ATM - A2 Milk Corporation Limited

**Master98** · 26-08-2021, 10:33 AM

sp will back to $5 level soon, china birth rate drop 16% first half of 2021, local players gain market share, daiguo channel won't recovery in near future......

**Entrep** · 26-08-2021, 10:33 AM

Given growth is gone, what's a reasonable new PE and share price for ATM?

**Motley Crew** · 26-08-2021, 10:34 AM

Originally Posted by Balance

Have a look at Comvita for comparison - one other company which built its initial success on the daigou channel.

Unlike ATM, CVT is already executing its reset & transformative strategy (of shifting over-reliance on daigou sales & harvest vagaries) - successfully.

Turnaround is massive and management is upbeat about delivering on expectations.

ATM still has not worked out a reset strategy from my reading of today’s commentary - except that they need the cash in the bank to see them through challenging times ahead!

ATM could do well to heed the way CVT reset its business. Sure it is a much smaller enterprise, but it recognised what it needed to do to smooth out the supply of raw material which was being impacted by the variability of the weather. Investment in marketing (at 15% of sales revenue) which so many companies fail to recognise is a key driver in increasing market share and the future sustainability of results. The markets that CVT operate in are almost exactly those that ATM operates in, and in general both are providers of single 'observable' products (milk and honey - that sounds like NZ all over doesn't it - the land of milk and honey, only ATM has gambled too heavily with an over-reliance on a single market, which all marketers will tell you will eventually have a predictable outcome). Even though CVT has a wider range of offerings in related health products, its premium manuka honey brands is where it will achieve flagship results, off which they can leverage the rest of their product range.
Disc. Sold ATM in 2020 and topped up heavily in CVT to average down a very high entry point made some years ago. It was worth the wait.

**Motley Crew** · 26-08-2021, 10:37 AM

Originally Posted by Dlownz

Wow big drop on opening. I see that recovering by the end of the day. Don't have any gambling money available

Don't count on it. Oz is yet to open. Another battering on the way.

**MarineSalvage** · 26-08-2021, 10:42 AM

so true - 12noon going to be interesting...

Originally Posted by Motley Crew

Don't count on it. Oz is yet to open. Another battering on the way.

**Balance** · 26-08-2021, 10:44 AM

Originally Posted by MarineSalvage

so true - 12noon going to be interesting...

ATM on NZX usually positive, then gets hammered by ASX on opening.

**Motley Crew** · 26-08-2021, 10:47 AM

Originally Posted by Maxtrade

Maybe getting back down into the mid $5's wasn't so unrealistic. With no support about any takeovers. No good news. More struggles and bad news. No clear solutions, seems like the steady bull push pre announcement was a lot of hope. Now with nothing materialising a falling SP into the $5's is very realistic within the next couple of days. If there were any real serious strategic share purchases being considered it would make sense to let the SP drive down maybe even sub $5 before presenting any real offers of interest. If I was going to present a takeover offer I would wait for the SP to hit all time lows at this stage before presenting any hand, wouldn't they already be thinking this. Also I think the takeover rumour was a lot of speculation stirred by the journalist of the Australian. Nothing substantial has materialised from it whatsoever. Unless I am missing something?

Yep. Why would you make a takeover offer at $6 when the market will take ATM a lot lower. Wait for the blood-letting to end and then swoop. Investors (gamblers) will be pleased to receive $3.50 to get out when the time comes :-)

**Maxtrade** · 26-08-2021, 10:49 AM

yeah I agree, wouldn't be surprised if we see pushing 20% drop on ASX today. A lot of hope just got squashed this morning. The upside potential now seems a long way off and a lot more risk involved.

**Beagle** · 26-08-2021, 10:49 AM

Originally Posted by Entrep

Given growth is gone, what's a reasonable new PE and share price for ATM?

Excellent question. I think AT BEST we're in a very low growth environment for ATM, maybe no growth. No growth fair PE is 11.5 in my book. I would ascribe a PE of no more than 18 to a low growth company.
These are the metrics I use and have worked extremely well for me over many, many years.

Maybe then can do 20 cps in earnings in FY22, maybe not. Choose whatever PE you think is right but I think a forward PE of 30 in the current environment with all known information, trends and risks is absolutely nuts !