ATM - A2 Milk Corporation Limited

[Leftfield]

Hi Left field, I'll share my TA thoughts on A2M (note I've used a chart of A2M on the ASX as the charting platform is better).

As you mentioned A2 has both a upper and lower gap, as to which one gets filled first...only the market knows.

Upper one fills first - there is a lot of overhead resistance that will sell into any positive SP movement, thereby creating a roof on the SP

Lower one fills first - there is good support and should provide a solid floor to the SP (unless further negative surprise news breaks this)

In any case the A2M chart needs to consolidated for a good period of time to shake out all the overhead resistance (weak holders who are trapped with losses), before it will be a buy in my book.

Attachment 9684

Addition TA signals with the current chart (attached):

- Price under all short term moving averages (most importantly the 50 SMA)
- 50 SMA is trending down
- MACD turned negative
- DMI turned negative
- Failed to break through $11 (AUD) resistance
- Large sell off volume (Funds and insto's exiting)

Please note for other ST readers - I'm a momentum investor and have my own system to exit a stock once that momentum stalls or fails. My views that I'm sharing will be different to a short term trader or a long term investor.

Disc - I held A2M up until the stock broke it's 26 SMA

Greatly appreciated - thanks McGinty. Your chart is much more clever than mine .

Short term is looking volatile, however as Couta points out the long term is still looking good as ATM is set to outperform.

The next couple of weeks are going to be very interesting and I suspect some more bargains will be prised from weak hands.

[Valuegrowth]

When a stock becomes overcrowded, there will be lot of weak hands as well in it. A big shakeout will take out all weak hands and speculators. Companies with strong hands not only will bring stability but also long term support for stocks. If we see pattern of investors are getting out, then there could be some pressure for stocks.

[bull....]

I'm interested in TA thoughts on the following.

Attachment 9683

Fridays SP seems poised between two gaps, A and B. MACD Sentiment is now negative.

I suspect the short term 'downside' potential to $9.00 is strong, however, at some stage the SP will revert to trend and fill the upper gap $!2.00 to $13.00

If the lower gap gets filled first, it would appear to be a good buying opportunity.

Another interpretation is that the SP has already tried to fill the lower gap and failed, so the upper gap is the more likely trend.

For long term investors it's all rather academic, but for those wanting to add more A2M, it's interesting times.

i find your gap at B as irrelevant as the price has already traded around this level numerous times , the gap at A is more relevant for filling at some point. mc ginty is also correct alluding to the fact some people are trapped at higher prices which could provide selling pressure on a retest.
also a gap fill at A does not guarantee it will just start heading to new highs again , it depends on a lot more factors.

[couta1]

i find your gap at B as irrelevant as the price has already traded around this level numerous times , the gap at A is more relevant for filling at some point. mc ginty is also correct alluding to the fact some people are trapped at higher prices which could provide selling pressure on a retest.
also a gap fill at A does not guarantee it will just start heading to new highs again , it depends on a lot more factors.

22 million shares on peak pessimism after guidance dissapointment couldn't close the gap to A. The only way I can see that gap being filled is if the company doesn't meet the 900-920 mill guidance in August, MSCI index inclusion coupled with the belief by many that they will exceed that guidance range presents major barriers to that gap being filled. Any price drop into the low 10's will see the shares snapped up like hotcakes and under 10 I will be topping up the mortgage Lol.

[Snoopy]

The ‘A2 milk company’ markets differentiated dairy products focussed solely on the benefits of A1 protein free milk. A2 only milk protein is a naturally occurring milk derivative, which nevertheless must be selected for in cows. Particular business attention is on the Asia Pacific market, of which by far the biggest contributor is China. The most profitable way for A2 to sell their milk has been in baby food formula. In 2015 China made up 1/3 of the world total market of infant formula. We should note that many (probably most) nominally Australian and New Zealand infant formula sales are to Chinese ‘Daigou’ resellers. The international brand that A2 milk use for ‘junior sales’ is ‘A2 Platinum Infant Formula’. Despite the company holding numerous international patents based on beneficial use, my assessment is that it is the ‘A2 brand’ -with all the first mover market presence and all the advertising and store shelf space that it has earned- is the real asset of the company.

For the latest half year 1HY2018, total group revenue was $434.7m of which $341.0m was ‘A2 Platinum’. Given the profit margins for A2 Platinum are significantly higher than fresh milk, and the A2 milk supply is limited, we can assume there is every incentive to develop ‘A2 Platinum’ above other A2 products in the medium term. With ‘A2 Platinum’ making up 78.4% of revenues today, and possibly 95% of company profits, we can get a good understanding of where the A2 company as a whole is going by just focussing on this one product.

A2 milk has only a 4.1% of the Chinese infant formula market, well behind international competitors such as Danone’s Nutrica (approx 8% market share) and Nestle’s Illuma (approx 16% market share). Furthermore I believe that this 4.1% market share is by value, not volume. And ‘A2 Platinum commands a premium price. So A2 isn’t even close to a top three market position by volume. But A2 are focussed clearly on the ‘A1 protein free’ market space. A2 have effectively created their own sub market space for baby formula where they are the clear leader. ‘Johnny come lately s’ to the ‘A1 protein Free’ sub market are Nestle with the Illuma sub brand ‘Illuma Atwo’ and Mengniu (the Chinese dairy giant) with their ‘A1-free Children’s Milk’. Right now A2 are clear market leaders in the market space they choose to occupy.

Conclusion: Pass test

SNOOPY

[Snoopy]

My view of the normalised profits for A2 Milk over the last five years is as follows:

FY2013 : [$4.120om + 0.7( $0.824m -$0.121m)] / 617.232m = 0.01cps
FY2014: [$0.010m +0.7($0.597m)] / 633.066m = 0.00cps
FY2015: [-$2.091m +0.7($1.681m-$0.831m)]/ 639.327m = 0.00cps
FY2016: [$30.4m + 0.7($0.753m) ]/ 715.570m = 4.3cps
FY2017: [$90.6m + 0.7($2.435m+$0.265m)] / 718.238m = 12.9cps

Notes:

1/ For FY2013 I have removed $0.824m of strategic review costs.
2/ For FY2015 I have removed the $1.681m worth of ASX listing costs
3/ For FY2017 I have removed $2.435m of intangible asset impairments
4/ For all years I have added back the foreign exchange losses (or removed the foreign exchange gains)

Conclusion: Pass test

SNOOPY

[Snoopy]

FY2013 : $4.612m / $59.93m = 7.7%
FY2014: $0.4279m / $58.64m = 0.72%
FY2015: -$1.497m / $58.63m = -2.5%
FY2016: $30.9m / $133.1m = 23.2%
FY2017: $92.5 / $241.5m = 38.3%

The last two years show what is possible. But history before then has tipped the trigger.

Conclusion: Fail Test

SNOOPY

[Snoopy]

FY2013 : $4.612m / $94.304m = 4.9%
FY2014: $0.4279m / $110.621m = 0.01%
FY2015: -$1.497m / $154.803m = -0.01%
FY2016: $30.9m / $352.502m = 8.8%
FY2017: $92.5 / $549.247m = 16.8%

From almost nothing just three years previous, to an impressive 16.8% at the end of the last financial year? That constitutes some improvement!

Conclusion: Pass Test

SNOOPY

[BobbyMorocco]

Too hard to say where this will head over the next while, except May 31st where the price will definitely be significantly up for a short period.

You know I wouldn't be so sure about this. Have a look at when FPH was included in this MSCI Index late last year. Nov. 29 close = $13.05. Nov. 30 close = $13.10. Only a 5c rise with 54 million shares traded.

Yes FPH's share price did increase quite nicely for the first month it was included in the index but there was not a huge spike on the day of inclusion. There's no guarantees that A2's share price will spike on May 31st either.

[dreamcatcher]

Month old but nice.....

https://www.youtube.com/watch?v=p8XxvGe1twQ