ATM - A2 Milk Corporation Limited

[Bjauck]

I am surprised that Directors in ATM have not sold more of their shares. The price had had a stellar rise (and the price had got away with itself) and they could have sold shares whilst still retaining a stake in the company and remaining optimistic for the prospects of the company.

[Snoopy]

My math differs from yours, Snoopy. In July, Babidge's family trust had 6m fully paid and 5m partly paid shares which totalled 11 million. He then sold 1 million fully paid shares at 72 cents each to help his family trust pay off a loan facility. His declaration of holdings following this sale showed him as still having 5 million partly paid and 5 million fully paid shares.

https://www.nzx.com/files/attachments/222913.pdf

In December he sold a further 1 million shares at an average of around 168 cents each, at which point the company said the transaction took place in a period when sales by executives and directors were not restricted. Yet there were no sales by others, even though the SP rose almost 50 percent beyond that.

A few days ago he sold a further half million shares. By my reckoning he has sold 2.5 million shares since July, not 3.5 million, which is just over 20% of his total stake, not 42%.

Read my post again NT001. I said Babbage sold his holding down to 3.5 million shares. I didn't say he sold 3.5million shares. By implication he started with 6m and sold 2.5m so that 3.5m remain. We agree on this point.

As far as the extra 5m partly paid shares go, these I believe are part of his Long Term Incentive plan. These are options which will not be exercised should things turn pear shaped. I don't regard options that Babbage has not put his own money on the line for as 'skin in the game'. So I stand by my point that Babbage has sold:

2.5m / 6.0m = 42%

of his ATM - fully paid -shares since last July. I consider A2 company financed partly paid shares should be ignored in this calculation.

As to your other questions about what I expect to come out of the Chinese clinical trial, I wouldn't know precisely, but if the result is favourable its value in promoting the health/medical difference between A2 and A1 won't necessarily be limited to China. I personally think too much attention is being focused on China, which is an unpredictable market, and am more interested in the US, about which we haven't heard much as yet. a2MC already has TV ads running in the US which highlight the digestive issues.

Interested in your view on how the Chinese trial result may help US market development. Thanks.

SNOOPY

[kizame]

Thought this was interesting,just to get perspective.

http://www.investopedia.com/articles...rm=stock-watch

[Yeshiva]

I must say that I'm awfully impressed by the recent announcements and share price rise in this company. And, if you think about the potential for a premium milk brand selling to 100 million more chinese babies (this is apparently what will happen now that China has changed its one child policy), then a multi $billion valuation is entirely possible for this company one day. This is a true success story.

[Snoopy]

Thought this was interesting,just to get perspective.

http://www.investopedia.com/articles...rm=stock-watch

In PE terms A2 is a lot more expensive than Amazon or Netflicks. I guess holders should wait for the a2 share price trend to break before heading for the exits if you follow invesopedia's advice. All I can say is that I've been around the markets a while now, and only once have I seen any share more overvalued than this. I think the potential is there for the share price to drop one dollar in a single day, even as the business continues to operate successfully. And if it did guess what? I still wouldn't buy any. Consider all shareholders warned!

SNOOPY

[Ginger_steps_]

In PE terms A2 is a lot more expensive than Amazon or Netflicks. I guess holders should wait for the a2 share price trend to break before heading for the exits if you follow invesopedia's advice. All I can say is that I've been around the markets a while now, and only once have I seen any share more overvalued than this. I think the potential is there for the share price to drop one dollar in a single day, even as the business continues to operate successfully. And if it did guess what? I still wouldn't buy any. Consider all shareholders warned!

SNOOPY

Unless they beat guidance and increase supply - then current SP will look cheap. People are buying this stock for the growth prospects - not the present value, obviously.
I often wonder is you invest in anything snoopy? have a bit of fun - take a punt once in a while, believe the story (with research) and just not the numbers, every now and then! I would go crazy if i were to crunch the amount of numbers you do.... not that there is anything wrong with your methods.

[Snoopy]

Unless they beat guidance and increase supply - then current SP will look cheap. People are buying this stock for the growth prospects - not the present value, obviously.

GS I have calculated the present value at 13.3c. That contains limited allowance for growth, so is obviously unrealistically low. At $1.80 the market allowance for growth is.

180/13.3 = 1350%!

IMO that is staggeringly high,and building in a decade of aggressive growth as a certainty, when in fact any number of things may not go according to plan. You are going to need around ten times the number of cows as exist in the supply chain now just to supply for a start. The company must grow like this just to return shareholders their invested capital back today, with no return!

Beating guidance will not make the share look cheap. It has already gone too far for that. Peoiple may be buying. But CEO Babbage is selling Hence my warning to other shareholders.

SNOOPY

[kiora]

GS I have calculated the present value at 13.3c. That contains limited allowance for growth, so is obviously unrealistically low. At $1.80 the market allowance for growth is.

180/13.3 = 1350%!

IMO that is staggeringly high,and building in a decade of aggressive growth as a certainty, when in fact any number of things may not go according to plan. You are going to need around ten times the number of cows as exist in the supply chain now just to supply for a start. The company must grow like this just to return shareholders their invested capital back today, with no return!

Beating guidance will not make the share look cheap. It has already gone too far for that. Peoiple may be buying. But CEO Babbage is selling Hence my warning to other shareholders.

SNOOPY

I for one would rather heed your advice Snoopy if I where invested in this stock

[bobxia]

Hi SNOOPY, whenever I've done valuations for a company, I always put some real money to do a trade, as a reality check of my research work. So if I believe the company is cheap, then I will buy the shares, and vise versa. If I feel reluctant to play the real money, then I will not trust the research work done by myself. This approach seems working so far, as my NZX portfolio has been over-performing the NZX50 in the last 5 years.

I just wonder, if you believe A2 is worth only 13.3c, it appears no brainer to short-sell this company, at the current price. Are you willing to do the trade, as you will make a fortune if A2 drops to your valuation price?

[Baa_Baa]

I for one would rather heed your advice Snoopy if I where invested in this stock

Me too, Snoopy is a legend. I'd rather believe him, my charts and the CEO selling into over valued SP, than buy ATM. So I dropped it from my 2016 stock picks for those reasons.