ATM - A2 Milk Corporation Limited

[Cyclical]

Well I'm back on the board with a small buy in the low $15.30s. Remains to be seen if it's a good move or not. Will be happy to average down if opportunity presents as funds become available, but FOMO meant it was time to dip a toe in.

[Balance]

https://www.ig.com/en-ch/news-and-tr...-update-200929

Couple of brokers very dark on the downgrade.

[Sideshow Bob]

https://www.ig.com/en-ch/news-and-tr...-update-200929

Couple of brokers very dark on the downgrade.

At least that is AU dollars! Only 75c away from the bottom price....

[couta1]

https://www.ig.com/en-ch/news-and-tr...-update-200929

Couple of brokers very dark on the downgrade.

And others not so dark like UBS with a $22.50 NZ target but really all brokers targets are almost meaningless, you could just throw a dart at a dart board.

[Beagle]

https://www.ig.com/en-ch/news-and-tr...-update-200929

Couple of brokers very dark on the downgrade.

Thanks for posting mate. Couple of further thoughts drilling down into the governance and disclosure element of this which looks more murky the deeper one looks for the nuances of the choice of words.
In late August the directors in their presentation under outlook say "Notwithstanding these uncertainties, overall for FY21, we anticipate continued strong revenue growth supported by our continued investment in marketing and organisational capability (I'll come back to the bolded bit).

In the following ten days there was heavy and widespread selling by insiders including for example the CEO of the Asia Pacific division selling 750,000 of his 850,000 shares, i.e. nearly all of them https://www.nzx.com/announcements/358806

One month later they come out with quite substantially revised guidance , just 6.8% annual growth. $750m first half, $1,100m second half at the mid point.

Drilling down into the nuances of this the company's outlook statement which was released contemporaneously with their FY20 results with 33% revenue growth, wherein they said the outlook was for "continued strong revenue growth". The presentation itself was titled "Building from Strength" What I find interesting is the choice of words here.
They could very easily have said for example we expect continuing growth in sales and left the word "strong" out, or they could have toned it down with "albeit at growth level's that could be lower than last year. Continuing strong sales growth implies on the face of it growth at a very similar strong level to FY20, i.e. 33%.

You could make the case that the outlook statement and overall tone presented a less than accurate picture of their real expectations at that time. The substantial selling shortly thereafter (acknowledging they have very short windows of opportunity to effect this), is at best very poor optics.

I think there are grounds for shareholders to feel aggrieved that the original outlook statement was more than a little too optimistic which begs the question regarding 2H sales expectations being 47% higher than 1H. (A cynic might say that they had to release an update that showed some growth expectations or there would have been a riot at the annual meeting about the insiders selling). In my very long career as an accountant I have learned that the very best guide to the future is the most recent past, not what happened last year or the years before that. I am cynical about the strength of the 2H sales recovery and I think is highly likely shareholders will end up having to swallow a couple of dead Covid rats with further downgrades to come.

It should be obvious to all investors that there's FAR MORE risk around 2H sales forecasts than 1H and its contingent on the diagou sales channel fully recovering, but will it ? Downgrades come in three's (Balance). In my experience this is right well over 80% of the time. 2H sales recovery to that extent looks optimistic / just plain hopeful to me. But like almost all things about the future, very little is absolutely certain, all we can do is try and extrapolate off current information, known trends and obvious and less obvious risks. Time will tell...

[tomm]

Thanks for posting mate. Couple of further thoughts drilling down into the governance and disclosure element of this which looks more murky the deeper one looks for the nuances of the choice of words.
In late August the directors in their presentation under outlook say "Notwithstanding these uncertainties, overall for FY21, we anticipate continued strong revenue growth supported by our continued investment in marketing and organisational capability (I'll come back to the bolded bit).

In the following ten days there was heavy and widespread selling by insiders including for example the CEO of the Asia Pacific division selling 750,000 of his 850,000 shares, i.e. nearly all of them https://www.nzx.com/announcements/358806

One month later they come out with quite substantially revised guidance , just 6.8% annual growth. $750m first half, $1,100m second half at the mid point.

Drilling down into the nuances of this the company's outlook statement which was released contemporaneously with their FY20 results with 33% revenue growth, wherein they said the outlook was for "continued strong revenue growth". The presentation itself was titled "Building from Strength" What I find interesting is the choice of words here.
They could very easily have said for example we expect continuing growth in sales and left the word "strong" out, or they could have toned it down with "albeit at growth level's that could be lower than last year. Continuing strong sales growth implies on the face of it growth at a very similar strong level to FY20, i.e. 33%.

You could make the case that the outlook statement and overall tone presented a less than accurate picture of their real expectations at that time. The substantial selling shortly thereafter (acknowledging they have very short windows of opportunity to effect this), is at best very poor optics.

I think there are grounds for shareholders to feel aggrieved that the original outlook statement was more than a little too optimistic which begs the question regarding 2H sales expectations being 47% higher than 1H. (A cynic might say that they had to release an update that showed some growth expectations or there would have been a riot at the annual meeting about the insiders selling). In my very long career as an accountant I have learned that the very best guide to the future is the most recent past, not what happened last year or the years before that. I am cynical about the strength of the 2H sales recovery and I think is highly likely shareholders will end up having to swallow a couple of dead Cvid rats with further downgrades to come.

It should be obvious to all investors that there's FAR MORE risk around 2H sales forecasts than 1H and its contingent on the diagou sales channel fully recovering, but will it ? Downgrades come in three's (Balance). In my experience this is right well over 80% of the time. 2H sales recovery to that extent looks optimistic / just plain hopeful to me. But like almost all things about the future, very little is absolutely certain, all we can do is try and extrapolate off current information, known trends and obvious and less obvious risks. Time will tell...

All have been working out for you , it doesn't mater how smart or how practical you are , things are done , news are out and the big boys made the decision. I got the concluded here.

UBS has a price target of NZ$22.70 and a Buy rating on A2M.

Bell Potter has a price target of A$13.75 on A2M.
Morgan Stanley has a price target of NZ$13.50 on A2M.

Macquarie has a price target of A$17.95 on A2M.

It is undecisive, so I take the top and the lowest and take the average of NZD$13.50 and NZD$22.70 .
The average SP for ATM is : NZD$18.10 .

It is a bargain. The Shorters are at it again every year.


Thought???

[couta1]

All have been working out for you , it doesn't mater how smart or how practical you are , the big boys make the decision. I got the concluded here.

UBS has a price target of NZ$22.70 and a Buy rating on A2M.

Bell Potter has a price target of A$13.75 on A2M.
Morgan Stanley has a price target of NZ$13.50 on A2M.

Macquarie has a price target of A$17.95 on A2M.

And there are quite a few others but as I said basically meaningless, the companies future performance will decide the true price.

[nztx]

All have been working out for you , it doesn't mater how smart or how practical you are , the big boys make the decision. I got the concluded here.

UBS has a price target of NZ$22.70 and a Buy rating on A2M.

Bell Potter has a price target of A$13.75 on A2M.
Morgan Stanley has a price target of NZ$13.50 on A2M.

Macquarie has a price target of A$17.95 on A2M.

They're all over the place on ATM

what are the dates on each ?

What sort of Short overhang is there on ATM & has that increased or decreased ?

Any end of quarter tidy ups ?

[Beagle]

All have been working out for you , it doesn't mater how smart or how practical you are , things are done , news are out and the big boys made the decision. I got the concluded here.

UBS has a price target of NZ$22.70 and a Buy rating on A2M.

Bell Potter has a price target of A$13.75 on A2M.
Morgan Stanley has a price target of NZ$13.50 on A2M.

Macquarie has a price target of A$17.95 on A2M.

It is undecisive, so I take the top and the lowest and take the average of NZD$13.50 and NZD$22.70 .
The average SP for ATM is : NZD$18.10 .

It is a bargain. The Shorters are at it again every year.


Thought???

Concluding thoughts. Fundamentally the stock is extremely expensive for the forecast growth rate of 7% this year. Even with this rout at the time of posting the FY20 PE is over 29. I think there are far better opportunities for growth at a much cheaper price and it wouldn't surprise me in the slightest if there was no growth at all this year. Looking further out the Chinese communist party is whipping up tremendous nationalistic fervor to buy China made. I think growth in the future is going to be much tougher and more expensive to come by.

Growth has dramatically slowed over recent years and I think the best days growth are gone. It went from ~ $3 in March 2017 to $13 in March 2018 in just one year. You'll never see anything remotely like that again. From a TA perspective this still looks like a very risky hold to me. I think there's plenty more pain to come for shareholders in the short term. I'm in the Morgan Stanley camp and think $13.50 12 months hence is a fair call, (which suggests with a required rate of return on risk capital of say 10%) fair value is $13.50 /0.9 = ~ $12.15 now.

[tomm]

They're all over the place on ATM

what are the dates on each ?

What sort of Short overhang is there on ATM & has that increased or decreased ?

Any end of quarter tidy ups ?

Check these and see for yourself.
https://www.shortman.com.au/stock?q=a2m