ATM - A2 Milk Corporation Limited

[winner69]

54 cents now.

and higher by end of day you reckon balance

Still reasonable volume for the punters as well

[fungus pudding]

Like Blis! :-)

Hell's teeth! I hope not.

[Balance]

and higher by end of day you reckon balance

Still reasonable volume for the punters as well

Pause at 55 cents as that's a quick 10% for those who got plenty from the placement.

After the stock is absorbed, I would say it will effortlessly move to 60 cents.

Especially if one of the Chinese companies decides to have a play - just like with Comvita.

(And I do not mean Cerebos Gregg)

[Balance]

Brokers busy ringing up those clients who obtained placement stock to take quick 10% profit.

Meanwhile, intos are now paying 55 cents so I suspect we will see 56 cents by tonite.

The numbers are simple - 160m shares placed at 50 cents. Another $10m to take the sp to 60 cents mean the instos show 20% return by year end on most of the 160m shares.

[Balance]

Balance - which brokers, can you share? My one hasn't tried that on me! Though he knows that I am probably likely to laugh.

That's what I have picked up from my broker - i.e. that some of the brokers are telling their clients to take a quick 10% profit.

If I were to take a guess, it will be the brokers with trading clients like UBS.

[Snoopy]

Originally Posted by Snoopy
"But there is no getting away from the fact that this is a one product company with unproven benefits"

What, like Fonterra?

Fonterra has Mainland , Tip Top, Anchor. These are brands that have taken decades to build up. A2 has nothing like this.

When I said A2 was a one product company, I wasn't talking about just being a milk company though. What I meant was the whole thing hangs on the health benefits or not of A2.

CJ, I believe that ATM has enormous potential. If they can get to the stage of clipping the ticket on every cow in the western world , then ATM has the potential to be as big as Fonterra. That is the upside, which is probably bigger than any other company in the NZX50.

The problem I see is that if A2 is proven to offer no health benefits over A1, then the entire reason for A2 existing collapses. A2 milk doesn't taste any different to A1, given the same path through the food processing factory. In fact unless you are a chemist, I don't think it is possible to discern any difference. So if A2 'doesn't work' then A2 cheese, A2 ice cream, A2 liquid milk, A2 baby formula... All of them will go down. The company will be left with being a niche player to the fashionably ignorant. That will be the end of the A2 growth story.

I agree that A2 is unlikely to be proved to be more harmful than A1. So I agree that given the choice, all things being equal, choosing A2 makes sense. The problem is A1 is cheaper. So with milk prices high, then a cost input difference like this can matter, especially to those who purchase milk as an ingredient for further processing.

Good luck to those who invest in A2. On balance my feeling is that you will do well. But for me the potential downside risk is too significant to ignore. Of all the companies in the NZX 50, this would be the one that I would rate as having the highest chance of going bankrupt. That is why I wouldn't invest in ATM, which is not to say that those with a different risk profile to myself shouldn't do it


SNOOPY

[Snoopy]

What you have just written is indicative to me of the unfortunate underlying psychic preference of New Zealanders when dealing with most issues - reactive rather than preventive, ambulance at the bottom of the cliff rather than fence at the top of the cliff.

Examples? Pike River blows up and now, the government and miners are scrambling to prevent future explosions. Finance companies meltdown and the government then introduces regulations. Too little, too late and extremely messy and expensive to deal with the fallout, after the fact. Reserve Bank NZ typically cuts interest rates only after NZ is in recession, not before. Raises interest rates only after an asset bubble is inflating close to explosion.

It is different overseas - they try to deal preventively. The case for consuming A2M is logically compelling - why take the risk of consuming A1 milk when you do not need to?

Even the leading A2 advocate in your article, Balance, said that the health message from A2 Corporation was for more milk in general to be consumed - with that being A2 - rather than A2 over A1.

The fact that NZers consume A1 milk is not a disaster in the sense that Pike River (your example) was. Consuming A1 milk in moderation for the average NZer will not send them to hospital as you imply. Granted for some A2 may have significant health benefits. But that doesn't justify a government decree that everyone must choose A2 milk. For most people on their normal diets, there are other dietary changes they can make that will lessen their chance of diabetes and heart disease that do not involve changing to A2, and are far more beneficial than simply changing to A2!

SNOOPY

[CJ]

Both A2 and Fonterra have one input, being milk though the outputs are varied from MA2inland cheese to A2nchor butter or TipTop2 icecream.

Agree the key issue for them is if they aren't allowed to scientifically say A2 milk is healthier, then they are just a more expensive version of Fonterra. And if they do get that scientific backing, is there anything stopping Fonterra from splitting out its A2 cows into separate herds for those that actually need the special milk.

[lou]

As a follow up, personally, the only sound reason I see for investing in ATM is that it gives one direct ownership, skin in the game if you will, in the diary industry. Which is a great business of that there is no doubt.

Agreed, also they are small enough to be able to focus on niche higher value diary products rather than whole milk powder.

[Balance]

Even the leading A2 advocate in your article, Balance, said that the health message from A2 Corporation was for more milk in general to be consumed - with that being A2 - rather than A2 over A1.

The fact that NZers consume A1 milk is not a disaster in the sense that Pike River (your example) was. Consuming A1 milk in moderation for the average NZer will not send them to hospital as you imply. Granted for some A2 may have significant health benefits. But that doesn't justify a government decree that everyone must choose A2 milk. For most people on their normal diets, there are other dietary changes they can make that will lessen their chance of diabetes and heart disease that do not involve changing to A2, and are far more beneficial than simply changing to A2!

SNOOPY

It's all about mindset, Snoopy.

I read the David Ross situation and how the Securities Commission chose not to follow up on two alerts by investors, but instead continued to indulge that Aussie sheila Plane Jane (with no substance save as a female under a lesbian-inclined Helen Clark government) flying all over the globe telling everyone what a wonderful regulator she was, and I know that's why an ATM will never find the support it deserves in NZ. It's all talk and no action in NZ.

Another example is Diligent. Took the Americans to pump in serious risk capital and take the company to its real potential.

So excellent move by the company to move overseas and i have no doubts, especially in Asia, that it will prosper.