ATM - A2 Milk Corporation Limited

[MAC]

Not at all Harrie, there are as many reasons for short term moves in share price as there are short termers, although when a large holder must sell for policy reasons into an illiquid market it can have a large effect as we have seen over the last year or so.

I’m a long term investor and not particularly interested in the short term, I research businesses, I buy sound growth oriented business plans, monitor their progress, and hold them whilst they remain on track.

The fundamental position of ATM has been ever increasing over the last three years extraordinarily well, and largely to the plan laid down in 2012, and that is a matter not one bit altered by short term volatility in share price or transient swings in short term sentiment.

Gross margins are the highest within the sector and every skerrick of free cashflow generated from those margins has been re-invested into expanding the product line and in opening large new markets. Elements that offer cash cow levels of forward free cash flow.

Watch as that free cash flow becomes greater than the re-investment rate over the next few years.

Analyst price target consensus: $0.76
My humble DCF base case: $1.10
First NZ Capital spot valuation: $1.24

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

The FA’s recognise the value Harrie, and grossly undervalued stocks with exceptional fundamentals such as ATM always return to fair value over time.

kind regards, Mac

[winner69]

harrie (part of)
Secondly Milfords holdings in ATM were far above the % ATM represented in the NZX 50 in fact at around 60c ATM only just made it into that index. At 97c ATM would have represented around 6% of the total market and around 9% of the NZX50 so you could hardly say that they needed to continue to buy as the price increased on that basis given that they already held around 15%. That is more than twice what they needed to be if they were following that index.

Some big numbers you quote.

Doubt if ATM ever represented 9% of the NZX50 ......probably well under 1%

ATM Active Fund has ATM as 1.8% of that total fund

Just to keep record straight

And I understand that AMP weren't compelled / forced to sell down as much of ATM as they did. ATM was a great investment for them over the years with a decent proportion of hem acquired at 10 cents or less

[skid]

So are we all on the same page when trying to evaluate this share ? Is it sitting about where it should be or is it still overvalued--or is it grossly undervalued? And are we talking about now, or are we talking about in 5 years time?
In the last year we have seen the SP decrease by roughly 50%--Is that a short term fluctuation (1 year)? (and is someone who has a 1 year window of investment any less commendable in terms of worth?)
If in fact the market has valued this share at this point,(while it waits to see if opening up new markets brings large profits or turns into cash burn), is logical,then IMO trying to predict what will happen in 5 yrs time and according to that prediction, labeling it grossly undervalued,(or overvalued) is not going to help those who would like to see an increase ,instead of decrease in the next year.
It took a year to get from roughly where it is now to almost $1 and a year to get back to where it is now.
In terms of FM,they have put all their free cash flow into opening large new markets-that may or may not work--It is not a given(how many companies have we seen that have seen their demise by vigorously expanding into foreign markets)
Have you ever tried counting the number of products in the dairy section alone in an American supermarket?--Its an outlet where you can go get your product that has been brought to your attention and you are impressed with(so how is the marketing going?)(what kind of ''shelf real estate'' is it getting?)
Those who have done research and provided their reasons ,I applaud, and it all helps with our education of where do we go from here.

In terms of absolute statements as to the value of this company,the jury is still out as to whether they are ''on track'' --lets hope so.

[NT001]

So are we all on the same page when trying to evaluate this share ? Is it sitting about where it should be or is it still overvalued--or is it grossly undervalued? And are we talking about now, or are we talking about in 5 years time?

Valid questions, Skid. All shares, including blue chips, are a bit of a punt. They can all go wrong because of unexpected commercial setbacks (such as Fonterra has had), strategic decisions by big shareholders, investor fickleness...you name it. And we're all aware that innovative new companies placing their bets on new markets are especially vulnerable. Anyone investing in ATM must have their eyes open. It's not enough to compare its annual results with the financial risks attached to market expansion. That stuff is all beside the point.

I've said it before and will say it again, anyone who has bought shares in ATM without reading Prof Woodford's book "Devil in the Milk" (and also looking at the scientific research listed on <http://www.betacasein.org/disclaimer.php?prevpage=> if you want the science) is buying a pig in a poke. Not a wise investment. Like, I wouldn't buy shares in a gold mining company because I know zilch about gold mining.

There's no such thing as saying ATM is currently over-valued or under-valued. Its "value" is impossible to estimate at this time. To answer your question, I'd see it as a good five-year investment, but that's not based on any recognised method of analysis of its present financial performance. It's based on an informed assessment of its future. Not a blind punt, but with a speculative element just the same. One of the main things to watch is whether its management team is acting smartly and responsibly. I think it is.

[klid]

It's about right, because the market is never wrong.

Or is it.

[couta1]

It's about right, because the market is never wrong.

Or is it.

A schizophrenic market suffering from paranoid delusions couldnt be wrong now could it

[skid]

Valid questions, Skid. All shares, including blue chips, are a bit of a punt. They can all go wrong because of unexpected commercial setbacks (such as Fonterra has had), strategic decisions by big shareholders, investor fickleness...you name it. And we're all aware that innovative new companies placing their bets on new markets are especially vulnerable. Anyone investing in ATM must have their eyes open. It's not enough to compare its annual results with the financial risks attached to market expansion. That stuff is all beside the point.

I've said it before and will say it again, anyone who has bought shares in ATM without reading Prof Woodford's book "Devil in the Milk" (and also looking at the scientific research listed on <http://www.betacasein.org/disclaimer.php?prevpage=> if you want the science) is buying a pig in a poke. Not a wise investment. Like, I wouldn't buy shares in a gold mining company because I know zilch about gold mining.

There's no such thing as saying ATM is currently over-valued or under-valued. Its "value" is impossible to estimate at this time. To answer your question, I'd see it as a good five-year investment, but that's not based on any recognised method of analysis of its present financial performance. It's based on an informed assessment of its future. Not a blind punt, but with a speculative element just the same. One of the main things to watch is whether its management team is acting smartly and responsibly. I think it is.

A fair and balanced post----(I do believe in the product,by the way) Just tend to take blanket statements with a grain of salt(not directed at you)--cheers

[bull....]

look at the bids at 46 and 41 someone thinks its going down

also cant fnzc lend there new holding out for shorting?

[skid]

It's about right, because the market is never wrong.

Or is it.

If you are trying to buy or sell shares on the day--No its not

Otherwise its a bit of a grey area--actually its an ''us'' rather than an ''it''

whether its right or wrong--its a dangerous thing to dismiss (you could probably do a doctorate on ''the collective psychological value of ''worth''

[MAC]

I’m pretty sure that nearly every FA and analyst in the world may disagree with you when you say that stocks cannot be valued NT001, many make a precise science and a professional career of it.

But, yes the company is on track and management have proven they are both capable and can deliver.

Australia:
The strategic plan target (2012) was for a market share of 10% by 2016, they are presently at 9.7%, slightly ahead of that schedule and ATM in addition have launched further products outside of that plan within that timeframe.

UK:
They had a temporary delay created by their joint venture partner, but bought them out and moved on, and now ATM have 100% of the UK business, the plan was 50% going forward. ATM have just advised second half revenues will be double first half suggesting the start of the growth curve. That leaves an expectation of profitability in 2016 which is in keeping with the original strategic plan.

China:
Fresh milk sales will be the mainstay and will more than compensate for the temporary regulatory delays, now passed, affecting infant formula sales. ATM have advised that they, in conjunction with retailer feedback, expect fresh milk sales to double this year and again next year. Then there are the UHT sales and the prospective SE Asia fresh milk market to kick in shortly.

US:
Product launched on time, three supermarket chains on board, similar gross margins to Australia, similar demographic, the correct recipe for success, will be an interesting watch over the next three years also.