ATM - A2 Milk Corporation Limited

[sb9]

Stock should be trading on a PE of 18 - $6.84

Third downgrade would see it down to that level.

If it gets to that level, there’ll be multiple bids the next day to scoop up the company...

[Snoopy]

I’ve seen somewhere if you take the cash on hand into the equation, the P/E is already around 17?

This is flawed logic. If ATM were going to take all their cash and give you a bumper special dividend then you would be on the right track. But ATM need the cash for their second tilt at the United States market, which is loss making. If they give you the cash, then ATM will not be able to develop the US and other Asian markets and growth will slow. ATM trades on a very high PE ratio (and yes so does much of the rest of the market but that is beside the point). Without growth the share price will collapse. (Some will say this process has already started.).

The whole idea that ATM has 'a lot of cash' is not true anyway from an investor perspective. Yes there is a lot in dollar terms But having to pay $11 for a share to buy $1.15 worth of cash is a very expensive way to obtain 'cash'.

Equally absurd is the suggestion that shareholders should ignore losses in the USA when valuing the company. It is true that shareholders would make more money today if the US operation was shut down. But guess what? A core part of future growth is to expand in the US. If such a growth plan did not exists the PE ratio would be trimmed again, as it became clear that ATM was a one market wonder for infant formula. The cash is needed "in house" to develop the business. Only when ATM starts to pay a dividend might a shareholder consider even some of that cash to be surplus to requirements, and so to be valued separately.

SNOOPY

[Balance]

If it gets to that level, there’ll be multiple bids the next day to scoop up the company...

Not if there’s a third downgrade.

[winner69]

If it gets to that level, there’ll be multiple bids the next day to scoop up the company...

Suppose there are some who would pay $8 billion for a $300m annual cash flow

[Mr Slothbear]

This is flawed logic. If ATM were going to take all their cash and give you a bumper special dividend then you would be on the right track. But ATM need the cash for their second tilt at the United States market, which is loss making. If they give you the cash, then ATM will not be able to develop the US and other Asian markets and growth will slow. ATM trades on a very high PE ratio (and yes so does much of the rest of the market but that is beside the point). Without growth the share price will collapse. (Some will say this process has already started.
SNOOPY

100% incorrect. Have been over this before A2 can fund US and asia growth via ongoing cashflow and future manufacturing partnerships.

US is very close to break even

as I said last time check ROIC and ROE. A2 need very little capital to grow.

in fact they need so little capital to grow thats why the massive cash pile is growing in the bank. Hard to spend it when you don’t really need to and can’t justify it besides the geographical diversification, risk spread etc..

[Snoopy]

100% incorrect. Have been over this before A2 can fund US and asia growth via ongoing cashflow and future manufacturing partnerships.

US is very close to break even

as I said last time check ROIC and ROE. A2 need very little capital to grow.

in fact they need so little capital to grow thats why the massive cash pile is growing in the bank. Hard to spend it when you don’t really need to and can’t justify it besides the geographical diversification, risk spread etc..

Mr Slothbear. You may be right in that future business development can be funded by future cashflow. But without sitting in that boardroom you really don't know what A2's plans for their cash is. Of late they have shown interest in buying into manufacturing plant that wasn't apparent in the early days for example. Where you are wrong is that the cash is very easy to spend. Just declare a special dividend and all that surplus cash will be gone. But A2 haven't done that. And the reason is they want to retain it to develop the business in ways you or I are not privy to. So until A2 declare a special dividend to divest themselves of all their supposedly surplus cash, taking the cash as an asset to be valued separately is actually counting it twice.

SNOOPY

[sb9]

Not if there’s a third downgrade.

Remember what happened to Bellamys, that was in more dire straits than A2..

[FTG]

Victoria went into hard lockdown from beginning of August.

The impact on daigou trade must have been felt within the first few weeks?

It took the company nearly 2 months to wake up to the problem?

Beggars belief !

Agree Balance. Frankly, the entire management/governance around these matters have been quite poor, bordering on negligent. Disappointing, and I'm not even a shareholder. I smell a rat....and as we know, if it smells like a rat, sounds like a rat and looks like a rat....

Going into a trading halt was unnecessary, and a little akin to a possum in headlights. Perhaps they were trying to "buy themselves some time" so they could set/control the narrative?

Technicals are still not looking healthy on the chart. But there may be a little support around $10. Interestingly we are now pretty much around the 50% retracement level off the FTH, but with yesterdays gap down, I wouldn't recommend trying to catch a falling knife right here & now. Seeing a number with an 8 in front is not inconceivable!

[Blue Skies]

Remember what happened to Bellamys, that was in more dire straits than A2..

Up 81.7% in the last 12 months in case anyones forgotten.
And AIR still in dire straits, up 125% in 9 months. (A lot of us got that wrong)

[alokdhir]

Best way to trade or invest in ATM ...follow KFL people not any outperform or must buy reports of fake news brokers, analysts and investment banks

They are the ones with actual money in the business .

They were the first ones who said we have reduced our position as sales not performing as we expected . Read their latest monthly report then you will know .
Yes they saved investors $ 1.5 mil by selling 500,000 ATM over $ 14 last week !!!
I followed them in and out ...though was not happy to exit around 14 but rest is history now ...

To get future track of ATM need study what they doing with their rest 3.8 million ATM !!!!