ATM - A2 Milk Corporation Limited

[HKG2301]

You couldn't really get a more positive view than that, could you?

Seems a very balanced article. Here's a quote from it on valuation...


A quick peak at price to earnings ratios in Refinitiv with the share price at NZ$14.18 puts the P/E with earnings estimates for the end of June 2022 at about 21x, not bad for a company capable of growing above 20% over the coming years. Morningstar puts the company’s fair value at about NZ$16 while according to Refinitiv, sell-side analysts have a median fair value of NZ$19.4. Our own modeling puts the fair value somewhere between NZ$18 and NZ$22 depending on how aggressive we are with revenue growth estimates. Assuming the company can grow at 20% (slow versus historic standards) over the coming decade, the fair value would land closer to NZ$30, offering more than 100% upside. It is inherently difficult to model such high growth potential companies, and we generally err on the side of caution when deciding how much to pay for growth over longer periods.

At the low end of our valuation zone of NZ$18 and requiring a margin of safety near 30% for a company with plenty of risks, we are looking for an entry point below NZ$13, but already see value in the opportunity.

[Biscuit]

......At the low end of our valuation zone of NZ$18 and requiring a margin of safety near 30% for a company with plenty of risks, we are looking for an entry point below NZ$13, but already see value in the opportunity.

I think they will be lucky to get in under $13 without more negative news coming out, but who knows. The sp still going down. Bought some more today as it dipped under $14. There are plenty of different valuations out there but I don't see anyone with a valuation under $14 (except the sellers).

[Waltzing]

China has it appears from the news flashes cut its belt and road investments from 70 billion to 4 billion. It may start to ramp up again next year but the worlds is in flux. Still milk is a basic supply product and not likely to be subject to any variations in spending such a this latest plunge in china lending ... They will still buy milk...

[HKG2301]

Have the clocks changed in Sydney or something?

ATM sp didn't get hammered until 1pm today (11am EST) - an hour late!

[bull....]

another newspaper outlet saying a2 might be punished if china takes action on aussie dairy

Dairy

Both the milk and cream processing sector and the milk powder industry are “highly vulnerable” to hefty Chinese tariffs.
ASX-listed companies like A2 Milk Company Ltd (ASX: A2M), Bega Cheese Ltd (ASX: BGA) and Keytone Dairy Corporation Ltd (ASX: KTD) could see their stock prices sink if that happened.

https://www.fool.com.au/2020/12/09/w...a-punish-next/

[tomm]

With continued market share gains in China, the brand should only strengthen and revenue should continue to grow. Market share gains are supported by smart management decisions around a Chinese label, effective marketing and growth in the number of stores in its distribution channel. According to the company, there are over 120,000 MBS in China and with a2 only reaching less than 20,000 of them so far, there is a lot of runway left to reach China’s growing middle class.

When we look longer term, the US market may be the real dark horse. The company is currently building scale in the market, but it could eventually be a meaningful profit contributor. So far, the progress is impressive, and the market is huge. The US is the largest global milk market with a growing premium segment. According to a2’s September 2019 investor presentation, the premium refrigerated milk market in the US is $12.8 billion which is multiple times the size of the Australia and New Zealand market at about $1.7 billion and the Chinese market at about $4.6 billion

Growth has been hampered by COVID-19, but it is set to continue as the pandemic fades. The company should continue gaining market share in its main markets while expanding its product range to areas such as solutions for expecting mothers and older toddlers. Investors can reasonably expect strong double-digit sales growth for many years to come.

[Leftfield]

another newspaper outlet saying a2 might be punished if china takes action on aussie dairy....

Crikey Bull, you must be getting desperate if you think Motley Fool has any credibility.

[tomm]

I LOVE IT , SUCH A GREAT MANAGEMENT FROM A2MILK.

Supply chain risk is also substantial. The a2 Milk Company is heavily reliant on key suppliers such as Synlait and Fonterra and Chinese distributor China State Farm (the company’s exclusive import agent in China). The company has tried to reduce supply chain risk through contractual agreements with its key suppliers, but it remains largely dependent on continuing symbiotic relationships. The a2 Milk Company also has a meaning ownership stake in Synlait, but remains a minority investor. As mentioned, the company recently entered discussions to buy Mataura Valley Milk, partially to reduce supply chain risk, and has enough financial flexibility to continue to vertically integrate, but that would be at the cost of making the company more capital intensive. Mataura Valley Milk is currently majority owned by a highly respected China state-owned enterprise – China Animal Husbandry Group which is a sister company to China State Farm

[tomm]

Crikey Bull, you must be getting desperate if you think Motley Fool has any credibility.

The Chinese are very good at it ,you can see all the mentioned are 100% Ausie own (wine, meat , fruit) , they are clever enought to make sure they won't hurt their own pocket.

[Nigelk]

I LOVE IT , SUCH A GREAT MANAGEMENT FROM A2MILK.

Supply chain risk is also substantial. The a2 Milk Company is heavily reliant on key suppliers such as Synlait and Fonterra and Chinese distributor China State Farm (the company’s exclusive import agent in China). The company has tried to reduce supply chain risk through contractual agreements with its key suppliers, but it remains largely dependent on continuing symbiotic relationships. The a2 Milk Company also has a meaning ownership stake in Synlait, but remains a minority investor. As mentioned, the company recently entered discussions to buy Mataura Valley Milk, partially to reduce supply chain risk, and has enough financial flexibility to continue to vertically integrate, but that would be at the cost of making the company more capital intensive. Mataura Valley Milk is currently majority owned by a highly respected China state-owned enterprise – China Animal Husbandry Group which is a sister company to China State Farm

I don't get what you're saying ... if they buy the company from the Chinese, the Chinese don't own it anymore