ATM - A2 Milk Corporation Limited

[ziggy415]

Good to see First NZ Capital backing their own analysis, research and valuation effort in taking an initial 5% holding. I wouldn’t be at all surprised to see several similar Australian investments made over the coming months.

https://www.nzx.com/files/attachments/211923.pdf

Recently within the NBR (27/02/2015);

“First NZ Capital has an “outperform” rating on the stock, noting yesterday that the result exceeded its expectations. Leveraging the company’s successful Australia model globally remains key. If A2 can successfully execute that strategy in the UK, China and US it could justify a “spot” valuation of $1.24, the brokerage says in its research note”.

“Based on our previous ‘what-if’ analysis for A2, if it were to successfully enter and execute its plans in the Californian liquid milk market, there is clearly significant value that could accrue to the company,” First NZ says, adding that it estimates the upside at 23c a share”.

still doesn,t explain the downward trajectory of the share price.....can Amp be still off loading

[skid]

Yes please, this is what our markets might need. http://www.nzherald.co.nz/business/n...ectid=11437565
I would suspect A2 would be one target the Chinese would look at.

Wow-that is certainly something to keep an eye on--Its exciting and scarey at the same time (in terms of property)

The Chinese certainly like their milk, and milk products--whether A2 particularly rings their bell remains to be seen but I guess it doesnt take a huge percentage of their population to come on board.
Thats one place I would ship the product rather than having the actual cows there as they have been known to steal things in the past--The States is a safer bet in that regard.

[skid]

still doesn,t explain the downward trajectory of the share price.....can Amp be still off loading

which goes to show how difficult it is to 2nd guess what instos are up to

[MAC]

It's just an ongoing transfer of wealth from the fickle to the wise.

Aside from AMP who had to sell for policy reasons, the others Milford, ACC and First NZ Capital et al, have been accumulating the dip from 97c. Now Australian funds also have the opportunity and we may also see several jump on board over the next few months.

IMO there was no fundamental reason for the SP to drop below 80c, look at it as a gift, I am.

[NT001]

Welcome to the...a2 Share Trader Milk Club. ... Do you think we should have a club meeting at a milk bar somewhere for ideas on a2 promotion,eg tee shirt with a2 milk written on the back, and some flyers, ... Or maybe open a milk bar..... The a2 Milk bar.

That's not such a silly idea, and I've been tossing it in my mind for some time. There is at least one A2 coffee shop in Melbourne. I think coffee shops would be better than milk bars, going up-market a bit. If any of us have a favourite coffee shop run by an intelligent health-conscious owner looking for a special angle, we should try to encourage them to offer A2 milk at least as a special option, if not as the only kind of milk on offer. It should cost a little extra, to make the point that it's not just ordinary milk, but something special with higher value.This would be an excellent way of making people ask "what's with this A2 milk?" - and make some flyers available, and maybe a wall poster explaining what it's about.

We'd have to get approval from a2MC, I think, because we wouldn't want to run any kind of campaign using the name a2 that might cause the company any difficulty. I'd be quite happy to take up the idea with them. But first we have to find a sympathetic barista. Where? I think Wellington would be a good place to start, partly because it's got quite a slew of CBD coffee shops and also because it might attract a bit of political and official attention.

Tee shirts are not such a bad idea either. This would involve using trademarked design, so there again we'd have to have company approval. It could be something the company is already looking at, not only here but in other markets - or perhaps should be. A tee shirt would need more than just an "a2 milk" logo, with also some brief statement of the benefits of a2. And it would need to be stylish.

[barleeni]

MAC you seem very bullish on this one of late, perhaps you should use a stronger disclaimer against your comments like some others..... there must be very many fickle people amongst us and very few wise to explain the now 12 month / 45% slide in share price (which I admit looks like it ** may ** be nearing the bottom).

Surely if all these insto's and now ozzie instos included have such faith in ATM/A2M we wouldn't see this downward pressure? The market says that there was a fundamental reason for the SP to drop below the 80's.. Mr Market is always right isn't he?

It's just an ongoing transfer of wealth from the fickle to the wise.

Aside from AMP who had to sell for policy reasons, the others Milford, ACC and First NZ Capital et al, have been accumulating the dip from 97c. Now Australian funds also have the opportunity and we may also see several jump on board over the next few months.

IMO there was no fundamental reason for the SP to drop below 80c, look at it as a gift, I am.

[MAC]

We all talk to different timeframes Barleeni, remenber Ben Graham,

“In the short run, the market is a voting machine but in the long run, it is a weighing machine”

The market doesn’t need a fundamental reason to do irrational things within a short timeframe, illiquid stocks like ATM can swing about over a year or so, but over the longer term, fundamentals come into play.

A large holder selling over a one year timeframe can affect and depress a market, as we have seen, for that same duration, but a long term trend it does not make.

IMO this dip from 97c has been absolutely over cooked, you will not see a better long term entry point for ATM within the next couple of years.

With an SP at 51c, ATM is;

49% from analyst consensus price targets at 76c,

88% from the level when AMP started to heavily sell down,

116% from my own humble valuation of $1.10,

143% from the First NZ spot valuation of $1.24, and they have just walked the talk,

And, the growth strategy for the company is sound, so, yes you could say I’m either bullish or have well researched the risk/reward position, I don’t mind either.

Buy when others are fearful and those stocks are undervalued.

Research reaps rewards.

[see weed]

That's not such a silly idea, and I've been tossing it in my mind for some time. There is at least one A2 coffee shop in Melbourne. I think coffee shops would be better than milk bars, going up-market a bit. If any of us have a favourite coffee shop run by an intelligent health-conscious owner looking for a special angle, we should try to encourage them to offer A2 milk at least as a special option, if not as the only kind of milk on offer. It should cost a little extra, to make the point that it's not just ordinary milk, but something special with higher value.This would be an excellent way of making people ask "what's with this A2 milk?" - and make some flyers available, and maybe a wall poster explaining what it's about.

We'd have to get approval from a2MC, I think, because we wouldn't want to run any kind of campaign using the name a2 that might cause the company any difficulty. I'd be quite happy to take up the idea with them. But first we have to find a sympathetic barista. Where? I think Wellington would be a good place to start, partly because it's got quite a slew of CBD coffee shops and also because it might attract a bit of political and official attention.

Tee shirts are not such a bad idea either. This would involve using trademarked design, so there again we'd have to have company approval. It could be something the company is already looking at, not only here but in other markets - or perhaps should be. A tee shirt would need more than just an "a2 milk" logo, with also some brief statement of the benefits of a2. And it would need to be stylish.

Something simple on back of tee shirt. Big writing a2 Milk, and much much smaller print above that a2 milk would be the words 'What Is'. Everyone will start tapping you on the shoulder if you haven't got a ponytail to pull, asking you what is a2 Milk. Then you can hand them a flyer.

[Snoopy]

remenber Ben Graham,

“In the short run, the market is a voting machine but in the long run, it is a weighing machine”

The market doesn’t need a fundamental reason to do irrational things within a short timeframe, illiquid stocks like ATM can swing about over a year or so, but over the longer term, fundamentals come into play.

A large holder selling over a one year timeframe can affect and depress a market, as we have seen, for that same duration, but a long term trend it does not make.

IMO this dip from 97c has been absolutely over cooked, you will not see a better long term entry point for ATM within the next couple of years.

With an SP at 51c, ATM is;

49% from analyst consensus price targets at 76c,

88% from the level when AMP started to heavily sell down,

116% from my own humble valuation of $1.10,

143% from the First NZ spot valuation of $1.24, and they have just walked the talk,

And, the growth strategy for the company is sound, so, yes you could say I’m either bullish or have well researched the risk/reward position, I don’t mind either.

Buy when others are fearful and those stocks are undervalued.

Research reaps rewards.

Mac, I invite you to consider the financial position of another fast growing NZ company eyeing up the USA market called Xero.

At the last reporting date Xero had $254.9m in shareholders equity. There were 127.6m shares on issue. Yes I know there have been more shares issued and lots more cash burn since then. But to get a rough measure of things I will carry on. NTA for Xero at balance date was:

$254.9m/127.6m = $2.00

Last week's closing share price was $20.85. The share is trading at something in the region of ten times asset backing. The actual figure should be less than that today because of the amount of capital raised since.

As detailed in my post 3309, the asset backing of ATM was around 1.5c at last balance date. At 51c , ATM is trading at 34 times asset backing. So by the measuring stick of asset backing, ATM is trading at a price nearly three and one half times more expensive than Xero.

No investor would consider that the likes of Xero is cheap. So I put it to you that ATM is even by the standards of a growth company the most expensive company being quoted on the NZX today.

Now another yardstick, PE ratio. Another way of looking at PE is a number in years before you get your investment capital back, assuming alll earnings going forwards were paid back to you in dividends.

When a company trades on a PE of 50, and you are in your early twenties, you might expect your unborn grandchildren will eventually come of age. At that point, you will start to get a return on your original invested capital. ATM, however, takes this whole argument to another level.

I have explained to you in my post 2335, that the PE ratio for ATM was 36 million at balance date. To give that some historical perspective, an amount of time half way back to the age of the dinosaurs would have to elapse before you got any return on your investment!

Looking forwards your descendents who might benefit from such an investment going forward would very likely no longer be homo sapiens. More likely they will be part humanoid cyborgs who have long since left earth and are living on another planet. As for getting a return on your A2 investment, it is very likely cows will be extinct by then.

Faced with such overwhelming evidence of expense, I find it increduluous that you still believe ATM is 'cheap'. Not only is it the most expensive share on the NZ market. It is a likely candidate for the most highly valued share listed on any market in any country.

You blame the decline in share price on one large seller and tight liquidity, yet you fail to acknowledge exactly the same factors were present in reverse when the share price was bid up to 97c. 97c was a Ben Graham 'vote', caused by an index fund having to buy at any price.

A2 milk is a great product. But ATM as a company is an extreme value stretch at 51c. IMO 51c is so far above fair value, the weighing machine effect, when it comes into play, will cause a significant price correction downwards.

SNOOPY

[winner69]

Snoops, you seem to using 'cash' as a proxy for 'NTA' - what about the other tangible assets?

ATM NTA last balance date was 6 cents. XRO said there's was $2.07 the other day.

Just for clarification. Both outrageously overvalued still