ATM - A2 Milk Corporation Limited

[Ferg]

While we are throwing around forecasts, given Management won't do it, I am picking a fall in H1 revenue with a slight rebound in H2 over H1, giving the following for FY22:

Revenues $1.18b
GM 50%
NPAT $130m

17.4c EPS assuming no change in shares.

[couta1]

Emotion, be it fear or greed, is the greatest enemy of the ordinary investor

Attachment 12900

A2 was actually my lifestyle for many yrs, due to the avg volume I held it was like a full time job on the trading side of things and up until this time last yr I had done extremely well. The biggest mistake I made was underestimating how far it was going to go down this time(It had been down 35%ish in the two previous yrs) so I like many others thought it would turn around at this level. No-one even the most staunch TA advocates would have believed it would go to where it is now a yr ago. My strategy of selling for a loss and buying back more had served me well for many yrs but of course in hindsight we know this time was different so continuing to sell for a loss and buying back in just lead to huge losses becoming even larger, at the end of the day waiting for it to return to $20 was not an option this time around. I never went through much Fear or Greed to be honest and as I said it was a lifestyle but yes in general your squiggly worm diagram holds true.

[winner69]

Arbroath - for what's it worth my calculated guess for F22 sales is 1,360m

some 660m in H1 and 700m in H2

Not as optimistic as you re npat - my calc said about 130m or eps 17.5 cents .... current PE 34

I think we are both about right --- a bright future built into current share price (or a big takeover premium)

……but David probably holding the good stuff back and my 130m calc guess will turn out to be 205m

[Beagle]

FWIW I'll have a stab at FY22 even though management are too scarred to attempt it publicly (actually think David wants to preserve his credibility for when they make a FY23 forecast next year)

H1 Revenue $600-625m + c. $40m for MVM = $640-665m (in keeping with marginally lower guidance but is actually about a 10% fall in core revenue on H1 '21)
H2 Revenue $650-675m + c. $40m for MVM = $690-715m (in keeping with significantly higher guidance for H2 and is a decent uplift in core business on H2 '21)

Total Revenue $1.33-1.38b (about a 5-8% revenue uplift on FY21 excluding MVM)
Ebitda margin around 20% so $260-275m ebitda
Npat around $160-170m after higher tax rate of c. 38%
EPS c. 19 cents per share = PE of 32 at $6.08. Ex-cash PE is c. 27x and Ex-MVM and US losses the core business PE still about 20x

The real action though is around whether they can demonstrate that momentum is building for FY23 to be the real recovery year. Valuations on FY22 earnings aren't that material to me. If they tangibly start to turn this around then they'll recover to $9-10 pretty fast once that is apparent. If not, they'll head towards Beagle's PE based valuation in the $4 range.

Looks like a really tough gig for ATM for the foreseeable future. Old inventory still hanging around, declining birth rates in China, daigou sales channel is dead for the foreseeable future, rise and rise of nationalistic fervor in China and CCP extoling buy China made, unstable and deteriorating geopolitical environment, Delta variant outbreaks set to create real headaches with shipping availability, costs and distribution, losses from MVM, reputational damage to try and restore with all the massive marketing costs that implies and last but not least many shareholders now feeling disenfranchised. I think investors are wise to take make a very sober assessment of the risks here.

Yes ATM will throw a heck of a lot at trying to stabilize the ship with personnel and marketing, (because there is nothing else they can do), but there are no guarantees of success.

[BlackPeter]

Emotion, be it fear or greed, is the greatest enemy of the ordinary investor

Attachment 12900

The good old cyclical stock - and yes, if ATM turns out to be one of them, you are right - now is perhaps the point of maximum financial opportunity.

Problem is just - we only will know with hindsight, and it well could be one of the less favorable shapes.

Not saying it will turn out like WYN, but it might end up like FSF:

FSFtrend.JPG

Are they at the point of maximum opportunity as well?

Personally I would not put my money onto this horse ...

[winner69]

BP mentions Fonterra ……chart reflects long term under performance, from both operational and selling/marketing point of views

It’s a worry that A2 seem hell bent on morphing into a Fonterra look alike …..is buying all that stainless steel a good thing

[Balance]

BP mentions Fonterra ……chart reflects long term under performance, from both operational and selling/marketing point of views

It’s a worry that A2 seem hell bent on morphing into a Fonterra look alike …..is buying all that stainless steel a good thing

Fonterra’s biggest misfortunes & losses have been its misadventures investing overseas - from China to South America, it has lost billions of dollars.

If ATM’s strategy review in October comes out with a strategy of investing in assets overseas, especially in China, it’s timbeeeerrrrrr time!

Get the hell out of the way.

[hyinvest]

I did an analysis earlier which suggests normalised earnings is closer to 23 cps. You need to dive into the numbers and see there were a number of one off items that should be adjusted. Normalised earnings removes one off anomalies to get a better understanding of the base business.

post is here

Many thanks Ferg for sharing your analysis. Great work.

[winner69]

Fonterra’s biggest misfortunes & losses have been its misadventures investing overseas - from China to South America, it has lost billions of dollars.

If ATM’s strategy review in October comes out with a strategy of investing in assets overseas, especially in China, it’s timbeeeerrrrrr time!

Get the hell out of the way.

That’s what worries me balance ….they seem quite keen going down that path

[winner69]

From AR A2 “Contributed to Synlait’s conversion of its current coal boiler to biomass fuel”

Wonder how much they threw in the pot