ATM - A2 Milk Corporation Limited

[ralph]

Or you could just drink water which is free, requires no fertiliser, no land, no greenhouse gas emissions and no extra water and it is nutritionally very similar to oat milk.

OR water from a still or fermented with grapes Hic leaves a bit of a footprint in the mornings . Seriously dont worry they will not replace milk ,but maybe a 2 with Organic full fat non homogenized

[Balance]

... well, yes - lines in the sand are easy to cross ;

Reason why A2M dropped below the $10 line in the sand?

A downgrade note from yet another broker this week:

"According to a note out of Citi, its analysts have retained their sell rating and cut the price target on this infant formula and fresh milk company’s shares to $9.40.

The broker expects the company to continue to struggle in the second half of FY 2021 due to ongoing weakness in the daigou channel and a resurgence in Chinese infant formula brands.

It appears concerned these pressures could be structural. Incidentally, for similar reasons, the broker has reaffirmed its sell rating and 51 cents price target on Bubs Australia Ltd (ASX: BUB) shares.

The a2 Milk share price is currently fetching $10.45."

[BlackPeter]

https://otisoatmilk.co.nz/ Hmmm...couldn't help noticing this claim
Lighter on the land. The Oat footprint is much lighter, according to global research. Producing one litre of oat milk requires 11x less land, 13x less water, 6.5x less fertiliser, and emits 3.5x less greenhouse gas emissions than one litre of dairy milk.

Hmmm...Wonder how much the price will come down too when they start producing it at great scale ? Maybe that factory they are looking to build in Southland is worth investing in ? I know who to ring to make more enquiries

Really one has to wonder if this isn't the future if its so environmentally friendly and good for you.

Can't help noticing Oat also rhymes with Moat...ATM used to talk a lot about their IP moat but have gone very quiet about that in recent times.

I think there is only one minor point of difference: There is not more milk in "oat milk" than there is fun in a "fun run".

Oat milk is a white colored emulsion of squashed plant based substances in water which has (from a chemical and nutritional perspective) absolutely nothing to do with real milk. I must however admit that it looks similar like the white colored water they sell in New Zealand supermarkets as real milk (with all the good stuff which nature puts into real milk removed).

[LEMON]

Speculation of lockdown in Melbourne to last up to 3 weeks.
Does anyone think this will be likely to affect A2 again with distribution etc??

[Habits]

Yes that is right it could have an effect though I heard the LD is for 5 days... maybe I should have sold these first thing last Tuesday like I planned but got talked out of it. Let's wait and see what the reaction is on Monday

[LEMON]

Yeah, the word is Dan Andrews, the Victorian premier gave 1 hours notice for a 5-day lockdown to prevent panic rather than give the full details of a full lockdown for a longer period. Instead, it backfired and people when loco anyway.

Some lady in the airport cafe also was positive and had served thousands of travellers moving around the country.
As usual, I must STATE this is only speculation but it may not look good for AUS which I believe will affect A2 heavily if it results in another severe lockdown.
I believe it's the UK variant also.
Monday may not look to good!

Again this is the only word in the grapevine

[Beagle]

I think there is only one minor point of difference: There is not more milk in "oat milk" than there is fun in a "fun run".

Oat milk is a white colored emulsion of squashed plant based substances in water which has (from a chemical and nutritional perspective) absolutely nothing to do with real milk. I must however admit that it looks similar like the white colored water they sell in New Zealand supermarkets as real milk (with all the good stuff which nature puts into real milk removed).

I can sense a doggy blindfold taste test coming for this hound in the near future. I must get Mrs Beagle to arrange several small samples of milk, A2M lite, Anchor lite, Almond, Goat, Oat, and Soy Milk. Got to be something in there I like because to be honest I find my inclination to drink milk declining quite significantly in recent times. Back to things that rhyme with goat and oat, one thing that really worries me going forward for ATM is the apparent lack of any moat. For years they talked up the value of their IP and the protection it accorded them but its clear with the passage of time these claims had no basis in law or fact whatsoever. It makes me wonder about the integrity of the claims they make about "it just makes you feel better".

The second thing that really worries me is they are so heavily dependent on China. The inherent high level of ongoing (and rising in my opinion), geopolitical and trade risk that goes with that makes me feel quite uncomfortable about getting back into this stock in any meaningful way.

https://www.marketscreener.com/quote...apide&mots=ATM Market screener has them on a FY21 PE of 28.
We know one can make DCF models to come up with almost any valuation you like dependent on one's assumptions regarding the future growth rate, (which lets all be honest is anyone's guess).

For my money I will stick with my model which has worked very well for me. I take a no growth PE which is currently 11 and will pay 1 PE more for every 1% growth rate I think a company can =grow at on average for the next 10 years.

Running this filter over ATM even after the ~ 50% correction on a forward PE of 28 this suggests to me that for me to be interested in ATM (leaving aside geopolitical and trade risks for a minute), I would need to feel they can grow eps at a compound average rate of 17% per annum for the next decade. My best guess, (and that's all it is), is they are unlikely to grow eps at that rate on average.

I think the Chinese brands are going to continue to gain more traction and the long term prognosis for trade protectionism is worrisome.
I think their years of fast growth are behind them and as they fail my filter I am still happy to sit on the sidelines notwithstanding the ~ 50% correction in the last 7-8 months.
Quite apart from any attempt to have a guess at the average future growth rate I can't help noticing that the chart still looks really horrible. I think anyone buying in the current downtrend is very "brave" Trying to pick a bottom in a downtrend is a messy business that usually end badly.

Better to wait for a confirmed TA signal of a new uptrend and buy into upwards momentum, a far less risky proposition (Thanks to KW, Baa Baa, Hoop and others for sharing your TA skills with us).

[Tomtom]

Maybe, can you name one?

Of course. Art must always be driven by purpose, without purpose it would merely be decoration.

[Habits]

All very good advice Beagle thank you... you are a smart bow-wow!! Thats the first time i have heard a formula for assessing PE ratio, yours seems a most useful way to get a perspective on that. Also good to be reminded to avoid downtrends even though they are tempting to average cost.. like last march when I kept buying HLG as they were falling from 6 bucks through 5 and 4 eventually i had to give up. I again bought more in the low 2s. We know what happened after that but it took until about 4.70 before i broke even. Absolutely crazy but I should have just waited.

[Biscuit]

Of course. Art must always be driven by purpose, without purpose it would merely be decoration.

We are going to get trashed for going off track, but I'd have to say that is a pretty weak "rule" of art! You are probably right although Jackson Pollock comes to mind, also Desmond Morris's paintings by his chimpanzee must defy the "rule of purpose". Also, wasn't it a big thing in the 60's to tie paintbrushes to animals to produce fairly random abstract art?

Discl: still holding ATM.