sharetrader
Page 867 of 2376 FirstFirst ... 36776781785786386486586686786886987087187791796713671867 ... LastLast
Results 8,661 to 8,670 of 23752
  1. #8661
    Advanced Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,933

    Default

    Milk2 has shown exponential growth during last financial year and it has taken steps to develop their business over last five years. It also has achieved another milestone by becoming zero debt company. My main concern is its valuation. As long as they are going to have strong balance sheet, generating cash for foreseeable future, there will be great demand for their shares from growth and value investors (they will wait until they see great value).

    Is there any other attractive company with better prospects to replace?

    Will there be any competition for them? If they have competition could they face it successfully?

    Could they retain their market share while looking for new markets?

    Strong balance sheets firms will make a big difference not only during good times but also during period of recession.

    I have found that zero debt companies can become multibaggers. Even mulitbagger companies will have sell-off periodically whenever they become overcrowded and overvalued.
    Last edited by Valuegrowth; 20-05-2018 at 06:57 AM.

  2. #8662
    Advanced Member
    Join Date
    Oct 2001
    Location
    chch, , New Zealand.
    Posts
    2,494

    Default

    Quote Originally Posted by BobbyMorocco View Post
    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.
    It could be that there are some big sellers waiting for that date, they will be able to offload big chunks without killing the price

  3. #8663
    Outside thinking.
    Join Date
    Jan 2013
    Posts
    2,563

    Default

    Quote Originally Posted by bull.... View Post
    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.
    Thanks Bull and Couta your opinions appreciated.

    On reflection I agree with you both that the balance of probability lies with the lower gap being filled in the near term.

    Disc. Still holding and happy.
    Last edited by Leftfield; 24-05-2018 at 07:11 AM.

  4. #8664
    ShareTrader Legend Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    21,362

    Default

    Quote Originally Posted by ratkin View Post
    It could be that there are some big sellers waiting for that date, they will be able to offload big chunks without killing the price
    Or on the other hand it could be that demand could overwhelm supply and the price jumps. My sense is we've already had a pretty healthy correction since the February high of ~ $14.60 and with a FY19 forward PE of about 28 at $11.30 and with outstanding growth prospects the current SP looks pretty reasonable to me. In FPH's case we saw a ~ 10% rise over the month after it was included in the MSCI.
    I have enjoyed 20% short term SP increases from holdings in CVT and PPH when they were added to the NZX50 index in the past With or without any short term support from index inclusion I think after a fairly long 3 month correction process the current SP more than fully accounts for the known risks and ATM presents as a very sound long term investment opportunity.
    Last edited by Beagle; 20-05-2018 at 02:24 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  5. #8665
    Advanced Member
    Join Date
    Oct 2001
    Location
    chch, , New Zealand.
    Posts
    2,494

    Default

    Quote Originally Posted by Beagle View Post
    Or on the other hand it could be that demand could overwhelm supply and the price jumps. My sense is we've already had a pretty healthy correction since the February high of ~ $14.60 and with a FY19 forward PE of about 28 at $11.30 and with outstanding growth prospects the current SP looks pretty reasonable to me. In FPH's case we saw a ~ 10% rise over the month after it was included in the MSCI.
    Interesting times that is for sure. Tomorrow will be interesting as that big sell off on Friday looked quite alarming

  6. #8666
    ShareTrader Legend Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    21,362

    Default

    Quote Originally Posted by ratkin View Post
    Interesting times that is for sure. Tomorrow will be interesting as that big sell off on Friday looked quite alarming
    Just gave back the 47 cents it recovered on Thursday so not that alarming. Good bull - bear cut and thrust between those that understand the reason the updated forecast may slightly undershoot previous sales expectations and those that simply want to pull the sale trigger and ask questions later. I think the whole correction thing since February is very close to being fully done, time will tell.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  7. #8667
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default Buffett Test FY2017 Results: Summary

    Before I give the Buffett perspective, I want to give an update on my $3 valuation.

    Quote Originally Posted by Snoopy View Post
    This $3 value is a consequence of supply constraint. Remember a PE of 12-15 still indicates a growth company. It is just that the forward growth picture will be stunted. If last year was maximizing the value of what they have to sell already, and there is no easy way to increase A2 milk supply significantly, then sales in the future have to be limited by supply. Yes they could buy in more A2 cows on behalf of their farmer suppliers. But they might have to discount the revenues from their identification test to do so. They may also have to pay a lot more than the historical premium of 5-7% for A2 milk. All of those factors will have to hurt the bottom line of ATM going forwards. By 'hit the bottom line' I mean a lower margin on incremental sales. I am not saying the company would not continue to grow at all.
    Since making this post, Fonterra has stepped up to 'solve the problem'. According to industry commentator Keith Woodford, owners of larger dairy farms will be able to split their herds into 'pure A2' / 'Other' quite quickly. Thus more A2 supply can be brought on board without waiting the ten years it might require a single herd dairy farmer to 'make the transition'. I haven't read anything about banking money from the A2 identification genetic tests for a while. Are A2 now doing this testing 'for free', so they can speed up their search for A2 cows? Anyone know?


    --------


    Warren Buffett requires a company with proven cashflows and a track record potential for 'growth' (that covers 'recovery growth' or 'incremental growth'). The issue with ATM is that while it is doing well, it has only two years (soon to be three) of significant profitability. This is insufficient to give insight as to what would happen when market winds blow less favourably. Looking back with the benefit of hindsight, the best decision that ATM made over the last year and a bit was to stick with the Daigou distribution of A2, despite the threat of the Chinese Government cracking down on this channel of distribution. Other Australian infant formula makers chose to focus on more conventional retail store distribution and suffered accordingly. Some will call this good management on behalf of ATM. Others may see that with a weak store presence, a 'challenger brand' such as A2 really had no choice but to stick with the Daigou. So it was really good luck. I mention this now because without the benefit of hindsight, I hope you can see that ATM was taking a huge risk with their stance.

    The 'huge risks' are set to continue through into FY2019 (Starting July 1st 2018)

    Coming 'huge risk number 1' is the roll out of a more comprehensive retail presence across China via the MBS (Mum and Baby Store) chain. Will these all be incremental sales? Or will ATM be cannibalizing the principal existing Daigou sales channel? And how will the Daigou respond if it is the latter?

    ATM has, until FY2017, been a niche supplier into the Chinese baby food market. But now the head is above the parapet will the international giant Nestle (via 'Illuma Atwo') and China's second biggest domestically owned dairy player Mengniu (via 'A1 free Children's Milk') be able to push back against ATM by fighting back with their own A2 milk products {'huge risk number 2')? On the plus side A2 has first mover advantage. On the minus side, these competitors have deeper pockets. And the Chinese government seem to have a policy of arranging more favourable treatment for their own home grown companies!

    I am not forecasting doom for ATM. I really don't know what effect 'huge risk number 1' and 'huge risk number 2' will have on ATM. All I will point out is that ATM have not been tested 'head on' in a way that happens when you come out of your niche and are recognised as mainstream. Warren Buffett likes the certainty that the tangible proof of market fighting ability gives. ATM offers promise, but no more than that. The true test of market fighting ability is when you are backed into a corner. And for ATM in China, this hasn't happened yet. Thus I don't believe that Warren would invest in this company. Not because it isn't good. But because it isn't proven,

    Up until now I haven't mentioned anything about an updated share price recommendation. I do know that it is possible to model different growth scenarios that can justify any price between $6 and $60. The problem is there are so many unknowns going forwards and there is so little 'track record' under pressure. So I would regard all such scenarios as highly speculative. One rule of thumb I have is that in the 'long term' in a mature market, PE deflation will see the market value of all the suppliers equal the sum total of total market revenue. If ATM has a market capitalization of $NZ10 billion and the total size of the infant formula market in China is $NZ10 billion, this implies an expected 100% market share for ATM infant formula is already priced into the share. This assumes a static overall infant formula market in China. No doubt the overall infant formula market in China will grow over time. But this metric does show just what sort of sales growth will be required to justify anything like todays ATM share price. I assess ATM as being uninvestable, for now. Not because it is no good. But because there is no credible fundamental data than can be used to justify the current share price, or anything close to it. In my assessment conservative sharemarket investors, and that includes those who invest via index funds, should have 0% of their wealth invested in this company.

    Give it another couple of years and that data may come through though!.

    SNOOPY

    discl: Not a holder, not looking to buy.
    Last edited by Snoopy; 20-05-2018 at 08:50 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  8. #8668
    Advanced Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,933

    Default

    I take this as a one of the best fundamental analyses that I saw in a forum. Thank you for educating us. During next two to five years we could find its true value. Companies start as small and then become big. Accordingly stock prices also will go up. Basically, if I interest on any company, I will study how they managed to overcome short term issues and other difficulties in the past, how they take action to develop the business, how they generate cash and how they manage resources and how they take effort to produce strong balance sheet etc. Further, I like strong competitors if they have competitors. In this meat and milk sector, definitely there will be great winners. M2 milk also has become winners by appreciating rapidly within the short period. Some other established companies got their multibagger status gradually and systematically. On contrast M2 reached it during last three years. If they cannot maintain their strong growth momentum during next five years, their stock prices could fall rapidly as it is trading at a premium.

    Quote Originally Posted by Snoopy View Post
    Before I give the Buffett perspective, I want to give an update on my $3 valuation.



    Since making this post, Fonterra has stepped up to 'solve the problem'. According to industry commentator Keith Woodford, owners of larger dairy farms will be able to split their herds into 'pure A2' / 'Other' quite quickly. Thus more A2 supply can be brought on board without waiting the ten years it might require a single herd dairy farmer to 'make the transition'. I haven't read anything about banking money from the A2 identification genetic tests for a while. Are A2 now doing this testing 'for free', so they can speed up their search for A2 cows? Anyone know?


    --------


    Warren Buffett requires a company with proven cashflows and a track record potential for 'growth' (that covers 'recovery growth' or 'incremental growth'). The issue with ATM is that while it is doing well, it has only two years (soon to be three) of significant profitability. This is insufficient to give insight as to what would happen when market winds blow less favourably. Looking back with the benefit of hindsight, the best decision that ATM made over the last year and a bit was to stick with the Daigou distribution of A2, despite the threat of the Chinese Government cracking down on this channel of distribution. Other Australian infant formula makers chose to focus on more conventional retail store distribution and suffered accordingly. Some will call this good management on behalf of ATM. Others may see that with a weak store presence, a 'challenger brand' such as A2 really had no choice but to stick with the Daigou. So it was really good luck. I mention this now because without the benefit of hindsight, I hope you can see that ATM was taking a huge risk with their stance.

    The 'huge risks' are set to continue through into FY2019 (Starting July 1st 2018)

    Coming 'huge risk number 1' is the roll out of a more comprehensive retail presence across China via the MBS (Mum and Baby Store) chain. Will these all be incremental sales? Or will ATM be cannibalizing the principal existing Daigou sales channel? And how will the Daigou respond if it is the latter?

    ATM has, until FY2017, been a niche supplier into the Chinese baby food market. But now the head is above the parapet will the international giant Nestle (via 'Illuma Atwo') and China's second biggest domestically owned dairy player Mengniu (via 'A1 free Children's Milk') be able to push back against ATM by fighting back with their own A2 milk products {'huge risk number 2')? On the plus side A2 has first mover advantage. On the minus side, these competitors have deeper pockets. And the Chinese government seem to have a policy of arranging more favourable treatment for their own home grown companies!

    I am not forecasting doom for ATM. I really don't know what effect 'huge risk number 1' and 'huge risk number 2' will have on ATM. All I will point out is that ATM have not been tested 'head on' in a way that happens when you come out of your niche and are recognised as mainstream. Warren Buffett likes the certainty that the tangible proof of market fighting ability gives. ATM offers promise, but no more than that. The true test of market fighting ability is when you are backed into a corner. And for ATM in China, this hasn't happened yet. Thus I don't believe that Warren would invest in this company. Not because it isn't good. But because it isn't proven,

    Up until now I haven't mentioned anything about an updated share price recommendation. I do know that it is possible to model different growth scenarios that can justify any price between $6 and $60. The problem is there are so many unknowns going forwards and there is so little 'track record' under pressure. So I would regard all such scenarios as highly speculative. One rule of thumb I have is that in the 'long term' in a mature market, PE deflation will see the market value of all the suppliers equal the sum total of total market revenue. If ATM has a market capitalization of $NZ10 billion and the total size of the infant formula market in China is $NZ10 billion, this implies an expected 100% market share for ATM infant formula is already priced into the share. This assumes a static overall infant formula market in China. No doubt the overall infant formula market in China will grow over time. But this metric does show just what sort of sales growth will be required to justify anything like todays ATM share price. I assess ATM as being uninvestable, for now. Not because it is no good. But because there is no credible fundamental data than can be used to justify the current share price, or anything close to it. In my assessment conservative sharemarket investors, and that includes those who invest via index funds, should have 0% of their wealth invested in this company.

    Give it another couple of years and that data may come through though!.

    SNOOPY

    discl: Not a holder, not looking to buy.
    Last edited by Valuegrowth; 20-05-2018 at 09:05 PM.

  9. #8669
    Dilettante
    Join Date
    Mar 2010
    Location
    Down & out
    Posts
    5,407

    Default

    Good, informative and thoughtful posts Snoopy. Thank you.

  10. #8670
    Banned
    Join Date
    Nov 2013
    Posts
    8,516

    Default

    It's all about vision and belief Snoopy, two qualities not easily measured by just crunching numbers, I wonder where Apple would be today if someone didn't exhibit those two qualities. I consider this company considerably derisked as compared to a year ago and therefore are comfortable to hold a good sized portion of my portfolio in it.

Tags for this Thread

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •