ATM - A2 Milk Corporation Limited

[Beagle]

Pick your period I suppose - 2556% over 5 years
https://www.stuff.co.nz/business/300...the-most-value

As I said a little earlier, EVERYONE is ignoring my question as to whether this company has now matured into a slowing growing mature blue chip stock.

And for the record Winner, its obviously a completely spurious and inappropriate observation, (yes it appears its easier to being out the worst in some people than others) comparing a listed company in a different sector in the first three years of its listed life (OCA) with a blue chip company that's been listed for ages but just for your edification I went back on MSN money as far back as the chart would go and in April 2004 it appears ATM started trading at it was 27 cents on 30/4/2004. Three years later on 30/4/2007 it was just 10 cents so had lost nearly two thirds of its value in the first 3 years of its listed life. As recently as 2009 it was still losing money http://nzx-prod-s7fsd7f98s.s3-websit...489/116019.pdf.

Its early days for OCA but I think they are building a base for growth and are currently priced by the market as though they are never going to grow. FYI I have a 7% portfolio allocation to them and am not emotionally attached. If I don't see reasonable growth over the next 4-5 years I will take the appropriate course of action.
In the meantime there's the expected yield of about 4.7% per annum, unlike with ATM eh

[Beagle]

Go and have an afternoon at sea mate!

That would be an excellent idea if I still owned a boat.

[Waltzing]

Im with MR B on this one. To many have made the big money on this one and popped the french champagne if they had good taste and are still drunk on the hang over from the high.....

it doesnt mean it wont go sky high again it the market gets excited again...

When you roll high and risk goes up the brain in many one off new investors is floating in the clouds.

its hard for the new investors (since the GFC) to come down to earth. it usually takes a loss for that to happen.

[BlackPeter]

It seems nobody is prepared to have a mature conversation about whether this company has matured into a slower growing blue chip company. My time here is obviously wasted.

Don't be too harsh on us :

I am with you that ATM will grow slower from here. I guess this is just following the laws of physics (inertia and all these things). It doesn't help either that they start piling "hardware" onto their balance sheet (in form of buying milk producers like Synlait and others). While it might make sense for them, it will reduce their future growth-rates.

On the other hand - They do have in my books a forward PE of 27 (yes, based on analyst consensus forecasts) - and even if their growth drops to something like 10 to 15% pa would the current price not look expensive to me. Maybe fairly priced.

More important however is that the big boys seem to like to play jo-jo with the ATM share price, and it currently feels its moving in its down-cycle. Never try to cross or abruptly change the path of a mighty large JO-JO ... from childhood experience I can confirm that this can really hurt ...

[McPussPuss]

I would not describe ATM as a blue chip stock, it provides very sound revenue growth yoy that most companies in 2020 would be green with envy over with big gains in market share still to be made. The fundamentals remain strong with the same old risks e.g. exposure to china which never materialise.

The 'downside' with the stock as an investment in my opinion is that it is so heavily traded and played with on the ASX, but that is an upside to those who trade it.

The pattern with the share price is almost too predictable now with weakness at this time of the year and associated commentary questioning it's future profitability and growth. This always gives way to new highs each year as the games peter out and instos position for the next round of trading.

Time to shut up shop and watch it possibly drift lower before new ATHs in the next 9 months.

[Beagle]

Don't be too harsh on us :

I am with you that ATM will grow slower from here. I guess this is just following the laws of physics (inertia and all these things). It doesn't help either that they start piling "hardware" onto their balance sheet (in form of buying milk producers like Synlait and others). While it might make sense for them, it will reduce their future growth-rates.

On the other hand - They do have in my books a forward PE of 27 (yes, based on analyst consensus forecasts) - and even if their growth drops to something like 10 to 15% pa would the current price not look expensive to me. Maybe fairly priced.

More important however is that the big boys seem to like to play jo-jo with the ATM share price, and it currently feels its moving in its down-cycle. Never try to cross or abruptly change the path of a mighty large JO-JO ... from childhood experience I can confirm that this can really hurt ...

Yes mate...one of Herdlicka's first moves was to blow $161m on Synlait shares at close to $11, (nearly halved since then and a company that's gambling more that the last 6 years of its profits on the outcome of a Supreme court case)...absolutely "brilliant" https://www.nzx.com/announcements/321685
Maybe their next move into investing in processing capability will be better...or maybe just another rat hole to sink a few hundred million more ?

[Waltzing]

Next level 17.60 , then 15.60. might move up from there if the numbers are good.

[Gerald]

As I said a little earlier, EVERYONE is ignoring my question as to whether this company has now matured into a slowing growing mature blue chip stock.

And for the record Winner, its obviously a completely spurious and inappropriate observation, (yes it appears its easier to being out the worst in some people than others) comparing a listed company in a different sector in the first three years of its listed life (OCA) with a blue chip company that's been listed for ages but just for your edification I went back on MSN money as far back as the chart would go and in April 2004 it appears ATM started trading at it was 27 cents on 30/4/2004. Three years later on 30/4/2007 it was just 10 cents so had lost nearly two thirds of its value in the first 3 years of its listed life. As recently as 2009 it was still losing money http://nzx-prod-s7fsd7f98s.s3-websit...489/116019.pdf.

Its early days for OCA but I think they are building a base for growth and are currently priced by the market as though they are never going to grow. FYI I have a 7% portfolio allocation to them and am not emotionally attached. If I don't see reasonable growth over the next 4-5 years I will take the appropriate course of action.
In the meantime there's the expected yield of about 4.7% per annum, unlike with ATM eh

To be fair A2 can easily pay a 3% dividend out of free cashflow, unlike some companies which we won't mention which "have a PE of 10", yet have to borrow money, and punish their balance sheet to pay its 4.7% divi.

I think it's reasonable to expect growth to slow especially with pantry destocking, but please let us know when you see it. History isn't on your side and people throwing around 10% growth need to read an annual report (34% eps growth anyone?)

I always appreciate your posts Beagle, but to be fair you've been all over the place on this one. A year ago when it was $12 you were calling it overpriced saying you might be interested at $8, and not long ago you said it was about fair price at over $20. But seeing how you love those LIC's overweight in A2 we all know you have seen the light my furry friend.

SP looks weak, and may continue for awhile, and geopolitical risk / Nestle & Danone etc moving into the A2 space pose ongoing risks, i'm not worried as it creates opportunities to accumulate. As A2 grows its MC should attract more investment from larger funds to support the valuation. In a permanent low interest rate enviroment one could call the current valuation comparitively attractive when comparing the PEG ratio to almost all other profitable NZ/AU companies.

Attached are some graphs for you to chew the cud. Whilest I joined you wrestling in the mud with this mongrel OCA by purchasing between 52-60c during the selloff, I am considerable more confortable holding a growing company with a strong brand, huge addressable market and no risk of the SP going skydiving 75% in its free time like some mutual acquaintances

[winner69]

I think it's been Babidge whose driven the investments in Synlait and Matuara. The Synlait deal (including the notorious $11 shares) was already underway when Hrdlicka joined - I don't think one can blame Jayne for taking A2 down this path.

[couta1]

That would be an excellent idea if I still owned a boat.

Plenty of charter boats around meantime we are going to have to find you another bone to gnaw on, you will probably rebury this one though and dig it up again this time next year.