ATM - A2 Milk Corporation Limited

[winner69]

Suppose FNZC / Harbour have a had a sizeable chunk of ATM shares for some time and its just now they have or may not have crept over the 5% mark

[NT001]

If A2 milk in the USA had similar gross margins to Australia, it wouldn't need to be funded from Australia! You will have noticed that the $A has declined significantly against the USD in recent months. That means less USD to fund the US expansion. Couple this with a big talking ex Pepsi manager driving things in the US and a softening of ATMs intention to not raise new capital, I would guess the book build is happening as we speak. That would expain why the ATM share price is weak.

Not sure that the first statement follows. It seems to indicate a continuing preoccupation with accounting minutiae which obscure the larger picture. Yes, you can argue that the US operation is being initially "funded from Australia", but that's really just saying it's being funded from company profits. There are obviously setup and other costs such as staffing, promotion etc that don't get repaid out of sales revenue from day one, whatever margins are charged, and if a2MC didn't have that initial cash provided for we'd have a solid basis for complaining.

I haven't seen much "big talking" from the new US CEO (ex-Pepsi), but people who know him think highly of him as a savvy operator (and he knows that A2 Milk is not Pepsi).

As for "a softening of ATM's intention to not raise new capital", I haven't really detected this. It has been the company's stated position for quite a while that there is no present intention to raise fresh capital but such an option is not ruled out if circumstances warrant. The model being used for developing the US, UK and China markets is capital-light, but of course if the US operation is speeded up there could be some need, not huge. I wouldn't see it as being enough to weigh down the share price significantly, given that it would be based on the prospect of an accelerated increase in revenues. And it could probably be borrowed.

[NT001]

If A2 milk in the USA had similar gross margins to Australia, it wouldn't need to be funded from Australia! You will have noticed that the $A has declined significantly against the USD in recent months. That means less USD to fund the US expansion. Couple this with a big talking ex Pepsi manager driving things in the US and a softening of ATMs intention to not raise new capital, I would guess the book build is happening as we speak. That would expain why the ATM share price is weak.

Not sure that the first statement follows. Yes, you can argue that the US operation is being initially "funded from Australia", but that's really just saying it's being funded from company revenues. There are obviously setup and other costs in the US such as staffing, product promotion etc that don't get repaid out of sales revenue from day one, regardless of margins, and if a2MC didn't have that initial cash budgeted for we'd all be complaining.

I haven't seen much "big talking" from the new US CEO (ex-Pepsi), but people who know him think highly of him as a savvy operator, and he knows that A2 Milk is not Pepsi.

As for "a softening of ATM's intention to not raise new capital", it has been the company's stated position for quite a while that there is no present intention to raise fresh capital but such an option is not ruled out if and when circumstances warrant. The model being used for developing the US, UK and China markets is capital-light, but if the US operation is ramped up there could obviously be some need, not huge. I wouldn't see it as being enough to weigh down the share price unduly, given that it would be based on the prospect of substantial boost in revenues. It could even be borrowed.

[Snoopy]

As for "a softening of ATM's intention to not raise new capital", I haven't really detected this. It has been the company's stated position for quite a while that there is no present intention to raise fresh capital but such an option is not ruled out if circumstances warrant. The model being used for developing the US, UK and China markets is capital-light, but of course if the US operation is speeded up there could be some need, not huge. I wouldn't see it as being enough to weigh down the share price significantly, given that it would be based on the prospect of an accelerated increase in revenues. And it could probably be borrowed.

You can't pay an interest bill out of revenues. You need profits. ATM has engineered their growth so they make no profits. I conclude that if they need more capital over and above what is being generated in Australia, the only option is to issue more shares.

SNOOPY

[winner69]

You guys made out the ASX listing as the bees knees and Aussies would be falling over themselves to buy the shares the NZ brokers had been hoarding for this and the share price would rocket to 70 cents (or was it 80 cents) and appreciate from there because Aussie investors valued growth (more than stupid New Zealand investors) and would like what this Aussie company is doing. (Long sentence but seems to cover what you were saying)

What's happened guys and girls ......price seems less than it was. Your hype was just that.

Your next trick to boost the share price is?

I am getting bored ......want another trade from mid 40s to 70 or 80 or maybe 80 ....who knows where it might go

ATM cheap as at the moment .....goodness gracious its even 17% below my DCF valuation of 59 cents (the scenario of some success in global markets)

[MAC]

Well, it’s possible Harbour’s model may yet be proven correct given the RBNZ announcement this morning;

http://www.harbourasset.co.nz/wp-con...Question-2.pdf

http://www.scoop.co.nz/stories/BU150...-be-needed.htm

[skid]

You guys made out the ASX listing as the bees knees and Aussies would be falling over themselves to buy the shares the NZ brokers had been hoarding for this and the share price would rocket to 70 cents (or was it 80 cents) and appreciate from there because Aussie investors valued growth (more than stupid New Zealand investors) and would like what this Aussie company is doing. (Long sentence but seems to cover what you were saying)

What's happened guys and girls ......price seems less than it was. Your hype was just that.

Your next trick to boost the share price is?

I am getting bored ......want another trade from mid 40s to 70 or 80 or maybe 80 ....who knows where it might go

ATM cheap as at the moment .....goodness gracious its even 17% below my DCF valuation of 59 cents (the scenario of some success in global markets)

Bit of a Deja vu is'nt it? Have you noticed how this thread has bumped another popular thread?(dont think Ive ever seen PEB so quiet for so long)--Both have potential but....just sayin..

Ramping up on the OZ exchange does seem to provide a temporary boost (like XRO) but then the dust settles..

Ive come to appreciate 2 words more and more as time goes on---Succesful Marketing---IMO ,that will be the key.

[MAC]

At HY15 reporting a2MC told us;

“A further standout for the period was the growth in sales of a2 Platinum™ infant formula in Australia in both grocery and pharmacy channels, and also in New Zealand where sales grew from a low base. Total sales of infant formula in Australia and New Zealand for the half year were $16.07 million”

That was an extraordinary leap in sales and that $16M represented 21.4% of total revenues.

My calculator tells me that $16M in sales represents around 1M tins sold within a six month period, yet in Australia and New Zealand only around 270,000 babies are born each year. We may be correct then in thinking that something doesn’t quite stack up ?

That’s either an extraordinary and spontaneous leap in Australian infant formula market share, or, more likely IMO much or even most of that infant formula is travelling on the black market to China.

With Australian and NZ based punters like these below selling a2 infant formula on Alibaba with minimum container sized orders, it would seem to be a lucrative and prolific play for them.

http://www.alibaba.com/product-detai...175949829.html

http://www.alibaba.com/product-detai...175949070.html

http://www.alibaba.com/product-detai...163035828.html

ATM China segment revenues at HY15 were only $1M, thus, one may also conclude that at that time way more infant formula sales were presently being made on the black market than are going through ATM’s own distribution channels.

Still though it shows the potential for the China market, and now that the regulatory and distribution channel changes are done and dusted, we may well see China segment revenues get a boost at FY15.

I’m looking for a continuation of this momentum at FY15 with Australian infant formula sales of $37.5M and China segment revenues of $5.5M.

Mac

[drcjp]

At HY15 reporting a2MC told us;

“A further standout for the period was the growth in sales of a2 Platinum™ infant formula in Australia in both grocery and pharmacy channels, and also in New Zealand where sales grew from a low base. Total sales of infant formula in Australia and New Zealand for the half year were $16.07 million”

That was an extraordinary leap in sales and that $16M represented 21.4% of total revenues.

My calculator tells me that $16M in sales represents around 1M tins sold within a six month period, yet in Australia and New Zealand only around 270,000 babies are born each year. We may be correct then in thinking that something doesn’t quite stack up ?

That’s either an extraordinary and spontaneous leap in Australian infant formula market share, or, more likely IMO much or even most of that infant formula is travelling on the black market to China.

With Australian and NZ based punters like these below selling a2 infant formula on Alibaba with minimum container sized orders, it would seem to be a lucrative and prolific play for them.

http://www.alibaba.com/product-detai...175949829.html

http://www.alibaba.com/product-detai...175949070.html

http://www.alibaba.com/product-detai...163035828.html

ATM China segment revenues at HY15 were only $1M, thus, one may also conclude that at that time way more infant formula sales were presently being made on the black market than are going through ATM’s own distribution channels.

Still though it shows the potential for the China market, and now that the regulatory and distribution channel changes are done and dusted, we may well see China segment revenues get a boost at FY15.

I’m looking for a continuation of this momentum at FY15 with Australian infant formula sales of $37.5M and China segment revenues of $5.5M.

Mac

Sales of infant formula: stuff is well priced at $30 a tin. Easy to use 6 tins in 6 months. At that rate you are looking at 90,000 babies. Its possible, but one wouldn't expect 1/3 of all births to use it? Maybe....

[sb9]

Wow, another big volume day...almost 4mln shares traded so far. Something is up, I think. At least price is up couple of cents...