ATM - A2 Milk Corporation Limited

[Cyclical]

While the directors and senior management were super swift in selling at the peak,it is strikingly surprising that not one bought any of the shares at these throwaway prices( or not)

Yes, good point. I'd be adding that indicator to Beagle's strategy below.

The best strategy would appear to be, wait for a trend reversal, ignore whatever the company says as that's been completely untrustworthy lately and put a very tight stoploss on any new position.

[Cyclical]

There were just over 10 million babies born in China last year (down from 11.79 in 2019). Blaming a declining birth rate is equivalent to taking several of buckets of water out of an Olympic size swimming pool Imo, just another excuse.

Just another excuse for sure, but that's not an insignificant decline. Not sure on the exact figures, but give or take 15% I guess. More competitors chasing a shrinking market aint good. Also consider the that it takes X amount of sales to break even, another % over and above that to properly get cranking, and then whatever % over that again is creaming it. One of many factor's bringing this company to its knees.

[Balance]

Just another excuse for sure, but that's not an insignificant decline. Not sure on the exact figures, but give or take 15% I guess. More competitors chasing a shrinking market aint good. Also consider the that it takes X amount of sales to break even, another % over and above that to properly get cranking, and then whatever % over that again is creaming it. One of many factor's bringing this company to its knees.

There were just over 10 million babies born in China last year (down from 11.79 in 2019). Blaming a declining birth rate is equivalent to taking several of buckets of water out of an Olympic size swimming pool Imo, just another excuse.

Flawed logic and analogy by Blue Skies.

11.79m down to 10m = 15.2% drop in demand in infant nutrition, all things being equal.

Infant Formula as we all know, is sold in 4 stages - from stages 1 to 4 so the 15.2% drop impacts immediately on demand for stage 1 which within a year, flows through to stage 2 as well.

Taken over 3 years, the drop will result in an overall drop of 15.2% reduction in demand across all the stages of IF - at a time when supply has been increasing, especially from domestic producers.

Economics 101 - price is set by demand & supply, and when supply exceeds demand or when demand drops, prices drop.

[Blue Skies]

Flawed logic and analogy by Blue Skies.

11.79m down to 10m = 15.2% drop in demand in infant nutrition, all things being equal.

Infant Formula as we all know, is sold in 4 stages - from stages 1 to 4 so the 15.2% drop impacts immediately on demand for stage 1 which within a year, flows through to stage 2 as well.

Taken over 3 years, the drop will result in an overall drop of 15.2% reduction in demand across all the stages of IF - at a time when supply has been increasing, especially from domestic producers.

Economics 101 - price is set by demand & supply, and when supply exceeds demand or when demand drops, prices drop.

You may see it that way, but thats not the way I see it.
That rational of a smaller division of a smaller pie only works if the market has reached 100% saturation point which clearly it hasn't.

If the market for IF in China is currently for example 4 million consumers, & there is a reduction in the overall size of the potential market from 11.79 to just over 10 million consumers, it would be incorrect to assume & predict that will automatically equate to a 15% reduction in demand, while there still exists a colossal untapped potential market of consumers to reach.


While it may have a small effect, due to the size of the potential market, I think its being over egg-ed & there are much more significant issues to worry about.

[Balance]

Two views to consider and so far, the institutional heavyweight Credit Suisse has the floor :

Analysts at Bell Potter, for example, have a buy rating and $8.50 price target on the company’s shares. While this is still a long way from its high, based on the current a2 Milk share price, this still implies potential upside of approximately 65% over the next 12 months.

Bell Potter is anticipating a stronger recovery in FY 2022 and is forecasting earnings per share of 28.9 cents. If this is accurate, the company’s shares are currently trading at a much more reasonable 18x estimated FY 2022 earnings.

Credit Suisse has a sell rating and $5.00 price target on a2 Milk’s shares and are forecasting the company reporting earnings per share of ~11.2 cents in FY 2021 and then ~17.7 cents in FY 2022. This means the a2 Milk share price is trading at 46x estimated FY 2021 earnings and 29x estimated FY 2022.

[silu]

Hmm all those broker reports are giving me target prices well below my sell orders I had $13 and $9.50. 4 stocks I have bought with the proceeds with those funds are all in the green bar one (which is -7%). So my portfolio would be way worse off if I had continued to hold.

Not patting myself on the back just showing that even stubborn people like me can be convinced.

[Balance]

Hmm all those broker reports are giving me target prices well below my sell orders I had $13 and $9.50. 4 stocks I have bought with the proceeds with those funds are all in the green bar one (which is -7%). So my portfolio would be way worse off if I had continued to hold.

Not patting myself on the back just showing that even stubborn people like me can be convinced.

If you so choose, you can buy back double the number of shares you sold out? Puts it in perspective, doesn't it?

We are all here to continue to learn and exchange views for all our mutual benefit, right?

All it takes is the right attitude and perspective to benefit from the exchanges of views on this valuable site.

There will always be those who think they know better - which is fine as that is what makes the market.

[Dassets]

The drop in baby numbers is a red herring. The real issues are twofold. First action of competitors especially domestic. Seems consumer has been switching suppliers. Second is margin and the assumptions a2 has used. Its old margin was out of whack with all competition. Margin seems to be normalizing in this case down.

Neither are good for a2 and are not trends you can really reverse at least easily.

[Balance]

The drop in baby numbers is a red herring. The real issues are twofold. First action of competitors especially domestic. Seems consumer has been switching suppliers. Second is margin and the assumptions a2 has used. Its old margin was out of whack with all competition. Margin seems to be normalizing in this case down.

Neither are good for a2 and are not trends you can really reverse at least easily.

The other big issue for ATM will be the surplus A2 milk supply which they now cannot sell?

[Dassets]

Really what they are contracted to buy. Same for Synlait. Then the next issue, assuming volume growth returns, willingness of farmers to enter contracts and price premium over competitors aka Fonterra and the aussis that you need to put out. This is not the first, or last, time this situation has occurred.