ATM - A2 Milk Corporation Limited

**Beagle** · 17-10-2019, 09:11 AM

Well said Balance. My post yesterday was simply to correct the (hopefully inadvertent) mistake that the forward PE was only 22 and this was cheap for a growth company with ATM's growth prospects. The real forward PE based on average analyst forecasts, (not my forecast or anyone else's on here that might be subject to bias) for FY20 of 45 cps at $13.50 is exactly 30.

I followed this up with observing that the forward PE under Geoffrey Babbage's leadership was ostensibly the same when the company was growing eps dramatically faster than it currently is. Simple logic suggests a lower PE is appropriate if eps growth has dramatically slowed. One example that readily springs to mind is SUM which used to trade on a forward PE of 30 when it was growing much faster and was a less mature company and it now trades on a PE of about 13.

Jayne herself has admitted that essentially all the low hanging fruit has been picked, (as Balance quite correctly points out), has actively guided to lower growth going forward.

Others then went on to critique the whole PE thing as though earnings don't matter. Well, I suppose when faced with an argument that can't be rebutted, (growth is slowing) those who have a strong vested interest have no choice but to try and undermine the valuation methodology.

According to market screener which compiles professional analyst views from ten analysts the average growth rate in eps for the next 3 years is 18%. That is very much lower than what's been enjoyed in the last three years, (in the last 2 years eps has more than tripled). The growth rate has dramatically slowed, something that should be perfectly obvious to anyone prepared to open their eyes.

**Balance** · 17-10-2019, 09:27 AM

A2M is presenting at Citicorp’s Investment Conference in Sydney today?

It’s 3.5 months into FY2020 so it will be interesting to see if Jayne provides some update on how things are going.

If she doesn’t, then it will be taken as read that the current market expectations are on track.

**carrom74** · 17-10-2019, 10:12 AM

https://www.nzherald.co.nz/nz/news/a...ectid=12277288

Out of topic... but in broader scheme of things for ATM...

John Key still packs a punch!

**Balance** · 17-10-2019, 10:30 AM

Originally Posted by Beagle

Well said Balance. My post yesterday was simply to correct the (hopefully inadvertent) mistake that the forward PE was only 22 and this was cheap for a growth company with ATM's growth prospects. The real forward PE based on average analyst forecasts, (not my forecast or anyone else's on here that might be subject to bias) for FY20 of 45 cps at $13.50 is exactly 30.

I followed this up with observing that the forward PE under Geoffrey Babbage's leadership was ostensibly the same when the company was growing eps dramatically faster than it currently is. Simple logic suggests a lower PE is appropriate if eps growth has dramatically slowed. One example that readily springs to mind is SUM which used to trade on a forward PE of 30 when it was growing much faster and was a less mature company and it now trades on a PE of about 13.

Jayne herself has admitted that essentially all the low hanging fruit has been picked, (as Balance quite correctly points out), has actively guided to lower growth going forward.

Others then went on to critique the whole PE thing as though earnings don't matter. Well, I suppose when faced with an argument that can't be rebutted, (growth is slowing) those who have a strong vested interest have no choice but to try and undermine the valuation methodology.

According to market screener which compiles professional analyst views from ten analysts the average growth rate in eps for the next 3 years is 18%. That is very much lower than what's been enjoyed in the last three years, (in the last 2 years eps has more than tripled). The growth rate has dramatically slowed, something that should be perfectly obvious to anyone prepared to open their eyes.

Interest rates have also fallen dramatically in the last 3 years so higher PERs and valuation multiples are warranted.

Point is that we are here to assist one another to make (hopefully) good investment decisions and there's a lot at stake with a stock like A2M - we want to get the call right.

It is not useful at all imo for posters to ignore or pretend to ignore what the institutional analysts and investors are saying and recommending as they have the firepower, not us little minnows.

As observed however, they are often wrong - in which case let's take advantage of their errors.

I for one will be reinvesting back fully into A2M and very very happy to pay a higher price if A2M comes out with an upgrade. That's my strategy - not gung ho but suits me as I sleep better at nights!

**Southern_Belle** · 17-10-2019, 02:27 PM

this time last year the A2M price was so volatile, up, down sideways, I got so caught up I sold the lot. Pre Xmas & New Year it raced ahead & I had FOMO and wanted to re-invest but kept thinking if I invest now it will go down. I did buy back in and continued going up (with some volatility along the way). No need to get too concerned about the daily fluctuations, A2M is a great company doing what it always does and happy to be a holder.

**sb9** · 17-10-2019, 05:17 PM

ASM at Generator on Madden Street down by Wynyard Quarter, Auckland @10.30am on 19th Nov.

Might try and attend this time.

**Beagle** · 17-10-2019, 05:52 PM

Coutts mate, seeing as you're donkey deep up to the eyeballs in these you should fly up and get all yappy at the annual meeting with heaps of questions.
Happy to help with transport logistics, (5 star safety rated car of course

), this end but not sure if they will let extremely yappy non shareholder Beagles into the meeting....they do have some standards you know

I'd buy a token one thousand shares just to get into the meeting if it wasn't for the fact that they're so overpriced at this level

(Sorry mate, couldn't help myself).

**Balance** · 17-10-2019, 06:25 PM

Originally Posted by sb9

ASM at Generator on Madden Street down by Wynyard Quarter, Auckland @10.30am on 19th Nov.

Might try and attend this time.

A crucial ASM at a critical juncture of A2M's progression into a truly multi-faceted global billion dollar entity. Cannot wait to attend!

https://www.ig.com/au/news-and-trade...to-hold-191014

Meanwhile, an upgrade from Bell Porter from SELL to HOLD.

Cannot be too far off from Citi making the same call now that A2M sp is around Citi's price target of A$12.20.