ATM - A2 Milk Corporation Limited

[Jasemc]

To snoopys credit I would prefer they waited to establish uk china and Asia before USA to ease cashflow pressure. You would think platinum sales in china will take off but in Aussie might fall as I remember someone saying they might be high because Chinese buying in Aussie and sending to china. Uk seems to be tracking in line . Exchange rate should almost be at its worst reserve bank will cut official rate this year and cool of housing using macro methods. So let's hope uk and china pick up. Did I read the increased cost of raw milk in there report so global dairy prices don't seem to matter. Overall predictable and exciting future.

[blobbles]

In all seriousness though Mayday, I think what a small minority of folk miss is that the rate of a2mc expansion is consciously engineered to quite precisely match available cashflows, they also have cash on hand which was raised to be used for growth and that is what they have and are doing.

a2mc have also told us that they will fund the US expansion ($20M) from cashflows and other financial holdings in the same way.

They have been growing at the maximum possible rate that cashflows have permitted, but no faster, hence the close to zero NPAT that we have seen for the last three years.

Earnings will come later from the now four markets Australia, UK, China and US when a2mc decide to level the growth rate off, hopefully no time soon, although I suspect we may well see a modest surplus at FY15 and FY16 as the forward $20M in US growth is not that great within the big picture.

The reconciliation is in the presentation for those who like to step things through.

https://www.nzx.com/files/attachments/208707.pdf

MAC is on to it, this is what SNOOPY forgets of course, which is why I find his methodology for measuring this company flawed. Basing a growth company's MCAP on EPS is folly - they should be using all that earnings for growth. If they are not, then they are no longer a growth company. For a good example, see DIL who have gone from a growth company to a earnings company as someone pointed out on their thread a while ago. SNOOPY in my opinion is using an Earnings methodology of valuing a company - great if you are looking at ROI currently or over the next year or two. But using the same methodology for a company using all of its earnings to grab market share/enter new markets etc IMO is just silly. What you need to consider is market share, revenue growth (growth trajectory as well), market potential and cash available for growth. The last of these is ~10m, which isn't that hot for a growth company, but for one who is able to offset losses in one market from profits in another, its probably enough until they become profitable. For these other factors, ATM is coming up well.

Sure, ATM is taking a risk hitting 3 markets at once. But I think its a calculated risk as the product (I feel) sells itself to health food and premium buyers in those markets. Having lived in and understood China, I think they will be very successful there at least. The jump to USA may be premature I feel as well, but they have already done a lot of groundwork there so understand it well enough. Having a few people there beavering away and getting market exposure may pay off big time if they are able to sign up a supply contract with a big supermarket or health food chain.

[NT001]

...ATM is taking a risk hitting 3 markets at once. But I think its a calculated risk as the product (I feel) sells itself to health food and premium buyers in those markets.

I think the company wants to get established in these major markets quickly because some of its IP has time limits, and also because when it's got wind in its sails in Australia this is a good time to expand elsewhere. And I strongly suspect that it is aware of some pretty supportive scientific research that's under way, that we don't know about yet.

As a longterm investor I like the strategy and am not concerned about the lack of profits and dividends at this stage. Just want to see it established and accepted in major global markets, and pleased that blobbles thinks it will do well in China.

Funny that today's NZX summary of market highlights didn't even mention the rise in ATM's SP, even though it has frequently mentioned smaller movements in the past. Must have got lost among a few other big SP movements today.

[MAC]

The situation looks reasonably good going forward Jasemc, don't you think.

a2mc tell us the UK will be profitable during FY16, and China may very well be profitable in FY16 on fresh milk sales alone.

a2mc also just told us that the US will launch later this year, means FY16, and that they will expand fresh milk sales further into Asia also in FY16.

Effectively, the Australian cash cow will switch from funding the UK and China to funding the US at that time. And, there will thus be three out of four markets profitable.

Doing the math on that, even if Australian growth stabilised where it is right now, that forward growth rate remains comfortably sustainable with $20M in capital going into the US spread over the three years as advised.

Should a2mc meet their goal of $230M in revenues at FY16 we may either see quite a large balance from growth reported as earnings, or alternatively, perhaps we may see yet a further expansion in the US or into Europe.

Onward and forward.

[babymonster]

I think today it will end up a bit higher...

[drcjp]

I found this interesting: https://nz.finance.yahoo.com/news/a2...010100335.html
Doesn't surprise me given the inducements new "recruits" are told to get them to run dairy in NZ.
Was talking with cockie on the weekend whom was told by a certain corporation that "the days of low payouts are gone".
He's not happy right now and actually mentioned A2 as an option.

This of course will be viewed as heresy and will be stamped upon at any cost.

[babymonster]

one off >1.6 million shares traded before it opens.

[GizyGold]

one off >1.6 million shares traded before it opens.

would love to know what funds are taking a position and are selling..... come on 60cents today!!!

[sb9]

one off >1.6 million shares traded before it opens.

Yep, its an off market transaction that went thro....

[Jasemc]

It will be the big seller over the last few weeks hopefully speeding up their reduction.