ATM - A2 Milk Corporation Limited

[LEMON]

http://thefoodbeveragenews.com/461/t...milk-products/

[LEMON]

https://www.fooddive.com/news/study-higher-plant-based-milk-prices-are-justified-but-dairy-milk-is-too/594744/

[LEMON]

https://www.google.com/amp/s/www.ope...-699-2-million

[Snoopy]

https://www.google.com/amp/s/www.ope...-699-2-million

"The key players operating in the a2 milk industry include GCMMF (Amul), Erden Creamery Private Limited, Freedom Foods Group Limited, Lion Dairy & Drinks, Provilac Dairy Farms Pvt. Ltd., Ripley Farms LLC, Taw River Dairy, The a2 Milk Company Limited, Urban Farms Milk and Vinamilk."

Hmmm, the A2 milk landscape is more of a 'battlegound' than I thought!

SNOOPY

[Akane]

Still blaming the Daigou aye, you'd thought for a billion dollar company they would've figured out how to ship their products via alternative channels by now, it's almost a year since the big lockdown.

[BlackPeter]

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).

Great reminder and reality check;

Related to your proposed blind test though would I recommend to add some real unprocessed milk as well ... all the stuff you can buy in the shop (particularly the "light" stuff) is compared to real raw milk basically tasteless. Waste of money.

BTW - real milk does not make fat (well, if consumed in moderation) .... the cream which they remove during processing is actually good for your body to process the good things in the milk (helps your body next to other things to absorb the vitamin D and use the calcium in the milk instead of just flushing it through your kidneys).

[Balance]

Still blaming the Daigou aye, you'd thought for a billion dollar company they would've figured out how to ship their products via alternative channels by now, it's almost a year since the big lockdown.

Gotto be fair - the pandemic has impacted on almost all businesses and ATM is no different from the other Australasian businesses adversely impacted by the Daigou disruption.

The greater issue though as you alert to is whether there is more to the slowdown in sales than just the Daigou disruption - the competition is certainly heating up out there and has ATM lost its ‘first mover advantage’ competitive edge and is its product premium pricing coming under stress?

ATM $44 per can vs Karicare A2 ind as by formula $32 per can.

Lately I have noticed Karicare A2 IF stock at two of our local supermarkets looking rather scarce vs plenty for ATM platinum.

And Karicare is launching a new A2 formulation shortly according to my contacts.

[Beagle]

Great reminder and reality check;

Related to your proposed blind test though would I recommend to add some real unprocessed milk as well ... all the stuff you can buy in the shop (particularly the "light" stuff) is compared to real raw milk basically tasteless. Waste of money.

BTW - real milk does not make fat (well, if consumed in moderation) .... the cream which they remove during processing is actually good for your body to process the good things in the milk (helps your body next to other things to absorb the vitamin D and use the calcium in the milk instead of just flushing it through your kidneys).

Good idea mate. Must admit I have often pondered how much goodness is sucked out of milk to make it "lite"

[alokdhir]

Does anyone give any importance to why pasteurisation was discovered and why all raw milk was advised to be boiled before consuming it ??

Processing of milk mainly pasteurisation still has many benefits and drinking not boiled raw milk is still not a safe practise for adults leave alone kids

Making milk light also has its advantages ...removing saturated fat is beneficial for majority of world's overfed population

[BlackPeter]

Does anyone give any importance to why pasteurisation was discovered and why all raw milk was advised to be boiled before consuming it ??

Processing of milk mainly pasteurisation still has many benefits and drinking not boiled raw milk is still not a safe practise for adults leave alone kids

Making milk light also has its advantages ...removing saturated fat is beneficial for majority of world's overfed population

Probably not the right subject for this thread - and I don't really want to get into all the nutritional quasi religious nonsense spouted around by nutritionists but changed every 10 years when a new generation of nutritional scientists starts to make their career. Most things we eat are depending on the flavor of the year either healthy or terrible for your health - but it changes: Meat, red meat, cholesterol, eggs, real milk, light milk, ... pick your choice in the right year, but difficult to keep up.

My family is drinking raw milk (with short breaks) for the last 60 years and we never had any related health problems and are all healthy, while a number of our NZ friends and acquaintances only taking in the oh so healthy "light" stuff suffer now from osteoporosis. Pretty sad. Some changed now to real milk, but I recon it might be too late for them ... if your bones are porous, you can't really refill them.

No kidding - we do know too many NZ friends / acquaintances with the light milk brain fad and suffering now under osteoporosis, while none of our friends and family back in Germany (where they don't have the light milk fad) suffer under this disease.

Making milk light has however a lot of advantages for the processor - it allows them to take all the good stuff out of the milk and to sell the remaining water to the full milk price to the people dumb enough to pay for it.

Obviously - if your calorie intake is too high and your exercise regime too light, you will gain weight and have other related negative health effects ... In this case it is a good idea to eat less and better and exercise more.

Anyway - each to their own :

I do agree however with your comment on pasteurization. It is a good idea unless you can control the cow and milkshed hygiene (which is difficult unless you milk your own cow). We can :