ATM - A2 Milk Corporation Limited

[bull....]

This could suggest that other domestic brands are close to launching A2-protein formulas, should they all use the same local milk source," he added. Junlebao is controlled by the Hebei provincial government.

http://www.sharechat.co.nz/article/1...arty-citi.html

and dont forget westland dairy in NZ will now grow a pool of a2 cows to supply these chinese companies. the chinese are very smart in building chinese owned supply chains

[tomm]

Paul Rickard, co-founder of the Switzer Report thinks a2 is a buy. This was two weeks ago so today’s price must now be a screaming buy! Thanks @kobbie for supplying a link to NABTrade article dated 22 Oct:

“A share price around $12 is a lot more attractive than the $17.30 the stock was trading at in late July.
Technicians might argue that it is too early to buy, with the 60-day moving average (currently $13.59) recently slipping below the 200-day moving average ($13.94). They’d say to wait until the 60-day average had climbed back over the 200 day average, and that the technicals suggest that there might be more price weakness to come.
But this stock is definitely on my radar and I am looking to buy. A2 Milk holds its AGM on 17 November, where the company is expected to provide a trading update for the first four months.

I like the look of A2 Milk. I can’t think of too many companies with these sort of growth rates, credible management team (led by Jayne Hrdlicka) and cashed up, strong balance sheet, trading on multiples under 30.”
a2m-broker.jpg

What do the brokers sayThe brokers are positive on the stock but worried about margin pressure as the company pursues growth in China and the USA. They don’t seem to doubt the market opportunity or that it can build share but rather the price of building brand and scaling distribution. Earnings per share growth is expected to fall from 45.4% in FY19 to 18.0% in FY20 (NZ 46.3c), before accelerating in FY21 to 24.7% (NZ 57.8c).
According to FN Arena, there are two buy recommendations, two neutral recommendations and two sell recommendations. The consensus target price of the major brokers is $13.89, approximately 13.6% higher than Friday’s close of $12.23. Individual recommendations are set out in the table below.

a2m-broker.jpg

On a multiple basis, the brokers have A2 Milk trading at 28.2 times forecast FY20 earnings and 22.7 times forecast FY21 earnings. No dividend is forecast for FY20.
Here’s my view
I like the look of A2 Milk. I can’t think of too many companies with these sort of growth rates, credible management team (led by Jayne Hrdlicka) and cashed up, strong balance sheet, trading on multiples under 30.”

[dobby41]

Technicians might argue that it is too early to buy, with the 60-day moving average (currently $13.59) recently slipping below the 200-day moving average ($13.94). They’d say to wait until the 60-day average had climbed back over the 200 day average, and that the technicals suggest that there might be more price weakness to come.

He was right - the technicals did suggest more price weakness to come!

[sb9]

This could suggest that other domestic brands are close to launching A2-protein formulas, should they all use the same local milk source," he added. Junlebao is controlled by the Hebei provincial government.

http://www.sharechat.co.nz/article/1...arty-citi.html

and dont forget westland dairy in NZ will now grow a pool of a2 cows to supply these chinese companies. the chinese are very smart in building chinese owned supply chains

Isn't it the whole point though that Prof Woodford has been driving forward that in future all milk will eventually be A2. And that's gotta be great for first mover with brand image like A2 milk and their IF products.

[sb9]

Looks like a potential game changer to me. Life is getting more and more difficult but no worries for our Jayne as she will simply keep doubling the marketing budget every year as what could possibly go wrong...

Not so sure of that term though...its just the usual dirt throwing job citi prior to key event like ASM. Honestly, do we all think chinese are going to trust their own pool of A2 milk production?

[bull....]

Isn't it the whole point though that Prof Woodford has been driving forward that in future all milk will eventually be A2. And that's gotta be great for first mover with brand image like A2 milk and their IF products.

the chinese party mantra is to build supply chains owned by chinese companies to supply china so first mover advantage means nothing in the long run.

[Sideshow Bob]

Isn't it the whole point though that Prof Woodford has been driving forward that in future all milk will eventually be A2. And that's gotta be great for first mover with brand image like A2 milk and their IF products.

Timeframe for that would be huge, but a lot of cockies already using A2 bulls, so would be part-way there in NZ at least.

[sb9]

the chinese party mantra is to build supply chains owned by chinese companies to supply china so first mover advantage means nothing in the long run.

Not until another melamine scare happens which puts those Chinese babies at risk, right?

[stoploss]

I remember when kiwifruit started to be exported to China and people caught taking kiwifruit vines to China ..... woe it was the end of the world and our export market .....never happened Apple's, cherries, kiwifruit.....we still can't export enough.

What about water being taken from Chch and sold in China...... of course they have that in China too and import from other parts of the world.

China is securing quality food sources for it's burgeoning population. It doesn't matter if another player ......there still won't be enough a2 milk to meet demand worldwide. There is no glut of product in the market.

Holders sit tight .... brighter days on the horizon

talk about coal to Newcastle ...... Kiwifruit exporters definitely suffered by vines being exported to Italy and their subsequent production. I believe it was not until they developed the new varieties that they really hit their straps again ( happy to be corrected on this )
I think the problem here is the high margin is likely to come down if they have a competing product that they feel is in some way comparable.

[Balance]

https://www.ig.com/uk/news-and-trade...r-emerg-191106

Worth a read to put the Junlebao's competitive threat in some perspective.

Meanwhile, the record high of A$17.50 seems a long time away but was only 3 months' ago!

https://www.ig.com/uk/news-and-trade...--17-25-190731

Article in July 2019,

"..... that its latest investor presentation, the company stressed that it is aggressively investing in China and the US in an attempt to boost brand awareness.

While the company flagged that this increased marketing spend would eat into margins, investors are unlikely to be overly concerned by this, given the potential long-term benefits of gaining deeper market penetration."

Turned out investors are very concerned about the increased marketing spend but really, imo, only because ATM disappointed ever so slightly with its results on 21st August.

So the ASM is going to be absolutely crucial to where ATM's sp is going to track next :

1. If there is any hint of another downgrade, I fully expect sp to track towards A$10.00 and I will be out.

2. If revenues are growing significantly on the back of the increased marketing and promotional spend, I expect the sp to track much higher and the shorters will scramble to cover.

Meanwhile, happy to stay on the sideline in the absence of any new information.