ATM - A2 Milk Corporation Limited

[Leftfield]

Been buying back in over the last week for a $2.38 average, will be hard to get them much below $2.45 next week IMO. PS-Directors selling down normally spells bad news, but not in this case I've decided.

Hope your interest in ATM is not the 'kiss of death' Couta!

Nice to see over in Hot Copper purported evidence from Alibaba that A2 still leading in Chinese IF sales against some pretty impressive competition from the BIG brands. I particularly like the premium pricing margin shown in this screen pic too! Next sales/revenue release from ATM is going to be very interesting.

Attachment 8726

[Baa_Baa]

"The only people likely to seek compensation would be people in the market for A2 Milk Co and Fisher & Paykel Healthcare shares on the day, Mr Wallis said."

https://www.nbr.co.nz/article/warmin...rt-says-200292

https://www.nbr.co.nz/article/warmin...inds-th-198012

[carrom74]

Been buying back in over the last week for a $2.38 average, will be hard to get them much below $2.45 next week IMO. PS-Directors selling down normally spells bad news, but not in this case I've decided.

Bang On...couta1.Started trading exactly as per your post today.

[see weed]

ATM looking 'HOT TO TROT' today.

[Vish]

https://nzx.com/companies/ATM/announcements/297747

Not sure if anyone saw this one.

[Joshuatree]

Yep nasi posted on the third; keep up Vish

[Vish]

Mondays

[Beagle]

https://simplywall.st/news/2017/03/0...h-share-price/

(For the newbie's) a PEG of one suggests the price is very cheap relative to EPS growth.

[Snoopy]

https://simplywall.st/news/2017/03/0...h-share-price/

(For the newbie's) a PEG of one suggests the price is very cheap relative to EPS growth.

I prefer to look at the figures in this article in a different way.

The article suggests that ATM is cheap relative to other 'Food & Beverage' shares because the average PE for this sector is 40.2, and ATM is trading on a PE of 29.9. ATM is predicted to grow at an average of 17% compounding over the next three years. By implication, this could suggest that food and beverage earnings overall will grow by rather more than 17% compounding over the next three years. That clearly is not going to happen. So what these figures are telling us is that this is a bad time to be investing in food and beverage in general, even if ATM is not overvalued.

But is ATM undervalued? Draw a growth curve on top of any current situation and it is easy to convince yourself that almost any share is undervalued. There are a couple of key questions to ask here.

1/ Can even current sales be sustained? ATM has had two big successes. The first is getting prime shelf space with the Australian supermarket duopoly. The second, which is partly boosting the growth of the former, is sales in the infant formula market in China where ATM has not only taken advantage of a growing market, but has grown market share at the same time. I think ATMs competitors will fight back, and I think that when you take the China growth out of the Australian market, the historical Australian market growth paints a picture that will not easily be followed in other markets.

2/ Can ATM grow into new markets, principally the UK and USA in the medium term? The first attempt to break into the USA failed, and the UK market is taking far longer to penetrate than expected. The fact that neither of these markets has a supermarket duopoly means that market acceptance will not be quick just because A2 is adopted by one supermarket player. The second problem I see is that ATM must secure an ever increasing supply of A2 milk to keep growing. This is far from easy to do in the short to medium term. The uncomfortable truth for shareholders is that ATM has a very poor record of doing business outside of their Australian/Chinese primary market, and it will take years to upgrade the milk supply chain to satisfy any further growth ambitions.

At a PE of 29.9, shareholders are assuming:

1/ that establishment as a highly profitable player in the UK is a done deal, AND
2/ a decent beachhead of US success is already priced in, AND
3/ that China will keep growing with no sales reversals.

To keep a PE of 29.9 in 2020 , a realistic plan to conquer other markets, like Europe and Indonesia will have to exist. Since no such plans do exist and ATM has a track record of more failure than success in new markets, my conclusion is that ATM is currently priced to perfection and consequently grossly overvalued.

In the past I have spent time trying to derive a realistic value for ATM. But IMO, ATM is so obviously grossly overvalued that it is a waste of time to even calculate a figure. You only need to look at CEO Babbage's selling down of his own ATM holdings at every opportunity to see this.

SNOOPY

P.S. Just in case anyone gets the wrong end of the stick, I think that A2 milk is a great brand and one that will continue to enjoy market success. The problem I see is that all of A2's greatness is already priced into the share price. So from an investor perspective, buying ATM today, there is no money to be made.

[couta1]

Just leave the money making in this stock to others aye Snoopy. Long term holders have made a stack, shorters and traders have, and will continue to make plenty of dosh. Only those sitting on the sidelines will make no money.