ATM - A2 Milk Corporation Limited

[JeremyALD]

Hard to say what competition will / won't do, but I can't see anything slowing down a2m's growth in China in the next few years. Its going to take a while for everyone to catch up and a2 have formed a good position.

I guess the USA could be challenging if a competitor came along as a2 dosen't have an established brand or position there. Maybe that's why they are pumping more into marketing in the US?

[Balance]

Yes, they have completely sold out the Devon Funds and they'll only realise in few years time what they've left on the table. Just like the Perich family of Freedom Foods who sold out too early in 2015 and in the process lost almost Billion dollar profit. A snippet from AFR...

"In late 2015, Freedom Foods, majority owned by Perich and other family members, sold its 117 million shares in the Kiwi milk company for $93 million.On Wednesday, another good profit result (referring to the latest HY Results) pushed A2's share price to a record $11.30 (30 per cent up on Tuesday's close). Which means those 117 million shares would today be worth a staggering $1.3 billion. Freedom Foods, and by extension Perich, left over a billion dollars on the table."

Thibnk of those who had faith and bought off Freedom Foods! $1.3 billion bonanza in 2 years!

[Valuegrowth]

Although livestock sector has bright outlook in the coming decade, time to time there could be some short term challenges as well. Those who can face those challenges successfully could become top winners.

Cash rich quality milk and meat companies with strong balance sheets should outperform others in the sector in the coming years. Although they could have growing demand for their products globally, time to time there could be short term challenges as well. Cash rich companies with strong balance sheet could emerge as strong competitors and thereby they will meet short term challenges successfully. Definitely, they will create long term shareholder value. Asian appetite for protein products will create opportunities for companies in New Zealand and Australia as well. New Zealand is famous for producing some quality stuff.

Globally, drought could be one of the challengers that industry will face in the future. Availability of arable land is another challenge. We don’t see any drought globally in the current year and we can reasonably expect better agriculture output and therefore good carryover stock for various crops this year as well. Innovative managers having good strategies and innovative ideas in this sector could make big difference.

In short, in this sector we should able to find some outstanding companies in the coming years. They may have some short term lean period in some period which is common to many industries but they should continually grow. Quality companies that can produce quality food will become ultimate winners.

According to some, sales growth in the huge Chinese market has been unaffected by the launch of a rival brand and that the company still holds a strong position. In my opinion there could be some competition. At the end strong competitor will become ultimate winner. I have seen this trend in the meat and milk sector.

So far, (ATM.NZ) was one of the beauties in the market during fast 12 months.

Will they become more beautiful in the future? We will not regret if we follow Companies with beautiful stories.

Can it also stay as a strong competitor while maintaining growth?

My main concern on this company is its extended P/E ratio. However, it seems growth players are willing to pay premium for this company and as a resul it got a high PE ratio during past 12 months. We should see more winners in the meat and milk sector in the coming years.

[hardt]

Similar with Citi's big fat sell rating at $2 early last year, if you don't agree with the approach taken to come to the negative coverage, don't follow or act on their insights or recommendations.

Devon funds had a rough year to say the least.
6.5% weighting in FBU construction -27%
5.7% weighting in GTN broadcasting - 36%
While selling out to a 33% weighting in cash
I somewhat agree with their 7.4% weighting in VGL

They are claiming Daigou are scary, unpredictable creature and have sent 2 analysts to China to study them in the wild...

They have also never owned a position in A2 milk as per their update at the end of CY17 below... - Why would Lego Man say that they did.

The other side of the story of our performance versus the market has been the stocks we haven’t owned, the most important of which has been A2 Milk. This stock has rallied over 190% in the past year and although it has been disappointing to not have been exposed to these strong returns, it does provide an example of our focus on capital preservation and risk management. We have known and followed A2 for a number of years and our experience has been that the company’s ability to execute on ambitious growth plans has been very mixed. They have built a successful fresh milk business in Australia but forays into the UK and US have not (yet) worked well nor did the company’s attempt to sell infant formula in China by way of direct distribution with a joint venture partner delivered the results expected. The company’s dramatic earnings growth over the last couple of years has been driven by sales via the informal “daigou” channel i.e. principally Chinese nationals in Australia purchasing goods to re-sell into China. The dangers with this channel are many and varied – visibility of the end customer is extremely limited, buyer behaviour can be very divorced from underlying demand, the distribution chain is long, complex and expensive and is always prone to “channel stuffing”, and finally most of these sales are technically illegal and subject to enormous regulation risk. We may well be wrong about A2 and they may continue to rapidly grow sales and earnings from infant formulas sales into China but we simply could not get sufficient comfort in the risk profile of the business to expose our client funds to it.

[Lego_Man]

Similar with Citi's big fat sell rating at $2 early last year, if you don't agree with the approach taken to come to the negative coverage, don't follow or act on their insights or recommendations.

Devon funds had a rough year to say the least.
6.5% weighting in FBU construction -27%
5.7% weighting in GTN broadcasting - 36%
While selling out to a 33% weighting in cash
I somewhat agree with their 7.4% weighting in VGL

They are claiming Daigou are scary, unpredictable creature and have sent 2 analysts to China to study them in the wild...

They have also never owned a position in A2 milk as per their update at the end of CY17 below... - Why would Lego Man say that they did.

The other side of the story of our performance versus the market has been the stocks we haven’t owned, the most important of which has been A2 Milk. This stock has rallied over 190% in the past year and although it has been disappointing to not have been exposed to these strong returns, it does provide an example of our focus on capital preservation and risk management. We have known and followed A2 for a number of years and our experience has been that the company’s ability to execute on ambitious growth plans has been very mixed. They have built a successful fresh milk business in Australia but forays into the UK and US have not (yet) worked well nor did the company’s attempt to sell infant formula in China by way of direct distribution with a joint venture partner delivered the results expected. The company’s dramatic earnings growth over the last couple of years has been driven by sales via the informal “daigou” channel i.e. principally Chinese nationals in Australia purchasing goods to re-sell into China. The dangers with this channel are many and varied – visibility of the end customer is extremely limited, buyer behaviour can be very divorced from underlying demand, the distribution chain is long, complex and expensive and is always prone to “channel stuffing”, and finally most of these sales are technically illegal and subject to enormous regulation risk. We may well be wrong about A2 and they may continue to rapidly grow sales and earnings from infant formulas sales into China but we simply could not get sufficient comfort in the risk profile of the business to expose our client funds to it.

Their last monthly says they bought and sold recently (presumably CY18). I guess they capitulated and went long before making a u-turn and taking full profits. Shows the pressures of the industry.

Anyway I think you need to be a little circumspect with NZ managers. Because of the relatively tiny pool of stocks to invest in, they just have to get one wrong and their peers smoke them. Doesnt make them stupid. Whereas the more diverse nature of offshore markets gives you more ways to skin the cat.

[hardt]

Their last monthly says they bought and sold recently (presumably CY18). I guess they capitulated and went long before making a u-turn and taking full profits. Shows the pressures of the industry.

Anyway I think you need to be a little circumspect with NZ managers. Because of the relatively tiny pool of stocks to invest in, they just have to get one wrong and their peers smoke them. Doesnt make them stupid. Whereas the more diverse nature of offshore markets gives you more ways to skin the cat.

https://devonfunds.co.nz/sites/defau...March%2018.pdf - TT Fund were shorting A2 for the year to Feb 2018 weighted at -2.3%

Looks like they know what it feels like to short A2, their march update has both TT and alpha funds with a +3% weighting in A2M.

[Beagle]

They added a very large position in FBU late in 2017...enough said.

[bull....]

devon underweight a2 = poor result , harbour overweight = good performance just goes to show there performances will be decided by the fortunes of a2 lol

[JeremyALD]

I lol'd at the statement from Devon that ATMs growth agenda and execution has been "very mixed" and basically put it all done to luck and China. Are they actually serious? It's probably the fastest growing and most successful nz stock of all time!

[NZSilver]

Haha look at there earnings growth, look how fonterra has gone relying on the direct route, I think it'an oversight not to expose some of there clients capital to such a great buisness. Give the UK and USA chance Iits early days, look at their balance sheet no debt, look at nestle a 250 bil usd company Reacting to a2 - they see how good it is.