ATM - A2 Milk Corporation Limited

[Biscuit]

....I still can't work out whether they've just seized the opportunity, or if it is a margin grab, or they need the volume, or that they've just essentially raised the white flag to the competition......or a combo of each.....

Interesting question. Would make sense that it is a bit of all of that - but maybe not the white flag bit. Also a sign that they have some confusion over their strategy? They were an "all about the brand" marketing company now they are a bit of that and a bit of a factory as well. They are a pretty interesting company at any rate!

[Mr Slothbear]

Looking at A2 at the moment, to me the most puzzling aspect is MVM.

We all know the issue with daigou/sales/revenue - and the processing agreement with SML. Surely at the moment they don't need more supply capacity.

To re-visit the investor update from the most recent announcement:



The plant has been a bit of dog since it has been built, but heard the original holders didn't tip in the capital they promised and milk supply a hodge-podge with everyone at different pricing, among other things.

It obviously has potential, and spreads geographic/supply risk - but what can they do that Synlait can't or couldn't? Have they just taken the opportunity while it has come up?

Or is this more a Synlait story - we all know how how reliant they are on A2 for their cream, but remembering that A2 own near 20% of SML, valued at $170m even at todays SP. Synlait updated the market at the same time as ATM before Christmas and said their IF volumes were going to be down 35% of the year and NPAT would halve (from $75m last year). Synlait have all sorts of issues, but is this a margin grab by A2? Or are they also worried about Synlait in some way?

Would be waaaaay too elementary, but $37.5m less NPAT on a volume drop of 35% might suggest they make $100m/pa out of A2. And SML have alot of other issues with their profitability. But regardless alot of value of A2 in that SML SP. So are A2 trying long-term to take that processing margin to MVM, at the expense of Synlait - with whom A2 don't have a rep on the board.

While I can understand the "Strategic Rationale", surely at the end of the day they bought them because they think they need more product and capacity? The trouble is they probably couldn't tip that money into Synlait without triggering some sort of takeover.

Then in the "transitional period" they are expecting to lose another $10m per annum, until FY 2025 - which seems a long time when the plant has already been up and operating for a few years. Then does A2 have the expertise and experience to make the plant work?

Maybe the plant came for sale and they looked at their cash pile, and thought "why not". Or maybe it is a hedge against the (ever-increasing) competition who own their own plants, can produce A2 and are attacking them on price & squeezing margins - and the start of A2 becoming more vertically integrated, and a more traditional producer model.

Clearly they haven't been willing to spend a large chunk of their cash pile and have a real big crack on marketing and building their moat (ie their brand). Will they roll the dice and go post-Covid?

I still can't work out whether they've just seized the opportunity, or if it is a margin grab, or they need the volume, or that they've just essentially raised the white flag to the competition......or a combo of each.

Still puzzled.....

nice to see some genuine thinking and analysis in the thread.

my thoughts bob are that part of the rationale comes into monopolising milk supply, if A2 don’t control all that milk then it leaves it open to purchase by competitora.

i also think its a great hedge against climate change, one only need look at the bushfires in aus and frequent droughts and how they can upset supply in both aus or potentially synlaits catchment as climate becomes much more variable.

as you said on the face of it it looks strange but i’m sure in a couple of years they’ll have launched IF in the USA and it would make sense to supply it from NZ while also increasing their freah milk sales in the USA being done with fresh milk farmed in the USA. They’re also planning to get it SAMR and china label is still tip of the iceberg.

By 2025 inthink their volume requirements will have significantly increased

[Rawz]

According to google, had to look it up as it's a long time since I had one, it's recommended that babies stop drinking IF at a year old, getting enough nutrition from 3 meals plus snacks a day. So the mothers who couldn't buy ATM last year, the changing brands argument, are not going to be the ones buying IF this year.

ATM is a classic example of complacent leadership, they were in a management bubble long before COVID hit.

Babies 'may not' need IF after 1yr to continue to grow but almost all parents I know continue with at least a night bottle up to 2yrs for the extra nutrients + help get them to sleep.

A better comparison from this Jan would be to compare to Jan 2019.
Jan 2020 had big pantry stocking so little point in comparing against those numbers.

[tomm]

Just Sell and someone will buy.
Just Buy and get the reward.

[tomm]

Financial Writer, Australia | Publication date: Monday 01 March 2021 15:54

Citi has remained unconvinced by A2M's interim results, reiterating their Sell rating and lowering their price target to AUD$7.15 per share.
UBS has a Buy rating and a NZD$15.60 price target on A2M.
Macquarie analysts have taken a middle-ground approach, highlighting the uncertainty which the company still faces, a Neutral rating and AUD$13.84 price target.

[winner69]

Financial Writer, Australia | Publication date: Monday 01 March 2021 15:54

Citi has remained unconvinced by A2M's interim results, reiterating their Sell rating and lowering their price target to AUD$7.15 per share.
UBS has a Buy rating and a NZD$15.60 price target on A2M.
Macquarie analysts have taken a middle-ground approach, highlighting the uncertainty which the company still faces, a Neutral rating and AUD$13.84 price target.

Seem guru analysts have varying opinions

Bit like Sharetrader legends

[tomm]

Seem guru analysts have varying opinions

Bit like Sharetrader legends

LOL hahaahh

[BlackPeter]

Just very simple question : are you holding this stock or are you looking for an entry ? If neither , why are you bothering post here ? Whatever happens are already happened! The Sp is already taken into account, the Sp is accounted for is from now , its a choice of people whom have faith in the product and the company as this company produced a straight record up until the covid -19 worldwide issue.
Repeating yourself about this issue which effected worldwide is helpless.
As I said earlier before , if you save time to post (whatever it is which people is already knew) and put an oder in, you won't have to repeating people's issue.
This happen to any stocks , not just ATM. If you dislike : SELL NOW. If you like this stock : BUY NOW.

Last time I checked this was an open forum. Who gave you the authority to attempt to bully others away from using it?

Anybody is welcome to contribute their views on stocks - and it is not up to self appointed watchdogs to control the flow of information in order to ensure a company is up- (or down-) ramped.

I certainly want to see all views on the companies which interest me. In case you do have a constructive arguments - please provide them, but stop to bully others for sharing their views, just because they don't fit into your picture.

Play the ball, not the player.

[xp04]

Speaks for itself :

Posted 11 Jan 2021



Fourth downgrade on the way - new CEO will be going in with his own mandate to clean out every single cupboard of gross mismanagement which we know is there.

How the heck can any well managed multi-billion dollar company not know how bad their stock situation & sales were?

Sales not being achieved = stock piling up because management had no clue.

Getting rid of stock = reduced margins.

Too easy to blame it on Covid & Daigou - allows management & BOD off the hook.

As Craig’s note alerted to - ATM has lost momentum vs it’s competitors.

And all that while executives and directors were feasting on share options, huge benefits and salaries and selling shares after telling all and sundry that everything is good!

So, where are the skeletons? What was so shocking and new in the report that was not known before?

stock situation & sales was known after December's update - nothing new
Sales not being achieved - which one? HY is above last guidance and below last year as was stated before - nothing new
Getting rid of stock - they were opened on this issue as well - nothing new
Too easy to blame it on Covid & Daigou - they did it since September - nothing new
As Craig’s note alerted to - ATM has lost momentum vs it’s competitors - Craig's opinion is nothing more than Craig's opinion.
And all that while executives and directors were feasting on share options - they were doing so since forever - nothing new
Guidance adjusted to lower end is hardly a skeleton.

So were are the promised skeletons by new CEO? If anything he was sitting quietly all QA session as he was not there.
and where is China's ban on infant formula from which you also promised?

[Beagle]

https://www.newshub.co.nz/home/money...aboolaexternal

Thirdly, he suggests staying flexible. "Don’t fall in love with your investments. You might have to change your mind as incoming news comes to light. It’s a real skill being able to cut your losses and move on."