ATM - A2 Milk Corporation Limited

[nextbigthing]

Danube want $550m or something out of Fonterra for the recent bot scare. That amount would buy them ATM at the current shareprice. My point being at this price it's peanuts to a large company like that, yet what's the IP worth to them? Ironic that the price has been driven right down recently.

[NT001]

There’s been a total of $3,572M dollars wiped off XRO’s market cap since its peak thus far, yep I had to calculate that twice, couldn't believe it initially.

Much of that would have been salvaged from elsewhere, and many XRO investors were probably predisposed to investing heavily within the SciTech sector also. It’s no wonder stocks like ATM and PEB have been so very heavily beaten up in that context.

But, that just serves to provide absolute bargain basement prices for both growth and value investors about here. At 55c ATM is a half price discount sale as far as I’m concerned.

It’s been an interesting one, I don’t think very many at all back in March would have anticipated precisely that a single stock sell down like XRO could have had so much impact on others.

That's a fascinating calculation, MAC, and really does give substance to this line of thinking. Strange that it doesn't seem to have been picked up by the media business analysts - it's got huge market ramifications. Is there any way of knowing how much of the investment in Xero was actually by NZers rather than offshore investors/traders?

[BFG]

What you witnessed in March was worldwide investors realising QE was ending and with it the hot money chasing more money upwards at extreme valuations. As such, growth stocks suffered horrendously. ATM is listed as growth.

I can guarantee a lot of those funds losing money were from elsewhere as XRO joined the NZX50 and the MSCI Global Index. Saw a lot of international trades pre and post market as well as Asian and Aussie traders flooding in around noon during the runs.

[MAC]

That's a fascinating calculation, MAC, and really does give substance to this line of thinking. Strange that it doesn't seem to have been picked up by the media business analysts - it's got huge market ramifications. Is there any way of knowing how much of the investment in Xero was actually by NZers rather than offshore investors/traders?

I'm really not sure NT, XRO is not a stock I own or research all that heavily, perhaps a question for others, but with the ATM market cap at a humble $356M, it does seem to provide some perspective.

Agree with you NBT, it does make ATM look like a tasty tit bit in the big picture.

[Goldstein]

There’s been a total of $3,572M dollars wiped off XRO’s market cap since its peak thus far, yep I had to calculate that twice, couldn't believe it initially.

Just checked the total NZX market cap, which is 88b. So your figure MAC is a whopping 4% (of current value). Blimey.

[Xerof]

Don't get too carried away.....the vast majority of holders hold (almost) forever, just look at any top 100 share register. It's just a peripheral group who will be in and out, plus the churners of course, who might play every day with a small fraction of their holdings, letting the algo's do it all for them

So, for most (in XRO at least), it's huge paper gains made on the way up, followed mostly by huge paper losses on the way down, to be sitting wondering WTF happened to their paper profits

[winner69]

Just checked the total NZX market cap, which is 88b. So your figure MAC is a whopping 4% (of current value). Blimey.

Add in $0.9 billion that RYM is down and the $1.0 billion FBU is down the losses on the NZX have been truly horrendous

Puts the $0.3 billion that ATM are down in the not too bad category eh .....almost on a par with EBO

[NT001]

Agree with you NBT, it does make ATM look like a tasty tit bit in the big picture.

For quite a while I've been suspicious that a planned takeover might be behind the apparently odd behaviour of the ATM share price, but this raises the question: what would a new owner actually do with ATM?

If the objective was to buy up its IP, what for? To try to close down the whole A1-A2 debate? That wouldn't achieve much because scientists around the world, totally independent of A2MC, have got their teeth into the issue of BCM7 and the risks attached to A1, and they can't be closed down, and won't be. They've barely started on this and will keep going on issues like BCM7's links with autism, schizophrenia, SIDS etc, and later the harder-to-prove links with diabetes and heart disease. They don't need funding from A2MC to keep working on issues that are of serious health concern globally.

A second alternative might be that the buyer would want to do pretty much what A2MC is already doing, but push it much faster. This would involve very vigorously promoting public understanding of the medical risks of A1, in other words taking on the global mainstream dairy industry head-on. Realistically this could only be done by a company that is not already involved itself in the production, processing or marketing of dairy products containing A1. That excludes Fonterra, Danone, Nestle etc. It would also involve antagonising the authorities in countries like China, Australia, NZ and quite a few others that have huge dairy industries and would not want to be told they are basically poison.

There's also the issue of supply. One reason A2MC is not moving quite as fast as some of us would like in places like the UK and USA is that it takes time to organise sources of supply, farmers in concentrated areas around a specialist processing plant who can produce commercially viable supplies of guiaranteed pure A2 milk. Not so hard if A2 is marketed as a niche product, but harder if it's supposed to take a big slice of the market.

So I'm going off the takeover idea. What I can still envisage, though, is a big company in the food and beverage field that is not in the dairy sector wanting a piece of the action through a buy-in. But that would have to be through a friendly offer. And let's not forget, Freedom Foods is already there with nearly 19% of A2MC and access through the Perich family to more cash if needed.

[MAC]

I had always considered a US takeover as more likely than Chinese or Australian, wouldn't rule it completly out though.

This is all hypothetical of course, there is no guarantee ATM would get the same penetration as they presently have or may continue to further grow in Australia, or alternativley they could get more in the US, who really knows. Home brand retail milk prices are similar in Australia and the US though.

Australia pop: 23M
United states pop: 319M
Australian segment revenues FY14: $107M

A similar sized US market could generate in say 5 years time, 107 x (319/23) = $1,484M in revenues

With an ATM market cap presently at $363M, the US market alone could well be attractive to one of the larger US dairy companies whom may want it from the get go, well about now.

[see weed]

With respect NT001 I don't really know where to start. Those studies suggesting a heath benefit associated with a2 milk as against a1 milk are inconclusive. They have not been accepted by mainstream health professionals as convincing. They have to be convincing in order to establish a likely benefit.

I take it that your explanation as to why the majority of mainstream health professionals do not accept there is a benefit with a2 is because you think they are bias, or there is a world-wide conspiracy on the part of the dairy industry or some such thing. In my view that is unlikely, the better view is that most mainstream health professionals who have taken the time to review the evidence have found it unconvincing.

My worry with this thread is that (with the greatest of respect) there is a nut-case element. Some of the activities described are a little disturbing (seeweed) and much of the "scientific" comment is at best unmeasured and at worst ignorant.

Fully agree, I would have to be a nut-case buying another 18k today, which I did. Phoned Milford Asset Man. this avo, but they would not tell me anything.