I wish this platform has an ignore button to ignore all the trolls .
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I wish this platform has an ignore button to ignore all the trolls .
hammers last year at 10.50 and again recently give a lot of support at that level so the moving average breakthrough might mean something - certainly a clear stop loss point.
double post
Craigs neutralQuote:
Stephen Ridgewell published and extensive preview overnight in advance of the ATM 1H21 result on Thursday. The result is pre-guided with $181m of EBITDA expected although the key questions for Ridgewell is whether ATM can provide confidence that revenue and margin trends are stabilising sequentially and also whether ATM can diversify its channels to market and defend its brand premium under new CEO David Bortolussi. Clarity on the latter question will take some time, although feedback from our proprietary large daigou contacts suggest that the sequential sales snap back is yet to eventuate. The issues around this important channel are multifaceted but can be best summarised as follows:
· Volumes declining - volume trends have worsened in early 2021 with Jan sales -70% yoy (vs. -55% yoy in the Dec qtr) with a much smaller than normal increase in demand ahead of the Chinese New Year period (chart 1)
· ATM’s daigou market share has eased – ATM has gone from market share gainer in 2018/19 to holding relative share versus other key daigou brands such as Danone’s Aptamil.
· Eroding Price Premiums – The decline in ATM’s price point benchmarked to 1 January 2020 has been more severe than other major brands which could reflect inventory overstocking but also greater A2 only competition (see Feihe’s A2 launch below).
· Price cuts have struggled to trickle down – ATM alluded to some prices cuts to restore daigou margins although feedback suggests that these have not yet been passed on from wholesale to large daigou.
· Brand spend needs to increase – Feedback suggests that ATM has become much harder to sell with daigou commenting that in addition to price cuts they want ATM to increase brand spend.
ATM’s current challenges reflect a mix of industry headwinds but also ATM specific issues. International brand market share has fallen from 56% to 49% over the past two years, driven by i) food safety concerns with consumers concerned about the risk of catching COVID from imported tins ii) regulations that support domestic brands iii) greater nationalism and iv) increasing competition as domestic brands more aggressively target tier 1 & 2 cities. This however does not explain why ATM’s history of gaining share appears to have halted. Whatever the primary driver, as Ridgewell indicates, ATM’s over-reliance on the daigou channel also means it has been more impacted by its collapse. With this in mind we now expect ATM to deliver FY21e EBITDA of $387m, at the low end of the guidance range ($364m - $450m, midpoint $406m) and with the PER still elevated at 31x we prefer to sit on the side-lines at these levels. Neutral rating retained with an updated TP -9% to $10.63 …
Ominous update from Craigs for Thursday results - declining volume, margin under pressure and need to increase advertising and promotion spend.
Should have kept Jayne on - she knew what had to be done but the board knew better.
Neutral from a corporate broker = underweight.
Lifetime of a commercial milking cow is 6 years. That's the maximum time it takes to turn a mixed A1/A2 herd into pure A2. No need to increase the numbers of animals. If they separate their A2 cows from the others, the changeover can be done obviously much faster, because you don't need to wait for the A1 cows to reach their end of life ...
BTW - many farmers started this process (breeding A2 and using A2 semen) already some years ago. Commercially available semen is for some years already only A2 (i.e. even farmers who don't intend to change now are preparing their herds already by increasing A2 gens).
I don't want to rain into your parade, but I think the moat you are talking about is pretty leaky and small :): The IP moat everybody talked about clearly did not materialize, i.e. the only thing they have is a first comer advantage. We will see how much this is worth in new markets.
I think A2 milk is better for some people than A1 milk (despite not believing in all the unsubstantiated hype and conspiracy theories). I am however not convinced, that the company A2 milk will be able to ride this wave much longer. I see a future where they compete with many other competitors selling normal A2 milk ... making quite standard margins as any other company.