Long time reader first time poster. Just want to chime in on a2 and the recent downgrades.
The a2 claims the crushing blow to the daigou is what’s causing these substantial downgrades in earnings guidance. The daigou is a sales channel that has been driven heavily by students and visitors from China.
We all know students and tourists haven’t been able to travel here since the border closures and the earnings guidance had been adjusted according with optimism in the 2H21 will be higher than the 1H21’s $670 million expectation. They are expecting FY21 to be between $1.4bn to $1.55bn.
There is a very very good chance a2 will not meet this guidance given the following:
-Both NZ and AUS have suspended visa processing on visitor’s visas and student visas of offshore applicants since lockdown.
-Visa processing for offshore applicants will unlikely resume until we know when the borders can reopen. This is likely months away, considering it largely depends on vaccine rollout and a sufficient % of the population having received the vaccine. Chances are we will slowly open up to low risk countries first like AUS, Singapore and the islands as more and more of the population is vaccinated.
-Considering we are months away from opening our borders again most Chinese students will not be able to enroll semester one courses AND have their visas processed to allow them to travel here. If Chinese students are returning to AUS/NZ this year, it will be for semester 2 in July, which, you guessed it, is outside of FY21.
-As for tourists, this will also take time to ramp up even after the border opens. Ask yourself, how long does it take to plan an overseas trip under normal conditions previously? At least a few months for most people. Throw into the mix, the limited flights going these days due to airlines reducing the flights they are running. Also, remember, marketing for AUS/NZ as a travel destination has been switched off for almost a year. It’s not likely we’ll be seeing any substantial tourist numbers for 2H21.
-If a2 is to meet its FY21 guidance given in December, the 2H21 improvement over 1H21 cannot be from daigou. Daigou will continue to contract further as more time passes in this border closure environment. Remember there are a lot of Chinese students who completed their study at the end of 2020 who have gone home. Other temporary visa holders have had their visas expire and left with no means to replenish these numbers.
Unless a2 achieves some decent growth in areas outside of daigou, I think they will struggle to exceed or even match their 1H21 sales. In conclusion, i think the likelihood of a 3rd downgrade is very likely.
disclosure:
sold off position at $12.
works in immigration space.