Couldn’t agree more Couta.. I should sleep well tonight as I am Just in the green... $14.06 is my average... Tomorrow is a new day... and let’s see what’s we have in store eh?
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The revenue growth and margin upgrade were great, but I particularly liked the way Jane talked about the China market.
"we are only just beginning onthe journey to our full potential in this market"
"Channels outside what is sourced directly from Australia account for ~90% of the market’s infantnutrition category value. We are significantly under-developed in the majority of thesestrategically important channels to consumers."
"there is asignificant opportunity to accelerate our brand scale by step-changing brand awareness and trial"
"more product launches to come inthe second half of FY20."
Sounds like there is significant growth still to come from the China business while we wait for the US business to grow to a significant scale.
Bit of coverage of a2 milk on zb news talk after 6.30 pm news tonight
MorningStar just updated their recommendation on A2M/ATM. Moved from "Accumulated" to "Hold"
Event analysis
A2 Milk's Upgraded Guidance Tracks Our Long-Term Expectations; Shares Remain Undervalued
A2 Milk's updated outlook at its annual general meeting meets our full-year fiscal 2020 top-line forecast, but exceeds our operating earnings estimate. While this improvement has no bearing on our long-term assumptions, we're encouraged by further success driving market share gains while also lifting price--hallmarks of a2's narrow economic moat. Moreover, the company outlined a new remuneration plan which better aligns management incentives with shareholders', and extended its infant formula production agreement with partner Synlait. We lift our fair value estimate to NZD 15.30 (AUD 14.50) from NZD 15.00 (AUD 14.20) due to the time value of money, with shares trading at a slight discount.
A2 is on-track to meet our lofty top-line targets. Management expects revenue in the first half of fiscal 2020 in a range of NZD 780 million to NZD 800 million, including infant formula revenue of NZD 640 million, suggesting about 29% growth in both versus the previous corresponding period. These figures align with our full-year growth forecasts of 30% for infant formula and 28.5% for consolidated revenue. We continue to expect a2 can capture about a point of infant formula market share annually on top of its current 6% in China. While this suggests slowing in the medium term, it still leads to double-digit annual growth in the product over the next decade.
The firm's EBITDA margin for fiscal 2020 is now expected to be 29% to 30%, slightly higher than previous guidance of about 28%, tracking closer to our unchanged long-term margins of about 32%. Encouragingly, this improvement is from successful price increases and favourable cost of goods movements, not a reduction of marketing expenses--which could undermine longer-term profitability. Management targets about NZD 200 million of marketing spending in fiscal 2020, matching our forecast. We think this investment, which steps-up to about 12% of sales from 10% in fiscal 2019, is needed to support the revenue opportunity we see.
For me, I am still accumulating.
I wouldn’t put too much hope on growth in the US milk market given that its largest milk producer has just gone into bankruptcy due to declining milk consumption. Source: https://edition.cnn.com/2019/11/12/b...tcy/index.html
“...has blamed its struggles on the "accelerated decline in the conventional white milk category."
Intolerance would be a huge factor in the dwindling milk consumption stats. Whats A2 all about again? ah yeah...
David said 'US Companies were approaching them and that's almost unheard of' (not direct quote but along those lines) I got the impression: actually they pretty much stated, US was looking very promising. They have the cash and the branding to have a big push and market the bejesus out of it. i think A2 in the US will explode and you will see stupendous growth there. A 30 odd PE on current SP is nothing if they crack it there...
One of the flaws in the partnership with Fonterra within NZ is that we'll never see a marketing campaign that implies any negative to our dairy industry. As a result many NZer just won't/don't get it. That includes perspective investors
https://www.youtube.com/watch?v=i4TGwweXqkg
As percy reminds us, success in investing is not just about choosing wisely, it is also about buying wisely ... ergo in fast growth companies or sectors, sometimes it's better to just hold your breath and wait for a decent entry. Everything in the market goes up and down, there's quality buying for the selective investor who is patient, always.
That moment can flash by us rather quickly though, so for ATM the moment past us today, arguably last week. Today was a very good day, the company matured significantly in the quality of their messaging to the market, including an upgrade and very positive outlook. It's still not too late to get on board or top up a long term success story. It's just not as good buying as it was yesterday, or last week. Hardly significant if one has a few decades horizon.
As for the other companies cited, I'm comfortable timing my buys in SUM, and HGH, both are around 30% up, around about the same as ATM after today's announcements. OCA, well I have enjoyed a long period of accumulation and recently some upside, it will do very well in the long term. I have a couple of other specs which could make these mainstream holds look lame when (if) they truely fire up.
Back to ATM, I don't think there's much point in arguing the FA metrics, it changes frequently and you'll note that the FA's never agree with each other, this company will confound the non-holders and naysayers for a long time regardless of how they reconcile their reluctance to take even a modest position, or any position.
As an analogy, there's a million reasons why you shouldn't have bought XRO at IPO .65 to now around $AU 77, but none of those reasons negate the fact that there's accidental millionaires who just bought a pile and ignored the noise and enjoyed the ride.
The key word there is "value" my friend. Stocks mentioned, their forward PE is very cheap relative to their growth rate and that makes them better value. You're not the only one on here by any means that needs to get their head around what a PEG ratio is and how you measure relative value with it in regard to comparing growth companies. Some will try and upskill and others...
ATM by no means the only company on the NZX that I think is poor value based on its projected eps growth rate. Others include FPH, AIA, RYM and POT to name just 4.
All good companies and all trading on very stretched metrics.