ATM - A2 Milk Corporation Limited

[longy]

8 times out of 10, sell when executives are selling, especially when many of them are doing so.

ATM is the outstanding example this year of following the executives.
Likewise, buy when they are buying.

I will remember this lesson for a very long time!!!

[troyvdh]

Some old buggers like myself remember that if one is recieving an annual compounding return of 7 % ..you're doing ok...just saying..

[Old mate]

I was in Hold ATM camp against my better judgement after posting here first that ASM commentary is not very convincing ...today I bailed out as management let me down by trying to fool investors two times first after full year results that strong growth expected and after 40 days they down grade ...then at ASM stating no downgrades and then after 30 days give massive profit and sales warning ...really disappointing behaviour from highly paid professionals

I have done done the same. There behaviour is nothing short of very dodgy.
Ive had enough.

[Balance]

I will remember this lesson for a very long time!!!

https://www.fool.com.au/2020/08/28/a...ons-of-shares/

Great selling by the executives!

[sb9]

https://www.fool.com.au/2020/08/28/a...ons-of-shares/

Great selling by the executives!

To be fair, management have sold post FY results every year if we go back and check details. This year has been exceptionally unpredictable with Covid disruption and current Aus-China spat.

If anything, it gives opportunity for management to refine their underlying strategy to counter these sort of disruptions. 2021 will no doubt gonna be difficult but it also gives company the opportunity to reflect and rejuvenate with fresh ideas. Let’s see if the new CEO has got that skill to steer the ship well, if so he’ll be in for a huge windfall and shareholders.

Finally time’s really up for that Hearn guy to go as I said many times before, I voted against his reelection for last two years.

[bull....]

https://www.fool.com.au/2020/08/28/a...ons-of-shares/

Great selling by the executives!

very smart executives running a2. impeccable timing. must have been reading my tea leafs on sharetrader

[winner69]

Personally I'm well down on a large parcel I purchased at $15.06 but my gut feeling is telling me to ride this out, its only a loss once I bail, and the majority of the loss has already happened. Biggest issue for me now, I held money back to average down and have held off doing so, key is trying to time a potential bottom. There was an uplift in late trading today but I think it's too early to tell if today was the bottom. I'd be keen to see who was buying today, if any institutions have started buying, clearly a lot of shares changed hands, was this a further move out of retail holders into institutional holders and how much of the company is now owned by the big fish...

Difficult to pick the bottom mate

As you still believe in A2 (after all still going to make $300m odd in F21) why not average down in lots.... say buy a third of what you are going to add to your holding on Monday and then other lots in following weeks or appropriate periods

Might miss the bottom but probably get a pretty good price

[whome]

Courtesy of NZ Herald -‘Shane Solly, portfolio manager with Salt Funds Management, said a2 Milk's earnings downgrade has left a sour taste in investors' mouths. "It's a Christmas present no-one wants.
"The company was clearly expecting a recovery in the daigou and that has not happened through the lack of travel with China. Their mistake was being too optimistic about the daigou demand returning."
Solly said a2 Milk's direct sales to China are strong with 40 per growth in the mother and baby stores. "It is still a premium product and a well-respected brand, and the sour taste will take time to rinse through. This is maybe the reset a2 Milk needed in terms of sales and margins."
I go along with Shane’s view. I see this period as the darkest days for A2 given the effect COVID has had in stopping daigou coupled with stupid Aussie politicians prodding China and getting tariffs imposed in return - not yet for infant formula but the threat is there. With 240 vaccines being trialled around the world I see COVID receding in the next 12 mths due to increased herd immunity if nothing else. We really need a vaccine against Aussie politicians. As Winner said A2 are still going to make $300 mill in ‘21. Too late to sell after the event but that’s investing - and have seen plenty ups & downs after 50 years in shares. Discl. Hold A2 and not selling. I would be interested to hear from posters directly involved in daigou.

[Beagle]

Courtesy of NZ Herald -‘Shane Solly, portfolio manager with Salt Funds Management, said a2 Milk's earnings downgrade has left a sour taste in investors' mouths. "It's a Christmas present no-one wants.
"The company was clearly expecting a recovery in the daigou and that has not happened through the lack of travel with China. Their mistake was being too optimistic about the daigou demand returning."
Solly said a2 Milk's direct sales to China are strong with 40 per growth in the mother and baby stores. "It is still a premium product and a well-respected brand, and the sour taste will take time to rinse through. This is maybe the reset a2 Milk needed in terms of sales and margins."
I go along with Shane’s view. I see this period as the darkest days for A2 given the effect COVID has had in stopping daigou coupled with stupid Aussie politicians prodding China and getting tariffs imposed in return - not yet for infant formula but the threat is there. With 240 vaccines being trialled around the world I see COVID receding in the next 12 mths due to increased herd immunity if nothing else. We really need a vaccine against Aussie politicians. As Winner said A2 are still going to make $300 mill in ‘21. Too late to sell after the event but that’s investing - and have seen plenty ups & downs after 50 years in shares. Discl. Hold A2 and not selling. I would be interested to hear from posters directly involved in daigou.

I have them on a forward PE of 28.2 based on eps of 39 cps for FY21 and that assumes there is not another downgrade, (which I do not think is a safe assumption).
Yesterday's share price drop on the face of it seems logical enough, (dropped in line with the forecast drop in current year eps) but no account seems to have been taken by the market yet of whether metrics of that order are still appropriate going forward given reports suggesting Chinese made IF is apparently gaining significantly more traction and predatory pricing practices by Fonterra with their Karicare A2 IF might cause ATM's growth rate to slow going forward. There's also no apparent account with those suggested metrics with the very heightened geopolitical risks that are readily apparent. On top of that I think management's credibility is now at best, "in doubt".

I guess it all comes down to whether one accepts management's explanation that this is a one-off Covid impact affecting the daigou sales or whether there are issues with the brand starting to lose traction with its growth ? I am skeptical that management are being completely transparent on what's happening out there, (for commercially sensitive reasons) and human nature is such one always wants to think the challenges presenting are temporary and the good times will start rolling again soon enough. Hope is a strategy, or is it ?

I remember the days ATM was on a forward PE of 30 and they were growing eps at 30-40%, that was the time to own them in my opinion...that they are still on a very similar metrics when there is now ample evidence growth has dramatically slowed in recent years and obvious headwinds to the business, frankly surprises me.

I would say in my several decades of investing that the old adage that downgrades usually come in three's is correct more than 90% of the time.
I think earnings will get another downgrade and the metrics this company trades on will also get a significant reset.

For what its worth, I never buy shares in a downtrend.

[Poet]

Like a lot of others, I'm not only not pleased but also highly suspicious of what's gone on here. It particularly irks me that management and board were selling large numbers of shares (shares, I might add that were not even bought and paid for by them, but instead were provided by us the shareholders in light of the fantastic levels of management performance)

According to Shane Solly
"The company was clearly expecting a recovery in the daigou and that has not happened through the lack of travel with China. Their mistake was being too optimistic about the daigou demand returning."

What I want to know is what sales numbers were the board and management looking at on 18 November when they reaffirmed revenue guidance for 1H21 at 725 to 775 million. At that point they were stating that there was a non zero possibility that (with just six weeks to run until the end of 1h21) they would achieve revenue of $775 million. Now four weeks later they are saying $670m so a deterioration of $105 million in a month.

Anybody have a guess at what sales number they would have to have had already "in the bank" at 18 November for them to sensibly and rationally think they could get to a total of $775million over the subsequent 6 weeks? I would pick that they would have needed around $595 million if they were doing a simple linear extrapolation from the known to the unknown, they may have some justification for using something slightly more optimistic than a simple linear model but....

Since they are now saying actual outcome will be $670m, I'm thinking it likely they only had around $520m banked at 18 November, so the $2B question is why they thought it reasonable to make such wildly optimistic projections.