ATM - A2 Milk Corporation Limited

[Sideshow Bob]

Opened up in Strayla at $14.00 +/-

***Grabs popcorn and A2 milkshake***

[Balance]

Nice ASM, well conducted and love all those bullish updates.

Gotta love Jayne's response re CEO and senior management selling question. Kudos to the team, they deserve to be rewarded for all their hard work.

My tp is to be in the vicinity of $20 by 1H results in Feb'20.

A lot of time spent on share selling by executives.

My pick - we will sell a lot of selling from this source this week.

Second your kudos to the team and how well the ASM was conducted.

[Beagle]

Updated forward PE @ $14.26, my estimated FY20 earnings are 46 cps = forward PE of 31, about the same as when Geoffrey Babbage was in charge and it was growing much, much faster.

[JeremyALD]

Updated forward PE @ $14.26, my estimated FY20 earnings are 46 cps = forward PE of 31, about the same as when Geoffrey Babbage was in charge and it was growing much, much faster.

What other company is growing as fast as ATM with as much cash as A2 milk has a PE of 31 on the NZX? You'd struggle to find better value imo.

[Beagle]

What other company is growing as fast as ATM with as much cash as A2 milk has a PE of 31 on the NZX? You'd struggle to find better value imo.

A while back I worked out the cash pile at about 60 cents a share, maybe its a little more now. Not worth getting to wound up about when you quantify it down on a per share basis.
Best way to compare valuations of growth companies (because they will all be growing earnings at different rates) is to look at the PEG ratio.
Forward Price earnings / eps growth rate. In ATM's case the PEG ratio based on today's updated forecast is 31 / 18 = 1.72
More on PEG ratio's here https://www.investopedia.com/terms/p/pegratio.asp

The other day I posted an example of a stock growing underlying earnings on average at 15% per annum, on a PEG ratio of 0.70 (MET, who I think are very cheap)
SUM are currently on a PEG of about 1.0 and have a long and highly credible track record of consistently growing underlying earnings very quickly.
HGH another company trading on a forward PE of just 12.2, (basically a no growth rate for the current risk free Govt stock rate) so you're getting growth for nothing as well as an 8.8% gross yield.
Plenty of other better value growth stocks on the NZX, just quoted you 3 obvious ones.
All of these shares are vastly better value growth stocks than ATM in my opinion.

[couta1]

What other company is growing as fast as ATM with as much cash as A2 milk has a PE of 31 on the NZX? You'd struggle to find better value imo.

Absolutely, but as Beagle is not a holder or a buyer then his opinion is just that, which of course he's entitled to.

[see weed]

A very good meeting. Full house with about 5 times more people there than 2 years ago. Good food and special coffees served with a2 milk continuously throughout the meeting. Zig Zag was the only other sharetrader I could see there. We shared a few words and laugh over lunch. ps The low for this month was $12.19c on 7/11/19, 8 days ago. Congratulations to all atm buyers since then.

[mfd]

One difference I see with A2 is the amount of growth they could have ahead of them. The US market revenue should be 27 million this half year, growing at over 100% per year. They have barely scratched the surface in the fresh milk market let alone adjacent markets. From the meeting today we know the company sees significant growth ahead in China as they develop their sales in channels other than Daigou. Add to that the rest of the world where they will pick and choose market entries as they like. This company could potentially grow at high rates for years and years. Obviously not the only growth opportunity in town, but I am certainly more confident about future growth after today's presentations.

[allfromacell]

The Balance sheet at the end of this year will look very strong, when I add FY19 Cash + FY20 NPAT + Synlait Investment I get $1.13 per share. Because of how light this business is and how it easily it pays it's costs with cash flow I believe discounting this off the PE calculation is worthwhile.

$14.10 - $1.13 = $12.97. I suspect Jayne and co are being conservative with their growth projections as they were with previous margins and 50CPS is easily obtainable giving a 2020 naked PE of 25.86. Still loads of value here imo.

[see weed]

One difference I see with A2 is the amount of growth they could have ahead of them. The US market revenue should be 27 million this half year, growing at over 100% per year. They have barely scratched the surface in the fresh milk market let alone adjacent markets. From the meeting today we know the company sees significant growth ahead in China as they develop their sales in channels other than Daigou. Add to that the rest of the world where they will pick and choose market entries as they like. This company could potentially grow at high rates for years and years. Obviously not the only growth opportunity in town, but I am certainly more confident about future growth after today's presentations.

Maybe get the second wave of new a2 shareholders coming in tomorrow with all the news and media hype of how well they are doing.