ATM - A2 Milk Corporation Limited

[winner69]

Shorters have had some terrible times with A2... 8% was the baseline for most of 2016-2017, then settled around 3-4% for the last 6 months and hit essentially 0.05% in march after the latest squeeze... this quiet period after the update is the perfect opportunity to short without risk of a repeat burn.

Does this mean the shorters have lost zillions then .....if so why do they continue to play the game

I don't always understand how these games are played

[minimoke]

As an aside doesn't look like mercury is suffering any with coming off msci

[couta1]

Does this mean the shorters have lost zillions then .....if so why do they continue to play the game

I don't always understand how these games are played

Shorters have lost heaps in this stock and they will soon lose heaps more, they continue to play the game because it's an addiction/adrenalin rush. However shorters are not the main driver of this massive drop, it's the big boys and it's orchestrated, when they have what they want, watch the turn around. It's a classic Game of Thrones in real life happening at the moment, holders can be sucked into the game or watch the action from the sidelines, your choice. PS-If it drops much further, I'll be joining the game as a buyer not a seller.

[Snoopy]

Generally those falling knives have been triggered by really bad news - not so in this case.

Perhaps you guys need to listen to the news a bit more?

1/ Mycoplasma Bovis now it appears has been spread by feeding surplus milk on one farm to calves on another. No tracking records have been entered on the NAIT system for these milk movements. This could be extremely serious in disrupting milk supplies.

2/ Fonterra gives first forecast 2019 year of $7/kgMS, That is about 10% higher than some analysts expected, and will flow directly into higher value processed product input costs, like A2's baby formula,

3/ China President Xi Jinping reminding the world stage that he can influence any prospective meeting between Kim Jon Ung and Donald Trump. Kim Jon Ung has gone cool on the proposed Trump meeting since his second meeting with President Xi, who doesn't want a united Western style Korean Democracy on his doorstep This is a reminder to the world that China is a command economy that will always ensure local interests ('Mengniu A1 free childrens milk') are not put out by foreign interlopers (like A2).

These are three things that could significantly affect ATM going forwards that have come to light over the last three or four days. Yet all the ATM believers seem completely blind to it all! I find that amazing.

SNOOPY

[hardt]

Perhaps you guys need to listen to the news a bit more?

1/ Mycoplasma Bovis now it appears has been spread by feeding surplus milk on one farm to calves on another. No tracking records have been entered on the NAIT system for these movements. This could be extremely serious in disrupting milk supplies.

2/ Fonterra gives first forecast 2019 year of $7/kgMS, That is about 10% higher than some analysts expected, and will flow directly into higher value processed product input costs, like A2's baby formula,

3/ China President Xi Jinping reminding the world stage that he can influence any prospective meeting between Kim Jon Ung and Donald Trump. Kim Jon Ung has gone cool on the proposed Trump meeting since his second meeting with President Xi. This is a reminder to the world that China is a command economy that will always ensure local interests ( 'Mengniu A1 free childs milk' are not put out by foreign interlopers (like A2).

These are three things that could significantly affect ATM going forwards that have come to light over the last three or four days. Yet all the ATM believers seem completely blind to it all! I find that amazing.

SNOOPY

Sounds an awful lot like that time no one would listen to your talk about raw milk supply not meeting markets expectations of $700m in sales... fast forward to $900+ and that faded pretty quickly.
$3 valuation *amazing*

There has never been any shortage of local products in China, mid-higher end consumers choose to buy premium ANZ brands while the low-middle class buy domestic producers... there is room for everyone in that massive and expanding market, likely to increase with the easing of the two child policy.

There have always been things that could significantly affect A2, there always will be... your list is not convincing.

[moka]

I missed the initial rise due to lack of funds at the right time. Now with the latest dip I’m having a more thorough look. Seems like a pretty attractive business, with the incredible growth of 60%+ helping with that.

My initial thought is that ATM needs to grow significantly to justify the price. Obviously the growth is happening but growing sales into the multiple billions is going to involve a lot of work. I’m amazed that a company that sells physical products can grow so quickly.

How long can this growth rate really be sustained? How risky is doing business in China when much of their growth is coming from there? There are are so many questions about this company that are only going to be answered with time.

Status: currently DMOR (doing my own research)

Investment in intangibles is a reason it has grown so quickly.


https://www.nzherald.co.nz/business/...ectid=12040941
Brian Gaynor: Intangibles taking over the markets

“One of the major challenges facing investors is that fast-growing US companies have a strong focus on intangible assets, instead of the more traditional physical assets. Intangible assets include software, brands, human networks, intellectual property, patents, market research and employee training, while physical or tangible assets include bricks and mortar, as well as equipment. This raises the question of how to value intangible-intensive companies as most of their investment is expensed, and has a negative impact on earnings, while physical investment is capitalised.

Uber is a massive taxi company that doesn't own taxis and Airbnb is a major accommodation group that has minimal property assets.

The delisting of Xero was a blow to the NZX because it was our largest intangible-intensive company although a2 Milk has some of these characteristics. The milk company has total assets of $548 million, with the main components being $240m of cash, a $105m investment in Synlait Milk and only $10m worth of property, plant and equipment. Intangible assets can be scaled more quickly than physical assets. Auckland Airport has $2.2b of debt, minimal cash and massive capital expenditures ahead. New Zealand's main airport can't cope with existing passenger numbers, never mind further growth.

The expensing of intangible investment has reduced the earnings of these companies even though this investment may create huge shareholder value in the long term. Thus, companies that invest heavily in intangibles are being penalised by earnings-focused investors while companies that don't invest in this area are treated more favourably.”

[couta1]

Snoopy's list could have been more convincing if he had added 1. A major Middle Eastern war. 2.Trump or Kim Jon push a nuke button. 3. A large meteorite striking earth. 4.The current Govt get a second term.

[Scrunch]

I had no idea about the level of shorting that existed on the ASX, but it does help explain the trading volumes that are much higher than in NZ.

shortman.com.au is a great resource - Thanks Hardt.

So A2M's at 2.56% shorted, what does this mean. Well there's 100 ASX stocks with a short ratio of 2.91% or higher. While ATM may be high, there's nothing unusual if you are not even in the top 100. A2M's a comparatively small company, and companies like BHP's are as big as they get in Australia. Well its got shorting of 2.23% so being around 2% could be defined as normal.

Looking at a bunch of bigger Australian stocks, there's basically a structural level of shorting in the Australian market. I'm not sure what causes this but it may be taxation driven with bigger entities using shorts to neutralise their holding without actually selling it and realising taxable gains.

[Snoopy]

There have always been things that could significantly affect A2, there always will be... your list is not convincing.

I am not calling time on the growth of ATM and A2 baby Formula in China. I am just saying that not all news in the market is relentlessly positive. There are real reasons why ATM should pull back at times, that cannot be shrugged off as 'market manipulation'.

Today's $10.24 closing price on last years 12.9c of earnings represent an historic PE of 79. There are huge expectations still built into that share price that only a forward earnings guidance of perfection can justify. Even 'wobble the cart' news could see that share price plunge. This doesn't mean I don't have huge respect for ATM and the A2 product. I'm readying myself to get on board the bus with you guys when it pulls up at the $6 stop.

SNOOPY

[Scrunch]

Snoopy's list could have been more convincing if he had added 1. A major Middle Eastern war. 2.Trump or Kim Jon push a nuke button. 3. A large meteorite striking earth. 4.The current Govt get a second term.

Or Synthetic milk. ATM's point of difference is that it doesn't have the A1 protein. Am I missing something or would this point of difference would mean little if synthetic milks become mainstream. The article below suggests that the availability of synthetic milks could be as few as two years away.
https://agrihq.co.nz/#