Bailed too early seeweed?
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Okay. so a few traders in Oz are making a nice margin temporarily on flogging infant formula off via courier to China, and it's getting up the noses of some angry Aussie shoppers, but is it really "disastrous" for us shareholders? a2MC is still selling the stuff at a profit on the Aussie market, and I've seen no proof that the quantities are so huge that we shareholders are being robbed blind. I don't think so.
It seems a lot of this hype is being stirred by the "Singles Day" phenomenon which is not 365 days a year. Most Chinese who are paying silly prices for Bellamy's formula wouldn't really have a clue why, and Bellamy's capacity to ramp up production to meet astronomical demand is very limited because of the problems around organic certification, which a2MC does not have.
Chinese consumers also don't fully understand the benefits of a2, but they soon will, because human clinical test results involving Chinese consumers are due for release quite soon. And my expectation is that the results will show a2 beats its competitors hands down, including organic competitors.
The immediate problem will remain, though, how to push more product into the short term pipeline. I would expect this to be one of the most interesting topics for discussion at the coming ASM. The current infant formula "explosion" has caught everyone a bit by surprise, and with China's sudden relaxation of its one-child rule the race is now on.
But a2MC's strategy has always been a longterm one. It can be tweaked a little to respond to surges in market demand, but the long term issue for a2 has never been whether its SP can get above $1 - it has always been a question of how long it takes to exceed $5 or $10, and at what point farmers in major milk-producing countries decide en masse to stop producing medically hazardous A1 milk, and producers such as Fonterra accept the inevitable (which they already know but won't admit). This whole thing has got a long long way to go yet.
Careful here. Chinese consumers are actually very well informed, much more so than most westerners. They research EVERYTHING that they do/give to their children because they are so important (1 child policy). They also read English quite well. To say they "don't fully understand the benefits of a2" is a bit stereotypical, I suspect you would be surprised if you asked them.
Having lived in China for a number of years, I understand the people fairly well. I was actually asked about a2 milk while there a couple of times when people with kids found out I came from NZ.
Having lived there you would know the one child policy has been expanded to two , hence some of the excitement in this sector ....
Quote "But a2MC's strategy has always been a longterm one. It can be tweaked a little to respond to surges in market demand, but the long term issue for a2 has never been whether its SP can get above $1 - it has always been a question of how long it takes to exceed $5 or $10, and at what point farmers in major milk-producing countries decide en masse to stop producing medically hazardous A1 milk, and producers such as Fonterra accept the inevitable (which they already know but won't admit). This whole thing has got a long long way to go yet." unquote
I have just been re-reading some of Prof Woodward's old newsletters. He is of the opinion that eventually {whenever that is} A1 cows will have to go and A2 cows will predominate in the dairy industry.
Grossly over-stated. As I am sure you know... medical evidence of adverse health effects in the general population from drinking milk containing A1 does not exist.Quote:
......it has always been a question of how long it takes to exceed $5 or $10, and at what point farmers in major milk-producing countries decide en masse to stop producing medically hazardous A1 milk......
I am aware, however the cultural bias will live on in China for a long while yet. Even allowing for 2 children - traditionally Chinese families have as many children as possible. 4-10 was not unusual before the policy was enacted. So being limited to 2 isn't going to change their desire to give the best to their children. You will also note that 2 children is only possible for those parents where at least one of the parents is a single child - perpetuating the cultural bias.
So how can anyone justify the current mkt cap up re $30 million today to approx $685 million !!!? Something tells me its another rinse and repeat. Sell some/all and take my chances with the number of shares i get in the spp.
Thanks stoploss and gmatt. I never got an email or snail mail with the application form. Anyway have applied for the max online along with everyone else.
the offer is going to be massively scaled back. They are after $3m and no oversubscriptions with applications being scaled on a proportionate basis, clause 6.3 in document
So, I presume, if you apply for $5000 in the spp - you will get 1/3 of the number of shares that the shareholder who applies for $15,000 will receive. Is that how the scaling will work?
I would like $2000 of new shares but I do not have $15000 cash. It is why as a small shareholder, I do not like this type of SPP.
The offer document states "6.3 If a2MC receives valid applications in excess of NZ$3,000,000, it will scale back all applicationson a proportionate basis..."
Can anyone clarify what this means in plain English? What is it proportionate to? The amount of shares applies for (so all those that apply for $15k will get the same scaling % applies as those who apply for $5k), or is it proportionate to your existing shareholding, so larger holders get more?
I assume the first, but the wording is not clear.