the market over-reacted yesterday.

Fair enough. We all make mistakes. I don't blindly follow any analyst and don't invest with them because I don't like some of their current holdings, for example FBU but I do think they've been dead right with ATM and have owned for a long time so I am more than happy to trust their analysis of the situation and accept their explanation of the repackaging affecting short term sales at face value as compared to some other fund manager trying to justify why they've never held.

[NZSilver]

12.50 by close?

[Sideshow Bob]

Recently in HK (flew AIR) and both A2 and Illuma stocked in Mannings. They are the largest pharmaceutical chain in HK, and quite often see "Ants" in their stores - Chinese who come over the border and fill up their suitcases with product.

All around same size (900g) but in terms of price, below Illuma (not Illuma Atwoo). Mead Johnson had a lot of product there and their 'Enfinitas' brand was over $500 HKD/can.

9675

Sorry you might have to rotate your head or computer as I can't rotate the photo.....

[winner69]

12.50 by close?

No no mate ....$13 at least

[Leftfield]

A great bounce back today.

Well done to all who held onto their ATM holdings yesterday (in the face of adversity)

Well done to those who upped their holdings yesterday.

Commiserations for the sellers, but this is one stock we shouldn't let the insto's rob us of our precious shares at crazy discounted prices. Take a long term view on this one and don't be blinded by short term manipulations.

[44wishlists]

Recently in HK (flew AIR) and both A2 and Illuma stocked in Mannings. They are the largest pharmaceutical chain in HK, and quite often see "Ants" in their stores - Chinese who come over the border and fill up their suitcases with product.

All around same size (900g) but in terms of price, below Illuma (not Illuma Atwoo). Mead Johnson had a lot of product there and their 'Enfinitas' brand was over $500 HKD/can.

9675

Sorry you might have to rotate your head or computer as I can't rotate the photo.....

I live in Hong Kong. And I concur the comments by Sideshow Bob. The A2 products are shelved in Mannings, as well as over 100+ Watsons stores and supermarkets chains owed by AS Watsons Retail group here in HK, a member of the CK Hutchison Holdings.

Although I don't have the sale figures and not standing in the store 24/7, I walk pass one of the most popular Mannings stores in HK, the one located at a Kowloon Tong shopping mall, I constantly see people ("ants") shopping for the A2Milks, and packaging them in their suitcases.

Last but not least, the recent field trip findings by Harbour aligns with what I see and experienced here in HK.

[see weed]

A great bounce back today.

Well done to all who held onto their ATM holdings yesterday (in the face of adversity)

Well done to those who upped their holdings yesterday.

Commiserations for the sellers, but this is one stock we shouldn't let the insto's rob us of our precious shares at crazy discounted prices. Take a long term view on this one and don't be blinded by short term manipulations.
Too right, A2 made a right clown out of me yesterday. Bought 4000 on Tuesday for 13.38 sold them on Wednesday for 10.48 hopping to get in a bit lower, but it was moving so fast ended up buying them back for 10.84, 11.18 and then some new ones at 11.30, was ready to join the Circus, felt like a dog chasing his tail. Had a bit of a laugh at end of the day, lucky it was only a small percentage of holding.Going to hold on tight for next update/announcement:D.

[Beagle]

I live in Hong Kong. And I concur the comments by Sideshow Bob. The A2 products are shelved in Mannings, as well as over 100+ Watsons stores and supermarkets chains owed by AS Watsons Retail group here in HK, a member of the CK Hutchison Holdings.

Although I don't have the sale figures and not standing in the store 24/7, I walk pass one of the most popular Mannings stores in HK, the one located at a Kowloon Tong shopping mall, I constantly see people ("ants") shopping for the A2Milks, and packaging them in their suitcases.

Last but not least, the recent field trip findings by Harbour aligns with what I see and experienced here in HK.

Thank you.

[bull....]

great trading as usual down 2 up 1 lol great a

[Beagle]

https://hotcopper.com.au/attachments/a2m_20180516_goldman_sachs-pdf.1106551/

Note their EPS estimate for FY19 of 43 cps ! Forward PE for FY19 at $11.70 is just 27, just a little more than Ryman and which company is growing faster !

[winner69]

https://hotcopper.com.au/attachments/a2m_20180516_goldman_sachs-pdf.1106551/

Note their EPS estimate for FY19 of 43 cps ! Forward PE for FY19 at $11.70 is just 27.

Wow ......good old GS

[Leftfield]

https://hotcopper.com.au/attachments/a2m_20180516_goldman_sachs-pdf.1106551/

Note their EPS estimate for FY19 of 43 cps ! Forward PE for FY19 at $11.70 is just 27.

I dug out this Feb 18 forecast from Macquaries...... (note not yet updated) However at FY18 27cps and FY19 40cps - it is pretty consistent IMO.

9676

[hardt]

https://hotcopper.com.au/attachments/a2m_20180516_goldman_sachs-pdf.1106551/

Note their EPS estimate for FY19 of 43 cps ! Forward PE for FY19 at $11.70 is just 27.


Having a look, GS have been consistently spot on with their A2 coverage over the past couple of years...

9679

[RupertBear]

Craigs retain their BUY recomendation on strong growth outlook with TP $14

[Balance]

you guys keep on convincing yourselves that the fundamentals will make everything alright. they might. but Mr Market is trying to tell us something.

the bottom-pickers today did well but today's bottom sometimes becomes yesterday's top. Sadly, the more I get shouted down on this, the more I will think that is more likely.

Always good to have dissenting views - positive or negative - makes for balanced approach.

[iceman]

I live in Hong Kong. And I concur the comments by Sideshow Bob. The A2 products are shelved in Mannings, as well as over 100+ Watsons stores and supermarkets chains owed by AS Watsons Retail group here in HK, a member of the CK Hutchison Holdings.

Although I don't have the sale figures and not standing in the store 24/7, I walk pass one of the most popular Mannings stores in HK, the one located at a Kowloon Tong shopping mall, I constantly see people ("ants") shopping for the A2Milks, and packaging them in their suitcases.

Last but not least, the recent field trip findings by Harbour aligns with what I see and experienced here in HK.

Thanks for the on ground intel

[bull....]

citi downgrades a2 milk slashes price target

http://www.afr.com/business/retail/fmcg/citi-downgrades-a2-milk-call-to-neutral-slashes-target-price-20180517-h1066u

[couta1]

citi downgrades a2 milk slashes price target

http://www.afr.com/business/retail/fmcg/citi-downgrades-a2-milk-call-to-neutral-slashes-target-price-20180517-h1066u Notorious shorters these guys so no surprises. A year or so ago they also slashed their target whilst they accumulated, then they raised it Lol.

[see weed]

Notorious shorters these guys so no surprises. A year or so ago they also slashed their target whilst they accumulated, then they raised it Lol.
Was just thinking the same thing, they just want to top up now before next big move up. They not going to get any of mine in the short term:).

[minimoke]

citi downgrades a2 milk slashes price target

http://www.afr.com/business/retail/fmcg/citi-downgrades-a2-milk-call-to-neutral-slashes-target-price-20180517-h1066uArent they just picking the current share price?

[winner69]

Some just don’t get it

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12053708

Bennie said A2's dream run might have ended as abruptly as it began.

Bennie is from Castlepoint

[Sideshow Bob]

Some just don’t get it

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12053708

Bennie said A2's dream run might have ended as abruptly as it began.

Bennie is from Castlepoint

Question is how whether they been constrained by supply/production etc? With Fonterra coming on-board, it may start to increase possibilities.

[bull....]

Notorious shorters these guys so no surprises. A year or so ago they also slashed their target whilst they accumulated, then they raised it Lol.

looks like citi winning at the moment

[couta1]

looks like citi winning at the moment Probably accumulating before May 31st.

[dreamcatcher]

https://hotcopper.com.au/attachments/a2m_20180516_goldman_sachs-pdf.1106551/

Note their EPS estimate for FY19 of 43 cps ! Forward PE for FY19 at $11.70 is just 27, just a little more than Ryman and which company is growing faster !

New Revision from GS FY19 of 39 cps..........interesting to read GS suggestion that ATM quote "intentional pullback of supply by A2M to
allow older products to clear the market, and for a smoother transition of their new product, rather than being reflective of a slowdown in demand. We continue to see the strong demand profile for A2M remaining intact"

HotCopper from "Ginger_Step_" in answer to question about why some large shops in HK not stocking IF product.

Dated 17/05/2018

"We have been struggling to meet demand for close to 3 years now, the company is hardly going to use a shotgun approach and spread the short supply over too many locations - if you know our management you would know that every move or decision is strategically snipered to provide the best long term value to the company. Give it time, a2 will be as easy to find as coke in China - we just need the supply and carefully managed growth strategies to get there. 9400 locations in china is pretty good in my books after just 3 or 4 years!"

Thank you "Ginger_Steps_" ........800+ posts all on A2M clearly very well informed and one to follow.

[Leftfield]

Dreamcatcher - you are right re Ginger Steps, he has long been a very informed poster on ATM both on this site and more recently via Hot Copper. He was instrumental in getting me on board back in the 53 cents days.

[dreamcatcher]

HotCopper A2M forum dated 17/05/2018

Ginger_Steps_ reply to a suggestion that "Share price can go anywhere with just speculations"

Quote "Wow @pp (https://hotcopper.com.au/members/98629/) , your ignorance and arrogance is astounding - I am embarrassed for you! You have been hilariously exposed as an ex A2M shareholder who sold out waaaaaay to early (missing ca 1000% gains!) and obviously like quite a few other investors earlier in this thread ( @Durr_Trades (https://hotcopper.com.au/members/197120/) @westsurf (https://hotcopper.com.au/members/12024/) @gred (https://hotcopper.com.au/members/228544/) @AllFuelledUp (https://hotcopper.com.au/members/43332/) ) are very sour that you missed out on massive gains from the best stock on the ASX. The company posted Q3 revenues 70% higher over PCP (and not off a small base anymore) and you peanuts actually think the stock is going to crash to nowheresville - friggin ROFLMAO!
And back to you @pp (https://hotcopper.com.au/members/98629/) - you think that we hit a SP of ~$13 on "just speculations"?!! You'd better add blindness to that list of yours I began compiling above. a2 has grown revenues from $155M to $920M in four financial years - if you call that "just speculation" then I would say you have MUCH bigger problems on your financial horizon. See attached image.

And to all of you above, please show me another company that is growing at 70% off such a large base anywhere on the ASX?? Would love to see it. Your posts are shameless and wreak of desperation, broken hearts and lost dreams. Don't quit your day jobs - obviously you are not very good at this trading / investing thing.....

And because I am fairly confident none of you have done a speck of research on A2M out of pure envy, I will let you in on a couple of clues as to what next year will bring: Revenue from 3 new major sources (including Fonterra), Chinese infant formula MARKET growth of 30% on top of our market share growing at ~100% in China ANNUALLY, 4 new products, Synlait building yet another site for IF capacity.

a2 sales growth is unchanged i.e. ACCELERATING - and you are missing out (not that that concerns me in the least - I'm just here to call you out). Ill leave you all with this image from the recent update."

Again "Ginger_Step_"...... Thank You for sharing your future vision

Another HUGE Chinese shopping event called 618 taking place on 18/06/2018 shortly after 1st June MSCI inclusion

Surprising what you find on a boring evening at home...............stories that investors DREAMS are made from ............:)

[minimoke]

Oh, how about that. Seems I have bought myself some more at 1115. That will teach me not to keep an eye on open orders.

[Leftfield]

Thanks for more inspiration from Ginger Steps Dreamcatcher.

Nice to be reminded;

"a couple of clues as to what next year will bring: Revenue from 3 new major sources (including Fonterra), Chinese infant formula MARKET growth of 30% on top of our market share growing at ~100% in China ANNUALLY, 4 new products, Synlait building yet another site for IF capacity."

For those in need of more inspiration, this from HotCopper poster JZ Huang FYI.

"We are only one month away from 618 shopping festival hosted by JD.com, which is second largest online shopping event in China. Close to US $9B money was spent on the day last year, compared to $26B as for 11/11. I wouldn't be surprised at all if A2MC eventually manage to beat $920M upper bound forecast after successfully participation of this event. Hold tight and finger crossed. June is critical."

[hardt]

Anecdotal evidence, looking on WeChat still rabid all over A2.
Not difficult understanding the supply affect of inventory phasing into China label... Nothing we haven't seen before from a mongoloidinous* selldown.

Not to say retracting multiples won't occur before this obvious fact is proven in the next report.

Citi had a sell rating and PT at £2.50 for most of early to mid 2017 when the worries of regulation spooked the market... It's just an opportunity to keep the pressure on to short into a squeeze in a month or two.

[couta1]

Another week of Game of Thrones, be sure to tune in for another exciting series next week. PS-Really looking forward to the May 31st episode, should be an epic watch.

[JeremyALD]

240m revenue in Q4 is still almost bigger than the entire first half in FY17. So the growth is well and truly alive.

[waterboy]

some more info on the 6.18 chinese shopping festival

JD.com’s 6.18 festival has grown in recent years to become a massive mid-year ecommerce event, with rival retailers also getting involved and offering discounts and savings for their customers.

JD said it sold 700 million items, with an increase in categories such as fashion, luxury and maternity products. Sales of fresh food quintupled, according to JD, with orders for 7,664 tonnes of food. Among these were 200 tonnes of beef, 57 million cherries, 10,000 tonnes of baby milk powder, 1 billion nappies and 3.6 tonnes of Haagen-Dazs ice cream.

JD.com controls one-quarter (24.7%) of China’s ecommerce market, however it lags behind Alibaba’s Tmall which dominates the sector with 56.6%, according to iResearch China"

The numbers are huge if they can get enough product over there.
Shame about the share price being manipulated by the big boys while retail investors are to small to do much ...how else do you explain all the little trades that go through... much more so on asx than nz...bal does same thing at same time...almost the same chart for last yr or so..to much of a coincidence.
hopefully the fundamentals win in the end

[bohemian]

some more info on the 6.18 chinese shopping festival

JD.com’s 6.18 festival has grown in recent years to become a massive mid-year ecommerce event, with rival retailers also getting involved and offering discounts and savings for their customers.

JD said it sold 700 million items, with an increase in categories such as fashion, luxury and maternity products. Sales of fresh food quintupled, according to JD, with orders for 7,664 tonnes of food. Among these were 200 tonnes of beef, 57 million cherries, 10,000 tonnes of baby milk powder, 1 billion nappies and 3.6 tonnes of Haagen-Dazs ice cream.

JD.com controls one-quarter (24.7%) of China’s ecommerce market, however it lags behind Alibaba’s Tmall which dominates the sector with 56.6%, according to iResearch China"

The numbers are huge if they can get enough product over there.
Shame about the share price being manipulated by the big boys while retail investors are to small to do much ...how else do you explain all the little trades that go through... much more so on asx than nz...bal does same thing at same time...almost the same chart for last yr or so..to much of a coincidence.
hopefully the fundamentals win in the end

What's a 6.18 festival?

[Sideshow Bob]

What's a 6.18 festival?

I would guess a made up 'festival' so to have a sale. Like Singles Day.....

[dreamcatcher]

CHINA'S E-COMMERCE SHOPPING FESTIVAL DATES............ 618 China's second most prominent e-commerce festival after Single’s Day, celebrates the foundation of JD.com

http://www.china-briefing.com/news/2017/11/09/chinas-e-commerce-shopping-festivals.html

[Beagle]

Another week of Game of Thrones, be sure to tune in for another exciting series next week. PS-Really looking forward to the May 31st episode, should be an epic watch.

Riding this wild tiger and clinging on for dear life. Was up about 20 cps when I left for the boat show at about 11.00 a.m. and down 47cps when I got home after close of trade. Just as well I didn't buy anything lol. Never a dull moment with this one.

[Snoopy]

Snoopy Wrote: "And of course the reason A2 are 'debt free' is that they have only recently transitioned from a loss making start up. Loss making start ups are always 'debt free', because there isn't a snowballs chance in hell of any bank lending them any money!"

This loss maker somehow made a profit for 7 out of the last 10 years in business...
Enough funds and investors were backing A2 to allow for ample amounts of debt if required... not sure what you are on about there either.

My view of the normalised profits for A2 Milk over the last five years is as follows:

FY2013: $4.120om + 0.7( $0.824m -$0.121m) = $4.612m
FY2014 $0.010m +0.7($0.597m) = $0.4279m
FY2015: -$2.091m +0.7($1.681m-$0.831m) = -$1.497m
FY2016: $30.4m + 0.7($0.753m) = $30.9m
FY2017: $90.6m + 0.7($2.435m+$0.265m) = $92.5m

Notes:

1/ For FY2013 I have removed $0.824m of strategic review costs.
2/ For FY2015 I have removed the $1.681m worth of ASX listing costs
3/ For FY2017 I have removed $2.435m of intangible asset impairments
4/ For all years I have added back the foreign exchange losses (or removed the foreign exchange gains)

I haven't gone back over ten years because in the light of where the business is today, those early years are not really meaningful. I might even suggest only the last two years have been meaningful! Before then the business pretty much ran on the smell of an oily rag. I would suggest that pre FY2016, the business was in no position to take on debt. Not that this mattered. There wasn't a problem when shareholders were called upon to put in more funds instead.

In terms of 'earnings per share', I get the following results:

FY2013: $4.612m / 617.232m = 0.01cps
FY2014 $0.4279m / 633.066m = 0.00cps
FY2015: -$1.497m / 639.327m = 0.00cps
FY2016: $30.9m / 715.570m = 4.3cps
FY2017: $92.5m / 718.238m = 12.9cps

The eps figures more clearly illustrate how far ATM has come over the last two years.

SNOOPY

[Valuegrowth]

When assets become overcrowded or overvalued there could be sell-off.Some sell-off creates great opportunity. If this drop below $10, it can go down further similar to Xero which fell sharply after dropping some key support levels. Later, it recovered somewhat. Intelligent investors who bought this stock at a great value will ignore volatility as long as they see growth potential and create long term shareholder value.

[Valuegrowth]

https://www.reuters.com/article/us-a2-milk-company-strategy-analysis/competition-heats-up-for-controversial-a2-milk-company-idUSKCN1IH0T9

[Leftfield]

I'm interested in TA thoughts on the following.

9683

Fridays SP seems poised between two gaps, A and B. MACD Sentiment is now negative.

I suspect the short term 'downside' potential to $9.00 is strong, however, at some stage the SP will revert to trend and fill the upper gap $!2.00 to $13.00

If the lower gap gets filled first, it would appear to be a good buying opportunity.

Another interpretation is that the SP has already tried to fill the lower gap and failed, so the upper gap is the more likely trend.

For long term investors it's all rather academic, but for those wanting to add more A2M, it's interesting times.

[McGinty]

I'm interested in TA thoughts on the following.

9683

Fridays SP seems poised between two gaps, A and B. MACD Sentiment is now negative.

I suspect the short term 'downside' potential to $9.00 is strong, however, at some stage the SP will revert to trend and fill the upper gap $!2.00 to $13.00

If the lower gap gets filled first, it would appear to be a good buying opportunity.

Another interpretation is that the SP has already tried to fill the lower gap and failed, so the upper gap is the more likely trend.

For long term investors it's all rather academic, but for those wanting to add more A2M, it's interesting times.

Hi Left field, I'll share my TA thoughts on A2M (note I've used a chart of A2M on the ASX as the charting platform is better).

As you mentioned A2 has both a upper and lower gap, as to which one gets filled first...only the market knows.

Upper one fills first - there is a lot of overhead resistance that will sell into any positive SP movement, thereby creating a roof on the SP

Lower one fills first - there is good support and should provide a solid floor to the SP (unless further negative surprise news breaks this)

In any case the A2M chart needs to consolidated for a good period of time to shake out all the overhead resistance (weak holders who are trapped with losses), before it will be a buy in my book.

9684

Addition TA signals with the current chart (attached):

- Price under all short term moving averages (most importantly the 50 SMA)
- 50 SMA is trending down
- MACD turned negative
- DMI turned negative
- Failed to break through $11 (AUD) resistance
- Large sell off volume (Funds and insto's exiting)

Please note for other ST readers - I'm a momentum investor and have my own system to exit a stock once that momentum stalls or fails. My views that I'm sharing will be different to a short term trader or a long term investor.

Disc - I held A2M up until the stock broke it's 26 SMA

[couta1]

Too hard to say where this will head over the next while, except May 31st where the price will definitely be significantly up for a short period. TA theories will always be trumped by news, good or bad.In truth the stock price is completely determined and controlled by the game players in the short term, the big boys drive the price down and mop up the shares offered up by retail holders, they then allow the price to rise again before retesting to see how many weak hands are left and so on. That's just one of the many games played with this stock, hence it's volatility and wide daily price spread, ultimately as long as growth continues and potential is realised then there is only one way for the SP to go.

[Leftfield]

Hi Left field, I'll share my TA thoughts on A2M (note I've used a chart of A2M on the ASX as the charting platform is better).

As you mentioned A2 has both a upper and lower gap, as to which one gets filled first...only the market knows.

Upper one fills first - there is a lot of overhead resistance that will sell into any positive SP movement, thereby creating a roof on the SP

Lower one fills first - there is good support and should provide a solid floor to the SP (unless further negative surprise news breaks this)

In any case the A2M chart needs to consolidated for a good period of time to shake out all the overhead resistance (weak holders who are trapped with losses), before it will be a buy in my book.

9684

Addition TA signals with the current chart (attached):

- Price under all short term moving averages (most importantly the 50 SMA)
- 50 SMA is trending down
- MACD turned negative
- DMI turned negative
- Failed to break through $11 (AUD) resistance
- Large sell off volume (Funds and insto's exiting)

Please note for other ST readers - I'm a momentum investor and have my own system to exit a stock once that momentum stalls or fails. My views that I'm sharing will be different to a short term trader or a long term investor.

Disc - I held A2M up until the stock broke it's 26 SMA

Greatly appreciated - thanks McGinty. Your chart is much more clever than mine :t_up: .

Short term is looking volatile, however as Couta points out the long term is still looking good as ATM is set to outperform.

The next couple of weeks are going to be very interesting and I suspect some more bargains will be prised from weak hands.

[Valuegrowth]

When a stock becomes overcrowded, there will be lot of weak hands as well in it. A big shakeout will take out all weak hands and speculators. Companies with strong hands not only will bring stability but also long term support for stocks. If we see pattern of investors are getting out, then there could be some pressure for stocks.

[bull....]

I'm interested in TA thoughts on the following.

9683

Fridays SP seems poised between two gaps, A and B. MACD Sentiment is now negative.

I suspect the short term 'downside' potential to $9.00 is strong, however, at some stage the SP will revert to trend and fill the upper gap $!2.00 to $13.00

If the lower gap gets filled first, it would appear to be a good buying opportunity.

Another interpretation is that the SP has already tried to fill the lower gap and failed, so the upper gap is the more likely trend.

For long term investors it's all rather academic, but for those wanting to add more A2M, it's interesting times.

i find your gap at B as irrelevant as the price has already traded around this level numerous times , the gap at A is more relevant for filling at some point. mc ginty is also correct alluding to the fact some people are trapped at higher prices which could provide selling pressure on a retest.
also a gap fill at A does not guarantee it will just start heading to new highs again , it depends on a lot more factors.

[couta1]

i find your gap at B as irrelevant as the price has already traded around this level numerous times , the gap at A is more relevant for filling at some point. mc ginty is also correct alluding to the fact some people are trapped at higher prices which could provide selling pressure on a retest.
also a gap fill at A does not guarantee it will just start heading to new highs again , it depends on a lot more factors. 22 million shares on peak pessimism after guidance dissapointment couldn't close the gap to A. The only way I can see that gap being filled is if the company doesn't meet the 900-920 mill guidance in August, MSCI index inclusion coupled with the belief by many that they will exceed that guidance range presents major barriers to that gap being filled. Any price drop into the low 10's will see the shares snapped up like hotcakes and under 10 I will be topping up the mortgage Lol.

[Snoopy]

The ‘A2 milk company’ markets differentiated dairy products focussed solely on the benefits of A1 protein free milk. A2 only milk protein is a naturally occurring milk derivative, which nevertheless must be selected for in cows. Particular business attention is on the Asia Pacific market, of which by far the biggest contributor is China. The most profitable way for A2 to sell their milk has been in baby food formula. In 2015 China made up 1/3 of the world total market of infant formula. We should note that many (probably most) nominally Australian and New Zealand infant formula sales are to Chinese ‘Daigou’ resellers. The international brand that A2 milk use for ‘junior sales’ is ‘A2 Platinum Infant Formula’. Despite the company holding numerous international patents based on beneficial use, my assessment is that it is the ‘A2 brand’ -with all the first mover market presence and all the advertising and store shelf space that it has earned- is the real asset of the company.

For the latest half year 1HY2018, total group revenue was $434.7m of which $341.0m was ‘A2 Platinum’. Given the profit margins for A2 Platinum are significantly higher than fresh milk, and the A2 milk supply is limited, we can assume there is every incentive to develop ‘A2 Platinum’ above other A2 products in the medium term. With ‘A2 Platinum’ making up 78.4% of revenues today, and possibly 95% of company profits, we can get a good understanding of where the A2 company as a whole is going by just focussing on this one product.

A2 milk has only a 4.1% of the Chinese infant formula market, well behind international competitors such as Danone’s Nutrica (approx 8% market share) and Nestle’s Illuma (approx 16% market share). Furthermore I believe that this 4.1% market share is by value, not volume. And ‘A2 Platinum commands a premium price. So A2 isn’t even close to a top three market position by volume. But A2 are focussed clearly on the ‘A1 protein free’ market space. A2 have effectively created their own sub market space for baby formula where they are the clear leader. ‘Johnny come lately s’ to the ‘A1 protein Free’ sub market are Nestle with the Illuma sub brand ‘Illuma Atwo’ and Mengniu (the Chinese dairy giant) with their ‘A1-free Children’s Milk’. Right now A2 are clear market leaders in the market space they choose to occupy.

Conclusion: Pass test

SNOOPY

[Snoopy]

My view of the normalised profits for A2 Milk over the last five years is as follows:

FY2013 : [$4.120om + 0.7( $0.824m -$0.121m)] / 617.232m = 0.01cps
FY2014: [$0.010m +0.7($0.597m)] / 633.066m = 0.00cps
FY2015: [-$2.091m +0.7($1.681m-$0.831m)]/ 639.327m = 0.00cps
FY2016: [$30.4m + 0.7($0.753m) ]/ 715.570m = 4.3cps
FY2017: [$90.6m + 0.7($2.435m+$0.265m)] / 718.238m = 12.9cps

Notes:

1/ For FY2013 I have removed $0.824m of strategic review costs.
2/ For FY2015 I have removed the $1.681m worth of ASX listing costs
3/ For FY2017 I have removed $2.435m of intangible asset impairments
4/ For all years I have added back the foreign exchange losses (or removed the foreign exchange gains)

Conclusion: Pass test

SNOOPY

[Snoopy]

FY2013 : $4.612m / $59.93m = 7.7%
FY2014: $0.4279m / $58.64m = 0.72%
FY2015: -$1.497m / $58.63m = -2.5%
FY2016: $30.9m / $133.1m = 23.2%
FY2017: $92.5 / $241.5m = 38.3%

The last two years show what is possible. But history before then has tipped the trigger.

Conclusion: Fail Test

SNOOPY

[Snoopy]

FY2013 : $4.612m / $94.304m = 4.9%
FY2014: $0.4279m / $110.621m = 0.01%
FY2015: -$1.497m / $154.803m = -0.01%
FY2016: $30.9m / $352.502m = 8.8%
FY2017: $92.5 / $549.247m = 16.8%

From almost nothing just three years previous, to an impressive 16.8% at the end of the last financial year? That constitutes some improvement!

Conclusion: Pass Test

SNOOPY

[BobbyMorocco]

Too hard to say where this will head over the next while, except May 31st where the price will definitely be significantly up for a short period.

You know I wouldn't be so sure about this. Have a look at when FPH was included in this MSCI Index late last year. Nov. 29 close = $13.05. Nov. 30 close = $13.10. Only a 5c rise with 54 million shares traded.

Yes FPH's share price did increase quite nicely for the first month it was included in the index but there was not a huge spike on the day of inclusion. There's no guarantees that A2's share price will spike on May 31st either.

[dreamcatcher]

Month old but nice.....

https://www.youtube.com/watch?v=p8XxvGe1twQ

[Valuegrowth]

Milk2 has shown exponential growth during last financial year and it has taken steps to develop their business over last five years. It also has achieved another milestone by becoming zero debt company. My main concern is its valuation. As long as they are going to have strong balance sheet, generating cash for foreseeable future, there will be great demand for their shares from growth and value investors (they will wait until they see great value).

Is there any other attractive company with better prospects to replace?

Will there be any competition for them? If they have competition could they face it successfully?

Could they retain their market share while looking for new markets?

Strong balance sheets firms will make a big difference not only during good times but also during period of recession.

I have found that zero debt companies can become multibaggers. Even mulitbagger companies will have sell-off periodically whenever they become overcrowded and overvalued.

[ratkin]

You know I wouldn't be so sure about this. Have a look at when FPH was included in this MSCI Index late last year. Nov. 29 close = $13.05. Nov. 30 close = $13.10. Only a 5c rise with 54 million shares traded.

Yes FPH's share price did increase quite nicely for the first month it was included in the index but there was not a huge spike on the day of inclusion. There's no guarantees that A2's share price will spike on May 31st either.

It could be that there are some big sellers waiting for that date, they will be able to offload big chunks without killing the price

[Leftfield]

i find your gap at B as irrelevant as the price has already traded around this level numerous times , the gap at A is more relevant for filling at some point. mc ginty is also correct alluding to the fact some people are trapped at higher prices which could provide selling pressure on a retest.
also a gap fill at A does not guarantee it will just start heading to new highs again , it depends on a lot more factors.

Thanks Bull and Couta your opinions appreciated.

On reflection I agree with you both that the balance of probability lies with the lower gap being filled in the near term.

Disc. Still holding and happy.

[Beagle]

It could be that there are some big sellers waiting for that date, they will be able to offload big chunks without killing the price

Or on the other hand it could be that demand could overwhelm supply and the price jumps. My sense is we've already had a pretty healthy correction since the February high of ~ $14.60 and with a FY19 forward PE of about 28 at $11.30 and with outstanding growth prospects the current SP looks pretty reasonable to me. In FPH's case we saw a ~ 10% rise over the month after it was included in the MSCI.
I have enjoyed 20% short term SP increases from holdings in CVT and PPH when they were added to the NZX50 index in the past With or without any short term support from index inclusion I think after a fairly long 3 month correction process the current SP more than fully accounts for the known risks and ATM presents as a very sound long term investment opportunity.

[ratkin]

Or on the other hand it could be that demand could overwhelm supply and the price jumps. My sense is we've already had a pretty healthy correction since the February high of ~ $14.60 and with a FY19 forward PE of about 28 at $11.30 and with outstanding growth prospects the current SP looks pretty reasonable to me. In FPH's case we saw a ~ 10% rise over the month after it was included in the MSCI.


Interesting times that is for sure. Tomorrow will be interesting as that big sell off on Friday looked quite alarming

[Beagle]

Interesting times that is for sure. Tomorrow will be interesting as that big sell off on Friday looked quite alarming

Just gave back the 47 cents it recovered on Thursday so not that alarming. Good bull - bear cut and thrust between those that understand the reason the updated forecast may slightly undershoot previous sales expectations and those that simply want to pull the sale trigger and ask questions later. I think the whole correction thing since February is very close to being fully done, time will tell.

[Snoopy]

Before I give the Buffett perspective, I want to give an update on my $3 valuation.



This $3 value is a consequence of supply constraint. Remember a PE of 12-15 still indicates a growth company. It is just that the forward growth picture will be stunted. If last year was maximizing the value of what they have to sell already, and there is no easy way to increase A2 milk supply significantly, then sales in the future have to be limited by supply. Yes they could buy in more A2 cows on behalf of their farmer suppliers. But they might have to discount the revenues from their identification test to do so. They may also have to pay a lot more than the historical premium of 5-7% for A2 milk. All of those factors will have to hurt the bottom line of ATM going forwards. By 'hit the bottom line' I mean a lower margin on incremental sales. I am not saying the company would not continue to grow at all.


Since making this post, Fonterra has stepped up to 'solve the problem'. According to industry commentator Keith Woodford, owners of larger dairy farms will be able to split their herds into 'pure A2' / 'Other' quite quickly. Thus more A2 supply can be brought on board without waiting the ten years it might require a single herd dairy farmer to 'make the transition'. I haven't read anything about banking money from the A2 identification genetic tests for a while. Are A2 now doing this testing 'for free', so they can speed up their search for A2 cows? Anyone know?


--------


Warren Buffett requires a company with proven cashflows and a track record potential for 'growth' (that covers 'recovery growth' or 'incremental growth'). The issue with ATM is that while it is doing well, it has only two years (soon to be three) of significant profitability. This is insufficient to give insight as to what would happen when market winds blow less favourably. Looking back with the benefit of hindsight, the best decision that ATM made over the last year and a bit was to stick with the Daigou distribution of A2, despite the threat of the Chinese Government cracking down on this channel of distribution. Other Australian infant formula makers chose to focus on more conventional retail store distribution and suffered accordingly. Some will call this good management on behalf of ATM. Others may see that with a weak store presence, a 'challenger brand' such as A2 really had no choice but to stick with the Daigou. So it was really good luck. I mention this now because without the benefit of hindsight, I hope you can see that ATM was taking a huge risk with their stance.

The 'huge risks' are set to continue through into FY2019 (Starting July 1st 2018)

Coming 'huge risk number 1' is the roll out of a more comprehensive retail presence across China via the MBS (Mum and Baby Store) chain. Will these all be incremental sales? Or will ATM be cannibalizing the principal existing Daigou sales channel? And how will the Daigou respond if it is the latter?

ATM has, until FY2017, been a niche supplier into the Chinese baby food market. But now the head is above the parapet will the international giant Nestle (via 'Illuma Atwo') and China's second biggest domestically owned dairy player Mengniu (via 'A1 free Children's Milk') be able to push back against ATM by fighting back with their own A2 milk products {'huge risk number 2')? On the plus side A2 has first mover advantage. On the minus side, these competitors have deeper pockets. And the Chinese government seem to have a policy of arranging more favourable treatment for their own home grown companies!

I am not forecasting doom for ATM. I really don't know what effect 'huge risk number 1' and 'huge risk number 2' will have on ATM. All I will point out is that ATM have not been tested 'head on' in a way that happens when you come out of your niche and are recognised as mainstream. Warren Buffett likes the certainty that the tangible proof of market fighting ability gives. ATM offers promise, but no more than that. The true test of market fighting ability is when you are backed into a corner. And for ATM in China, this hasn't happened yet. Thus I don't believe that Warren would invest in this company. Not because it isn't good. But because it isn't proven,

Up until now I haven't mentioned anything about an updated share price recommendation. I do know that it is possible to model different growth scenarios that can justify any price between $6 and $60. The problem is there are so many unknowns going forwards and there is so little 'track record' under pressure. So I would regard all such scenarios as highly speculative. One rule of thumb I have is that in the 'long term' in a mature market, PE deflation will see the market value of all the suppliers equal the sum total of total market revenue. If ATM has a market capitalization of $NZ10 billion and the total size of the infant formula market in China is $NZ10 billion, this implies an expected 100% market share for ATM infant formula is already priced into the share. This assumes a static overall infant formula market in China. No doubt the overall infant formula market in China will grow over time. But this metric does show just what sort of sales growth will be required to justify anything like todays ATM share price. I assess ATM as being uninvestable, for now. Not because it is no good. But because there is no credible fundamental data than can be used to justify the current share price, or anything close to it. In my assessment conservative sharemarket investors, and that includes those who invest via index funds, should have 0% of their wealth invested in this company.

Give it another couple of years and that data may come through though!.

SNOOPY

discl: Not a holder, not looking to buy.

[Valuegrowth]

I take this as a one of the best fundamental analyses that I saw in a forum. Thank you for educating us. During next two to five years we could find its true value. Companies start as small and then become big. Accordingly stock prices also will go up. Basically, if I interest on any company, I will study how they managed to overcome short term issues and other difficulties in the past, how they take action to develop the business, how they generate cash and how they manage resources and how they take effort to produce strong balance sheet etc. Further, I like strong competitors if they have competitors. In this meat and milk sector, definitely there will be great winners. M2 milk also has become winners by appreciating rapidly within the short period. Some other established companies got their multibagger status gradually and systematically. On contrast M2 reached it during last three years. If they cannot maintain their strong growth momentum during next five years, their stock prices could fall rapidly as it is trading at a premium.


Before I give the Buffett perspective, I want to give an update on my $3 valuation.



Since making this post, Fonterra has stepped up to 'solve the problem'. According to industry commentator Keith Woodford, owners of larger dairy farms will be able to split their herds into 'pure A2' / 'Other' quite quickly. Thus more A2 supply can be brought on board without waiting the ten years it might require a single herd dairy farmer to 'make the transition'. I haven't read anything about banking money from the A2 identification genetic tests for a while. Are A2 now doing this testing 'for free', so they can speed up their search for A2 cows? Anyone know?


--------


Warren Buffett requires a company with proven cashflows and a track record potential for 'growth' (that covers 'recovery growth' or 'incremental growth'). The issue with ATM is that while it is doing well, it has only two years (soon to be three) of significant profitability. This is insufficient to give insight as to what would happen when market winds blow less favourably. Looking back with the benefit of hindsight, the best decision that ATM made over the last year and a bit was to stick with the Daigou distribution of A2, despite the threat of the Chinese Government cracking down on this channel of distribution. Other Australian infant formula makers chose to focus on more conventional retail store distribution and suffered accordingly. Some will call this good management on behalf of ATM. Others may see that with a weak store presence, a 'challenger brand' such as A2 really had no choice but to stick with the Daigou. So it was really good luck. I mention this now because without the benefit of hindsight, I hope you can see that ATM was taking a huge risk with their stance.

The 'huge risks' are set to continue through into FY2019 (Starting July 1st 2018)

Coming 'huge risk number 1' is the roll out of a more comprehensive retail presence across China via the MBS (Mum and Baby Store) chain. Will these all be incremental sales? Or will ATM be cannibalizing the principal existing Daigou sales channel? And how will the Daigou respond if it is the latter?

ATM has, until FY2017, been a niche supplier into the Chinese baby food market. But now the head is above the parapet will the international giant Nestle (via 'Illuma Atwo') and China's second biggest domestically owned dairy player Mengniu (via 'A1 free Children's Milk') be able to push back against ATM by fighting back with their own A2 milk products {'huge risk number 2')? On the plus side A2 has first mover advantage. On the minus side, these competitors have deeper pockets. And the Chinese government seem to have a policy of arranging more favourable treatment for their own home grown companies!

I am not forecasting doom for ATM. I really don't know what effect 'huge risk number 1' and 'huge risk number 2' will have on ATM. All I will point out is that ATM have not been tested 'head on' in a way that happens when you come out of your niche and are recognised as mainstream. Warren Buffett likes the certainty that the tangible proof of market fighting ability gives. ATM offers promise, but no more than that. The true test of market fighting ability is when you are backed into a corner. And for ATM in China, this hasn't happened yet. Thus I don't believe that Warren would invest in this company. Not because it isn't good. But because it isn't proven,

Up until now I haven't mentioned anything about an updated share price recommendation. I do know that it is possible to model different growth scenarios that can justify any price between $6 and $60. The problem is there are so many unknowns going forwards and there is so little 'track record' under pressure. So I would regard all such scenarios as highly speculative. One rule of thumb I have is that in the 'long term' in a mature market, PE deflation will see the market value of all the suppliers equal the sum total of total market revenue. If ATM has a market capitalization of $NZ10 billion and the total size of the infant formula market in China is $NZ10 billion, this implies an expected 100% market share for ATM infant formula is already priced into the share. This assumes a static overall infant formula market in China. No doubt the overall infant formula market in China will grow over time. But this metric does show just what sort of sales growth will be required to justify anything like todays ATM share price. I assess ATM as being uninvestable, for now. Not because it is no good. But because there is no credible fundamental data than can be used to justify the current share price, or anything close to it. In my assessment conservative sharemarket investors, and that includes those who invest via index funds, should have 0% of their wealth invested in this company.

Give it another couple of years and that data may come through though!.

SNOOPY

discl: Not a holder, not looking to buy.

[iceman]

Good, informative and thoughtful posts Snoopy. Thank you.

[couta1]

It's all about vision and belief Snoopy, two qualities not easily measured by just crunching numbers, I wonder where Apple would be today if someone didn't exhibit those two qualities. I consider this company considerably derisked as compared to a year ago and therefore are comfortable to hold a good sized portion of my portfolio in it.

[Leftfield]

Before I give the Buffett perspective, I want to give an update on my $3 valuation.....

......If ATM has a market capitalization of $NZ10 billion and the total size of the infant formula market in China is $NZ10 billion, this implies an expected 100% market share for ATM infant formula is already priced into the share. This assumes a static overall infant formula market in China. No doubt the overall infant formula market in China will grow over time. But this metric does show just what sort of sales growth will be required to justify anything like todays ATM share price.


Always good to have a conservative Buffet/Graham view of ATM, however I'm afraid there are aspects of your thoughts that are just a tab questionable. Examples;

1.) A2m does not have a market cap of $10 Billion. As at last Friday its market cap was $8.2 bill (source ANZ)
2.) A2m is not solely reliant on China or Infant Formula for its Market cap. As 1HFY18, 70% of its sales were from Australia and NZ. 26% of sales were from Asia (i.e. more than just China) and 16% out of USA and UK.
3.) Thus a 100% of Market Share in China is not priced into the current SP as you claim. A2's current share in China is about 5% of the IF market. It may grow to 10% over the next year or two, but no one is expecting 100% IF market share in China.

I could go on, but suffice it to say, DYOR.

[BlackPeter]

Always good to have a conservative Buffet/Graham view of ATM, however I'm afraid there are aspects of your thoughts that are just a tab questionable. Examples;

1.) A2m does not have a market cap of $10 Billion. As at last Friday its market cap was $8.2 mill (source ANZ)
2.) A2m is not solely reliant on China or Infant Formula for its Market cap. As 1HFY18, 70% of its sales were from Australia and NZ. 26% of sales were from Asia (i.e. more than just China) and 16% out of USA and UK.
3.) Thus a 100% of Market Share in China is not priced into the current SP as you claim. A2's current share in China is about 5% of the IF market. It may grow to 10% over the next year or two, but no one is expecting 100% IF market share in China.

I could go on, but suffice it to say, DYOR.

Agree with your point 2 and 3 ... however:

9685

$8,249,441,457 (@1130) are *(at least in the English language conventions and rounded equivalent to $8.2b.

Millions have 6 following digits, Billions 9 ;);

kind regards,

BlackPeter

[minimoke]

2.) A2m is not solely reliant on China or Infant Formula for its Market cap. As 1HFY18, 70% of its sales were from Australia and NZ. 26% of sales were from Asia (i.e. more than just China) and 16% out of USA and UK.


I could go on, but suffice it to say, DYOR.And there is of course its not just Infant Formula. Its also about fresh Milk and milk powder. Without even considering A2 Cheese, yoghurt and other dairy products. The "Worried Rich" is a pretty large market.

[Snoopy]

It's all about vision and belief Snoopy, two qualities not easily measured by just crunching numbers, I wonder where Apple would be today if someone didn't exhibit those two qualities. I consider this company considerably derisked as compared to a year ago and therefore are comfortable to hold a good sized portion of my portfolio in it.


Couta, I agree that ATM would not be where it is today without the vision and belief of the sadly departed founders he late Dr Corran McLachlan, and the late Howard Paterson. I also agree that those investors who put up the early investment capital had to be driven by belief and not a quick cash payout. ATM today, and it fact the whole dairy industry in NZ, owes a great debt to these people. If I had been in a position to support the company in its early days I wouldn't have done it. And if everyone had thought like me back then, our country would be so much the poorer today.

However all that was some twenty years ago. Investors who buy into ATM today are not adding any development capital into the company. If the ATM share price halved tomorrow, the progress that ATM is making on the ground in China and elsewhere would carry on unabated, and the company would continue to pile up cash. In recent years it has been CEO Geoff Babbage that has become the bearer of the torch of faith. But Babbage has also been selling down his holding. Does this mean he has 'lost the faith'? Well, he still works for the company and still retains a substantial share parcel. So I would say his belief is intact.

Where I disagree with you is in the use of the word 'all' in your introductory comment.

"It's all about vision and belief."

Twenty years on we now need to see some runs on the board as well. It is time to bank some of that early vision and belief and Babbage has done exactly that for himself. Shareholders today need to keep in mind that you can make up a projected growth figure to justify almost any share price you care to name. At some point the share price has to reflect realistic cashflow projections. And that is the place in the business cycle where ATM sits now.

SNOOPY

[couta1]

Word on the street is that all these shares being picked up off the weak hands over the last while will be used in the upcoming index rebalancing, after that the price should rise due to the end of the big boys games Lol.

[Snoopy]

Always good to have a conservative Buffet/Graham view of ATM,


It is interesting that you have lumped Buffett and Graham together. It is true that Buffett was a student of Graham. But they ended up with very different views on how to assess company value. Graham was all about valuing 'net tangible assets'

At the last full year balance date:

Net Assets' less 'Intangible assets' = $241.482m - $13.281m = $228.201m

$228.201m / 718.238m shares = 32 cps

At the last balance date Ben Graham would consider the true value of ATM to be 32c and he would be looking to buy in at a price significantly less than that!



however I'm afraid there are aspects of your thoughts that are just a tab questionable. Examples;

1.) A2m does not have a market cap of $10 Billion. As at last Friday its market cap was $8.2 bill (source ANZ)


True as of yesterday. But ATM has been valued at $10 billion over the last couple of months.



2.) A2m is not solely reliant on China or Infant Formula for its Market cap. As 1HFY18, 70% of its sales were from Australia and NZ. 26% of sales were from Asia (i.e. more than just China) and 16% out of USA and UK.


Yes, but how much of that Baby Formula ostensibly sold in Australia ends up in China? I think, via the Daigou, the answer is about 80% of it. Heck I think about 60% of the Infant Formula sold in the UK, more than half a world away, also ends up in China!



3.) Thus a 100% of Market Share in China is not priced into the current SP as you claim.


OK I may have used rounding to slightly exaggerate the position to make a point. But I do think that the current ATM share price does reflect about a 75% Chinese Infant Formula market share, which is an order of magnitude above where actual sales are today.

SNOOPY

[Beagle]

Snoopy, you're never going to be able to put a value on ATM looking backwards. Take Xero for example which has never had earnings. Its all about the growth.
Most of the professional analysts have a target price around $14 and are forecasting solid growth in EPS over the years ahead. Yes this company has very strong EPS growth unlike a lot of other growth companies that just grow sales and losses.

[Leftfield]

Word on the street is that all these shares being picked up off the weak hands over the last while will be used in the upcoming index rebalancing, after that the price should rise due to the end of the big boys games Lol.

Yes, a friend of mine was rung by his broker saying (words to this effect), "you've had a good run with your ATM however, it may be overpriced, and perhaps you should consider selling some of your holding."

Was the Broker 'well intentioned'? Was the Broker chasing some 'weak hands?" Interesting times.

[winner69]

Yes, a friend of mine was rung by his broker saying (words to this effect), "you've had a good run with your ATM however, it may be overpriced, and perhaps you should consider selling some of your holding."

Was the Broker 'well intentioned'? Was the Broker chasing some 'weak hands?" Interesting times.

A well intentioned broker .....they don't exist

Hope he told that broker what for in no uncertain terms

Even changing won't make a difference because they are all the same

[Snoopy]

And there is of course its not just Infant Formula. Its also about fresh Milk and milk powder. Without even considering A2 Cheese, yoghurt and other dairy products. The "Worried Rich" is a pretty large market.

See my post 8656 minimoke. 78.4% of revenues in the last half year were from Infant Formula, and I would suggest 95% of profits. There is a limited supply of A2 milk available to ATM and it is up to them to get the best return they can for shareholders. Although the presentations highlight he opportunity in fresh milk, the figures tell a different story. Fresh milk has been sidelined and cheese yogurt and other dairy products are hardly mentioned any more. To all intents and purposes ATM has become an infant formula manufacturer only. And rightly so. This is where the best return on the limited supply of product lies.

It is very likely all of these other A2 markets will be taken over by other A2 suppliers, before ATM itself gets back to them.

SNOOPY

[couta1]

A well intentioned broker .....they don't exist

Hope he told that broker what for in no uncertain terms

Even changing won't make a difference because they are all the same Double ticket clippers with tainted motives.

[Snoopy]

Snoopy, you're never going to be able to put a value on ATM looking backwards. Take Xero for example which has never had earnings. Its all about the growth.
Most of the professional analysts have a target price around $14 and are forecasting solid growth in EPS over the years ahead. Yes this company has very strong EPS growth unlike a lot of other growth companies that just grow sales and losses.


'Growth' is not synonymous with any 'share price you like' and turning off all quantitative measuring tools. The purpose of looking at business history is to look at experience and there is not sufficient ATM experience in the Chinese market there yet for me to assume the ATM expansion will follow a hyperbolic growth curve.

Also, there is no need to lower the tone of this thread by resorting to four letter words Beagle. ATM is definitely worth analyzing, if not investing in at this point (in my view). That other one OTOH....

SNOOPY

[bull....]

im hoping for a retest of around 10.50

[BlackPeter]

A well intentioned broker .....they don't exist

Hope he told that broker what for in no uncertain terms

Even changing won't make a difference because they are all the same

Its not that bad - and it depends.

Assume somebody bought some years ago for $10,000.00 20,000 ATM shares for 50 cents each - and this was 10% of their portfolio.

This single holding would be by now more $220,000 - and (depending on how the other shares did, but assume NZX average growth) around 65% of their portfolio.

I think in this case the broker recommendation to reduce would make a lot of sense.

Obviously - some people here think different about the merits of diversification, but I would consider the brokers advise in this context only as sensible portfolio management.

[Beagle]

'Growth' is not synonymous with any 'share price you like' and turning off all quantitative measuring tools. The purpose of looking at business history is to look at experience and there is not sufficient ATM experience in the Chinese market there yet for me to assume the ATM expansion will follow a hyperbolic growth curve.

Also, there is no need to lower the tone of this thread by resorting to four letter words Beagle. ATM is definitely worth analyzing, if not investing in at this point (in my view). That other one OTOH....

SNOOPY

LOL we definitely agree on the hype with that one. I posted some Goldman Sachs research last week. Perhaps you might like to have a good look at that. They don't need hyperbolic growth to justify the current SP. Forecast EPS for FY19 which we'll be starting in a few weeks is ~ 40 cps so the shares are on a forward PE of about 28. Check out the PE's of other top ten NZX stocks like AIA, FPH and POT to name just 3 to see their projected PE. 28 is very reasonable in my view considering their long term prospects including product diversification, (A2 yogurt, cheese, butter e.t.c.)
I agree its not a grannies or orphan's stock and its unlikely to repeat last year's feat of tripling in price in the near future but I'm satisfied its a solid long term hold with great growth prospects and time is one's friend with this stock. All stocks carry risk.

[bull....]

im hoping for a retest of around 10.50

we can do it

[couta1]

we can do it The machines versus the weak hands, machines always going to win against the gullible Lol.

[bull....]

The machines versus the weak hands, machines always going to win against the gullible Lol.

yes it is very frustrating getting front run by the machines all the time

[minimoke]

The machines versus the weak hands, machines always going to win against the gullible Lol.I dont understand the machines - where are they able to pick off the small trades from?

[bull....]

I dont understand the machines - where are they able to pick off the small trades from?

the machines are faster

[couta1]

I dont understand the machines - where are they able to pick off the small trades from? From any weak hands(Mainly retail holders) Automated trading systems don't have any emotion but create fear in holders by driving the price down and forcing them to sell as well as triggering stop losses, they can also work simultaneously on both sides of the market.

[ratkin]

From any weak hands(Mainly retail holders) Automated trading systems don't have any emotion but create fear in holders by driving the price down and forcing them to sell as well as triggering stop losses, they can also work simultaneously on both sides of the market.

It is the same tactic traders use to bully people on betfair. Put in big sell orders just above current price and all the nervous small players jump in front and sell, creates its own momentum, then the big player suddenly switches sides and buys up big at the lower price, and repeats the scenario on the way up. Basically herding all the small sheep.

It easier in stocks as they know where all the stop losses are and that the small sheep are all watching the popular moving averages etc, so they force the price below them creating a technical sell that tricks all the amateurs. It the reason many small traders now have such a hard time, they are manipulated by machines

[RTM]

It is the same tactic traders use to bully people on betfair. Put in big sell orders just above current price and all the nervous small players jump in front and sell, creates its own momentum, then the big player suddenly switches sides and buys up big at the lower price, and repeats the scenario on the way up. Basically herding all the small sheep.

It easier in stocks as they know where all the stop losses are and that the small sheep are all watching the popular moving averages etc, so they force the price below them creating a technical sell that tricks all the amateurs. It the reason many small traders now have such a hard time, they are manipulated by machines

So so pleased I am not a trader !

[couta1]

So so pleased I am not a trader ! That update last week was just what the terminators were waiting for, perfect opportunity to terminate retail sheep.

[Beagle]

That update last week was just what the terminators were waiting for, perfect opportunity to terminate retail sheep.

Dog's are on too those Terminators if my memory serves me correctly from the Terminator movie series :)

[couta1]

The retail sheep should stop running with the herd for a minute and ask themselves, does a very small reduction in anticipated earnings guidance warrant a $3 SP drop in 1 week? A reduction due to the need to clear out old labels,lol. PS-Reduction will most probably be even smaller come full year announcement time.

[Ggcc]

The retail sheep should stop running with the herd for a minute and ask themselves, does a very small reduction in anticipated earnings guidance warrant a $3 SP drop in 1 week? A reduction due to the need to clear out old labels,lol. PS-Reduction will most probably be even smaller come full year announcement time.
Of course A2 have a habit of beating their forecasts and maintain a more conservative approach...... I agree that people are panicking a little too much. I am happy to keep holding!!

[Beagle]

The retail sheep should stop running with the herd for a minute and ask themselves, does a very small reduction in anticipated earnings guidance warrant a $3 SP drop in 1 week? A reduction due to the need to clear out old labels,lol. PS-Reduction will most probably be even smaller come full year announcement time.

Was just over $13 so a $2 drop to be fair mate but yes I agree 100% with the gist of what you've said.

[couta1]

Was just over $13 so a $2 drop to be fair mate but yes I agree 100% with the gist of what you've said. Yeah, around $2.40ish, although the weekly trading spread is $3.21 which tells the true story of the Terminators.

[Snoopy]

The retail sheep should stop running with the herd for a minute and ask themselves, does a very small reduction in anticipated earnings guidance warrant a $3 SP drop in 1 week?


Perhaps you need to ask yourself Couta, why every time the share price goes up your belief in the company and its future is reinforced, whereas every time the share price goes down it is an irrational overblown counter-reaction.

SNOOPY

[couta1]

Perhaps you need to ask yourself Couta, why every time the share price goes up your belief in the company and its future is reinforced, whereas every time the share price goes down it is an irrational overblown counter-reaction.

SNOOPY My belief in the company doesn't change either way otherwise I'd be one of the sheep selling out but yes the market tends to overshoot in both directions. This particular drop is a one way battle however as retail holders have no chance of putting up any counter reaction to the machines and rampant shorters in combination. It's all an orchestrated move by the big boys whilst the shorters are just riding on their backs as opportunists.

[Valuegrowth]

If I am correct still company has not well established in China. The recent announcement by Nestle that they have just launched an A2 infant formula in China is a new development. Nestle is a big and well-resourced competitor. Its Wyeth brand, account for approximately 18 per cent of the infant formula sales volume in China. It can spend huge amount for its sales on advertising and marketing.

For ATM’S revenue growth to continue, it will need to sell more in Chinese retail stores. If it can establish very well in China, then there will be some support for this stock. Otherwise demand for this stock could come down in the coming months and years. In addition, we should monitor behavior of this stock during coming bear market as well. Could it be another winner in the coming bear market?

[hardt]

Perhaps you need to ask yourself Couta, why every time the share price goes up your belief in the company and its future is reinforced, whereas every time the share price goes down it is an irrational overblown counter-reaction.

SNOOPY

Over the last 18 months significantly material announcements and updates have lead to substantial increases to analysts revenue and earnings assumptions for A2M, justifiably so, the SP has risen with the tide...

A year ago the expectations for FY18 was Revenues of 667M and EPS of 15c
Fast forward to todays expectations of FY18 Revenues of ~920M and EPS of 25-29c ( ^38% & ^87% )

Increasing IF consumption market share in China to 4.6% ( not based on value but on volume )

Perhaps you need to ask yourself why you only contribute to this thread when the share price goes down?

[bull....]

citi downgraded atm due to the increasing uncertainty over the stock’s short-term outlook as it transitions to a new packaging for its infant formula and is wary of price reductions in the Australian daigou network and Chinese online shopping platforms.

[Scrunch]

....One rule of thumb I have is that in the 'long term' in a mature market, PE deflation will see the market value of all the suppliers equal the sum total of total market revenue. If ATM has a market capitalization of $NZ10 billion and the total size of the infant formula market in China is $NZ10 billion, this implies an expected 100% market share for ATM infant formula is already priced into the share. This assumes a static overall infant formula market in China. No doubt the overall infant formula market in China will grow over time. But this metric does show just what sort of sales growth will be required to justify anything like todays ATM share price. I assess ATM as being uninvestable, for now. Not because it is no good. But because there is no credible fundamental data than can be used to justify the current share price, or anything close to it. In my assessment conservative sharemarket investors, and that includes those who invest via index funds, should have 0% of their wealth invested in this company.

Give it another couple of years and that data may come through though!.

SNOOPY

discl: Not a holder, not looking to buy.

Excuse my ignorance, but isn't it the profitability of the "mature market" that matters. Some markets like supermarket retail have high turnover and low margins. The cumulative market value of the participants may only be some fraction of the volume sold. Other markets can be mature with quite strong margins. The cumulative market value of companies operating in these markets will materially exceed the value of sales. Australian companies like ANZ and BHP show this through market capitalisations more than 3x annual sales.

One of ATM's strengths is the strong margin on the sales its making. IMO it would take a collapse of the A2 market margins before the market capitalisation of the participants was sensibly lower than the market sales figures. This could happen but its not what's being priced by the market currently. If there are $10b of china sales, the cumulative market capitalisation of the participants should be a lot more than this. ATM being near this figure at about $8.2b isn't an issue.

[couta1]

citi downgraded atm due to the increasing uncertainty over the stock’s short-term outlook as it transitions to a new packaging for its infant formula and is wary of price reductions in the Australian daigou network and Chinese online shopping platforms. Do you believe Citi over all the other analysts consensus? As I have said before, they are notorious shorters and downrampers for their own purposes. Trusting Citi is equal to listening to the advice from Devon Lol.

[bull....]

Do you believe Citi over all the other analysts consensus? As I have said before, they are notorious shorters and downrampers for their own purposes. Trusting Citi is equal to listening to the advice from Devon Lol.

obviously more people believe citi , than your other brokers by the way the price has not recovered , if it was so undervalued there would be no way you could short it profitably it would be up in price.

[minimoke]

obviously more people believe citi , than your other brokers by the way the price has not recovered , if it was so undervalued there would be no way you could short it profitably it would be up in price.Give it a couple of days

[couta1]

obviously more people believe citi , than your other brokers by the way the price has not recovered , if it was so undervalued there would be no way you could short it profitably it would be up in price. Come on bull, you know as well as I do that the machines are in control of the price(Driven by multiple big players) and that the shorters are just riding on their backs.

[hardt]

obviously more people believe citi , than your other brokers by the way the price has not recovered , if it was so undervalued there would be no way you could short it profitably it would be up in price.

It is far easier to convince someone to sell than it is to convince them to buy...

[bull....]

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

will show shorts in the stock as can see % shorted overall is tiny but as last few days has increased.

so is it like you say couta , or is because of fundamentals? time will tell

[winner69]

Devon Fund Managers won the Fund Manager of the Year 2017 NZ Equities 🥇

[hardt]

Devon Fund Managers won the Fund Manager of the Year 2017 NZ Equities 磊

Well if you want to throw around awards meaning something :) , surely the bullish on A2 Harbour Asset with the below awards are worth more.


Morningstar Fund Manager of the Year: Domestic Equities Category 2018
Morningstar Fund Manager of the Year: International Equities Category 2018
Morningstar New Zealand Fund Manager of the Year, 2017
FundSource Awards – Australasian Equity Sector - Winner 2017 (for our Focus Fund)
Morningstar New Zealand Fund Manager of the Year, 2016
Morningstar New Zealand Fund Manager of the Year: Fixed Interest Category 2016
Morningstar New Zealand Fund Manager of the Year, 2014
FundSource Awards Boutique Manager of the Year 2014

[winner69]

Well if you want to throw around awards meaning something :) , surely the bullish on A2 Harbour Asset with the below awards are worth more.


Morningstar Fund Manager of the Year: Domestic Equities Category 2018
Morningstar Fund Manager of the Year: International Equities Category 2018
Morningstar New Zealand Fund Manager of the Year, 2017
FundSource Awards – Australasian Equity Sector - Winner 2017 (for our Focus Fund)
Morningstar New Zealand Fund Manager of the Year, 2016
Morningstar New Zealand Fund Manager of the Year: Fixed Interest Category 2016
Morningstar New Zealand Fund Manager of the Year, 2014
FundSource Awards Boutique Manager of the Year 2014

Wow ...they pretty good eh ...the best?

[Beagle]

Well if you want to throw around awards meaning something :) , surely the bullish on A2 Harbour Asset with the below awards are worth more.


Morningstar Fund Manager of the Year: Domestic Equities Category 2018
Morningstar Fund Manager of the Year: International Equities Category 2018
Morningstar New Zealand Fund Manager of the Year, 2017
FundSource Awards – Australasian Equity Sector - Winner 2017 (for our Focus Fund)
Morningstar New Zealand Fund Manager of the Year, 2016
Morningstar New Zealand Fund Manager of the Year: Fixed Interest Category 2016
Morningstar New Zealand Fund Manager of the Year, 2014
FundSource Awards Boutique Manager of the Year 2014

And they do multiple trips to China to see how things are going for themselves while others presumably make blind assumptions to toss into their valuation models, (garbage in- garbage out).

[hardt]

Wow ...they pretty good eh ...the best?

They must be, I mean Morningstar don't just throw out awards willy nilly... right?

In all seriousness, Harbour are pretty good.

Nikko asset also happen to have a cabinet full of awards, they just so happen to be bullish on A2 as well.


And they do multiple trips to China to see how things are going for themselves while others presumably make blind assumptions to toss into their valuation models, (garbage in- garbage out).

I think Devon said they are going to send a person to China soon enough to have a proper look at the market, perhaps they will see what Harbour do... perhaps everyone just sees what they want and nothing changes... ( most likely )

Devon have been wrong on A2 this past FY while the company continues to post stunning records for shareholders so it is safe to say my money is not in Devon.

[Snoopy]

Over the last 18 months significantly material announcements and updates have lead to substantial increases to analysts revenue and earnings assumptions for A2M, justifiably so, the SP has risen with the tide...

A year ago the expectations for FY18 was Revenues of 667M and EPS of 15c


A year ago, on 22nd May 2017, the ATM share price was $NZ3.49. That makes for a projected PE for FY2018 one year out of 349/15 = 23



Fast forward to todays expectations of FY18 Revenues of ~920M and EPS of 25-29c ( ^38% & ^87% )


Closing price 22nd May 2018 was $NZ11.04. That makes for a projected PE for FY2019 of 1104/29 = 38 to 1104/25 = 44

Those last figures of course are influenced by what the market sees happening in FY2019 and beyond. Using your figures the expectations of revenue increase over the year FY 2018 are up by:

920/667 = 1.37 (+37%)

Earnings expectations are up by: 25/15 to 29/15 equals = +66% to +93%

So what you are telling us Hardt, is that the growth of earnings expectations has been approximately twice as much as the growth of revenue expectations.

Now looking towards next year's reporting date (for FY2019 this is 30th June 2019), what earnings growth will be required to reduce the one year forward looking PE back to 23? Using an average forward PE at the FY2018 balance date of 41, I get:

41/23 x 27cps = 48cps (FY2019 projected earnings)

This is an increase in earnings of 48cps/27cps of 77% between FY2018 and FY2019 year on year. Now all that is fine. But what we are talking about here is a profit increase of nearly 80% for two years in a row. I would expect the second year (FY2018 to FY2019) to be more difficult to achieve because we are starting from a larger initial sales base and true competition, in the A2 space has arrived.

The share price gain over the last year has been 1104/349 = +300%

This increase is a lot higher than any projected increase in profitability. So this is evidence to me that the share price has got a long way ahead of itself. If the FY2017 historic multiple had been maintained over the year, the ATM share price today would be about $6.30. I would say that is much closer to 'fair value' than the $11.04 the ATM share trades at today.



Increasing IF consumption market share in China to 4.6% ( not based on value but on volume )


The small print at the bottom of page 18 the latest ATM presentation (16-18 May 2018), suggests the firm Kantar that ATM use for 'market tracking' measure 'value' and not 'volume'.

https://thea2milkcompany.com/wp-content/uploads/The-a2-Milk-Company_CLSA-Investor-Roadshow_Asia_May-2018_FINAL.pdf




Perhaps you need to ask yourself why you only contribute to this thread when the share price goes down?


Because that is when shareholders are probably most interested in why the share price has fallen?

SNOOPY

[winner69]

Sales forecasts for A2 over the next 2 years don't look too outrageous

Chart is rolling annual sales

[hardt]

A year ago, on 22nd May 2017, the ATM share price was $NZ3.49. That makes for a projected PE for FY2018 one year out of 349/15 = 23



Closing price 22nd May 2018 was $NZ11.04. That makes for a projected PE for FY2018 of 1104/29 = 38 to 1104/25 = 44

Those last figures of course are influenced by what the market sees happening in FY2019 and beyond. Using your figures the expectations of revenues are up by:

920/667 = 1.37 (+37%)

There was plenty of uncertainty priced in at $3.50 while the regulatory environment was still rather iffy as well, plenty of issues facing Bellamy's dragged down the sector and the popularity and uptake of A2's offering was not even on the radar for most investors last year.

A2 is trading on par with its domestic peers while housing the best ( by far ) margins on the market... with a steady flow of cash with no real expenditure.
A2's performance has warranted a set of above market and above sector multiples.
Since August, the Forward PE has floated between 40-50 alongside every upgrade.

Having one of the lowest PEG ratios on the market is also of no significance?

[Snoopy]

Excuse my ignorance, but isn't it the profitability of the "mature market" that matters.


Yes I agree.



Some markets like supermarket retail have high turnover and low margins. The cumulative market value of the participants may only be some fraction of the volume sold. Other markets can be mature with quite strong margins. The cumulative market value of companies operating in these markets will materially exceed the value of sales. Australian companies like ANZ and BHP show this through market capitalisations more than 3x annual sales.


You make a good point. That is why my 'market value of all market participants' = 'value of total market sales' is really a rule of thumb where competition is high and profit margins are restricted.



One of ATM's strengths is the strong margin on the sales its making. IMO it would take a collapse of the A2 market margins before the market capitalisation of the participants was sensibly lower than the market sales figures. This could happen but its not what's being priced by the market currently. If there are $10b of china sales, the cumulative market capitalisation of the participants should be a lot more than this. ATM being near this figure at about $8.2b isn't an issue.


As markets mature, unusually high net profit margins tend to reduce. I am not saying this will necessarily happen to ATM in FY2019 or even FY2020. But A2 only protein milk itself is a naturally occurring commodity product with little patent protection. Sharper priced competition is coming.

I think the part of your quote that I have emboldened is a real risk.

SNOOPY

[Snoopy]

There was plenty of uncertainty priced in at $3.50 while the regulatory environment was still rather iffy as well, plenty of issues facing Bellamy's dragged down the sector and the popularity and uptake of A2's offering was not even on the radar for most investors last year.


Yes, but there are what i perceive as risks at least equal to those still in the market today (see my post 8668).



A2 is trading on par with its domestic peers while housing the best ( by far ) margins on the market... with a steady flow of cash with no real expenditure.


IMO, ATM has no domestic peers. The closest I an think of is Comvita, which is a stretch to say it is really comparable. As an aside I expect market development expenditure for ATM to increase a lot.



A2's performance has warranted a set of above market and above sector multiples.
Since August, the Forward PE has floated between 40-50 alongside every upgrade.


Eventually these high PEs have to come down. The fact that they haven't is a warning sign for me.



Having one of the lowest PEG ratios on the market is also of no significance?


PEGs are usually based on analysts projections, not company projections. I don't think it is very easy to forecast where sales and profits will go from here. I would take all published PEG ratios for ATM with a grain of salt.

SNOOPY

[waterboy]

dow futures well up, will tomorrows sentiment (assuming closes well up) be enough to stop the machines from dropping the price further? A good day on the dow used to mean a good day for atm...I know that makes no financial sense other than creating positivity

China-US trade ceasefire: The world's top two economies have agreed not impose new tariffs on one another while trade talks continue.

[dreamcatcher]

View expressed by Bell Potter’s high-profile stock guru, Richard Coppleson, who is predicting that the stock will surge back to over $13 over the next two weeks because of its inclusion into the prestigious global stock benchmark that is watched closely by international fund managers.

16/05/2018 Bell Potter .........Buy Recommendation A$12.8o

https://www.fool.com.au/2018/05/15/why-the-share-price-of-a2-milk-company-ltd-could-be-surging-ahead-in-the-next-two-weeks/

[JayRiggs]

China planning to end limits on number of children families can have.
https://www.bloomberg.com/news/articles/2018-05-21/china-said-to-consider-ending-birth-limits-as-soon-as-this-year

[dreamcatcher]

China planning to end limits on number of children families can have.
https://www.bloomberg.com/news/articles/2018-05-21/china-said-to-consider-ending-birth-limits-as-soon-as-this-year

WOW Opportunity Knocks :t_up:

Good find, thanks for sharing

[couta1]

View expressed by Bell Potter’s high-profile stock guru, Richard Coppleson, who is predicting that the stock will surge back to over $13 over the next two weeks because of its inclusion into the prestigious global stock benchmark that is watched closely by international fund managers.

16/05/2018 Bell Potter .........Buy Recommendation A$12.8o

https://www.fool.com.au/2018/05/15/why-the-share-price-of-a2-milk-company-ltd-could-be-surging-ahead-in-the-next-two-weeks/ Yep, some on here are underestimating the effect being included in the MSCI index will have on the SP over the month following inclusion. Wise shorters will know their time is short and will close their positions before May 31st, the rest will burn.

[BlackPeter]

Devon Fund Managers won the Fund Manager of the Year 2017 NZ Equities 🥇

... and lets not forget that Peter Harris won the prestigious title of being "entrepreneur of the year 2017 ;p;"

[winner69]

Even though ATM is more than 13% of some of Harbours Funds I wonder what their internal valuation is?

[winner69]

... and lets not forget that Peter Harris won the prestigious title of being "entrepreneur of the year 2017 ;p;"

Maybe Harbour gurus and Harris met up at these awards nights to get the inside goss?

[Leftfield]

On top of today's news that China is looking at removing its birth restrictions, this news from the EU re the start of Free Trade negotiations is welcome.

https://www.sbs.com.au/news/eu-to-approve-free-trade-negotiations-with-australia-and-nz

[winner69]

Share price going up today

That’s good

Punters seem to be contented

No worries ....12 bucks tomorrow

[couta1]

Share price going up today

That’s good

Punters seem to be contented

No worries ....12 bucks tomorrow HaHa, never speak too soon with this stock.I smell the presence of the machines.

[winner69]

HaHa, never speak too soon with this stock.

Just so much lack of action on here today I had to actually look up the price to see what was happening.

[gbogo]

still mind the gap. awesome stock. great fubdamentals, but it doesn't seem to want to stay above $11.00.

[couta1]

still mind the gap. awesome stock. great fubdamentals, but it doesn't seem to want to stay above $11.00. Have you tried swimming against a strong current(Strong current equals machines plus large short volume) Not possible for retail holders Lol.

[waterboy]

Was looking positive on the nzx but the aussi machines have driven it down again. Finding a lot of aussi stocks are manipulated. Personally I prefer stocks only on the nzx for this reason. I wonder how it can be legal particularly if there is collusion between big funds to drive it down and get in cheaper later on. Somebody must be selling to the machines to make this work. It does worry me though if all the machines are programmed to do the same thing then they have a huge influence.
Still the machines are probably responsible for driving it up as well so just have to wait it out.

[minimoke]

Was looking positive on the nzx but the aussi machines have driven it down again. Finding a lot of aussi stocks are manipulated. Personally I prefer stocks only on the nzx for this reason. I wonder how it can be legal particularly if there is collusion between big funds to drive it down and get in cheaper later on. Somebody must be selling to the machines to make this work. It does worry me though if all the machines are programmed to do the same thing then they have a huge influence.
Still the machines are probably responsible for driving it up as well so just have to wait it out.RBC gets a "please Explain" on a 4 cent SP rise on minimal volume yet the XChange lets this carry on go unquestioned. I cant figure it. But since I'm not a trader I just ride it out.

[winner69]

Have you tried swimming against a strong current(Strong current equals machines plus large short volume) Not possible for retail holders Lol.

Tides and gaps don’t go well together ......causes rips .....and the under tow takes you out to see fast ,.....and many perish as a result

[dreamcatcher]

Earlier this month wrote to Devon Funds to inquire about their China report as totally conflicted to JAMIE GRAY'S article from NZ HERALD same day, their response was to say they stick by report and printed again............ Personally don't rate Devon highly!

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12049777

[winner69]

Was looking positive on the nzx but the aussi machines have driven it down again. Finding a lot of aussi stocks are manipulated. Personally I prefer stocks only on the nzx for this reason. I wonder how it can be legal particularly if there is collusion between big funds to drive it down and get in cheaper later on. Somebody must be selling to the machines to make this work. It does worry me though if all the machines are programmed to do the same thing then they have a huge influence.
Still the machines are probably responsible for driving it up as well so just have to wait it out.

Waterboy ....I recommend you don’t look at the A2 share price that often

You’ve picked a great company to invest in ....rest easy ..... keep up to date with the news and presentations etc ...but don’t look at the share price until a week before Christmas ....and buy yourself a decent present.

Saves a lot of worry and angst

[Ggcc]

Up and down it goes..... geez fantastic for traders......... I might just need to stop looking at this share for now until next week

[dreamcatcher]

THE CORPORATE REGULATOR IS INVESTIGATING RULES ON SHORT SELLING OF STOCKS

https://stockhead.com.au/news/the-corporate-regulator-is-investigating-rules-on-short-selling-of-stocks/

Tide may be turning ?

[winner69]

Earlier this month wrote to Devon Funds to inquire about their China report as totally conflicted to JAMIE GRAY'S article from NZ HERALD same day, their response was to say they stick by report and printed again............ Personally don't rate Devon highly!

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12049777

One of them will turn out to be more correct than the other eh

Possibly they each saw/heard in China what they wanted to see/hear ......just like punters believe a story they want to hear and say it’s the best report ever written ....and rubbish the hell out of the other.

Good n you for challenging Devon anyway

[RGR367]

Tides and gaps don’t go well together ......causes rips .....and the under tow takes you out to see fast ,.....and many perish as a result

Just a lovely reply :p

[RGR367]

WOW! Got hit. More tha a dollar cheaper now than when I last bought some. Try Mr. Market to take another dollar off. :t_up:

[Ggcc]

WOW! Got hit. More tha a dollar cheaper now than when I last bought some. Try Mr. Market to take another dollar off. :t_up:
Getting close to that $10.50 I bought it for....... as I think Bull said if this continues we may see $9 shares up on offer....... Who knows what these shareholders think? Maybe conservative kiwis selling to patient Australians

[RupertBear]

Tides and gaps don’t go well together ......causes rips .....and the under tow takes you out to see fast ,.....and many perish as a result

Love it! :D

[RupertBear]

Bit suck watching your paper profits disapearing :( going to be very hard for this bear to resist dumping a few if/when they go back up :mellow:

[couta1]

Bit suck watching your paper profits disapearing :( going to be very hard for this bear to resist dumping a few if/when they go back up :mellow: Yep, my profits have gone from an XXXOS size just over a week ago down to an OS size as of tonight, a good reminder to us all once again that the market can strip your pantry bare as quick as it filled it up, worse than that, it can remove your shelving as well.

[RTM]

Bit suck watching your paper profits disapearing :( going to be very hard for this bear to resist dumping a few if/when they go back up :mellow:

I call it my Fantasy Money. And I have had some fun spending it.
Yes...its always hard to know when to sell.
Disc. Not a holder. Have SML tho.