ATM - A2 Milk Corporation Limited

[misterx]

feel as though sp will shoot above $10 after agm.. or will I jinx it

[couta1]

Another 5 weeks + before ex div. 5 weeks a long time and lots of milk under the bridge before then.

I didn't have the luxury of waiting based on the size holding I wanted, plus not wanting to pay more than $3.30 Avg for that holding.

[Brain]

This share reminds me of 1987.
I bought this share at an average of 70 c. And sold out at $2 because I thought it was grossly overvalued. The market had gone mad I thought.

[kizame]

This share reminds me of 1987.
I bought this share at an average of 70 c. And sold out at $2 because I thought it was grossly overvalued. The market had gone mad I thought.

Hmmn now 4x that,the market has just got angrier, and is it getting a bit too far ahead of itself?

[Beagle]

Hmmn now 4x that,the market has just got angrier, and is it getting a bit too far ahead of itself?

Maybe ask the investors at XRO who are paying a lot of money for no earnings at all because they believe the company is growing an excellent worldwide franchise.

[sb9]

Maybe ask the investors at XRO who are paying a lot of money for no earnings at all because they believe the company is growing an excellent worldwide franchise.

Exactly, this is the company that's sitting on $121mln cash on hand as at 30/06/17. Even if we average out 10mln cash per month they would be sitting currently (end of OCT) on cash of in excess of $160mln (my bet its more like $170mln+).

And their investment in Synlait has more than doubled since investing at around $3.12 or so, which strengthens their balance sheet even further.

Lastly their debt is ZILCH.....isn't that lovely mouth watering recipe for any company to be in.

[Sideshow Bob]

Exactly, this is the company that's sitting on $121mln cash on hand as at 30/06/17. Even if we average out 10mln cash per month they would be sitting currently (end of OCT) on cash of in excess of $160mln (my bet its more like $170mln+).

And their investment in Synlait has more than doubled since investing at around $3.12 or so, which strengthens their balance sheet even further.

Lastly their debt is ZILCH.....isn't that lovely mouth watering recipe for any company to be in.

Not to mention something unique, with IP protection, fixing a need, lots of potential markets etc etc etc etc

[Beagle]

Not to mention something unique, with IP protection, fixing a need, lots of potential markets etc etc etc etc

With potential for different dairy based products derived from A2 milk too. As you say, the A2 brand name is trade marked, I don't think some people are understanding the ramifications of that in terms of global product expansion going forward.

[hardt]

The question is not: "Does ATM have sufficient raw material supply for the business plan?"

The question is: "Does ATM have sufficient milk supply to meet the investor expectations implied by the current share price?"



It is quite difficult to get information on volume of milk supplied. This statement came with the annual result for FY2015

"In response to the increasing demand for infant formula and whole milk powder products, the Company has been active in securing new long term milk supply contracts in New Zealand, with annual milk supply doubling to over 100 million litres."

The revenue for China and Other Asia for FY2015 was $4.044m. The incremental revenue in Australasia

$149.017m - $106.866m = $42.151m

Let's assume all of that incremental revenue is representative of the 'Daigu' A2 milk powder imported into China. So total Chinese revenue for FY2015 was:

$42.151m + $4.044m = $46.195m

p20 of the AR2017 says A2 Platinum sales rose 78% over FY2017. In dollar terms, this was a rise from $214,376m to $394.026m. There was no equivalent product sales breakdown in AR2016. However if you look at the 'Portfolio Presentation' given to investors on 11th - 12th September, 'Portfolio Composition' slide on p20, if drawn to scale looks like a revenue gain of about 500% between FY2015 and FY2016.

So total Revenue gain from FY2015 to FY2017 looks like it has gone up: 5 x 1.78 = 890%.

$46.195m x 8.9 = $411m, within the ballpark of Synlait's $394m quoted sales figures.

Meanwhile the milk under contract via Synlait NZ has gone up from 100 million litres at EOFY2015 to 225 million litres at EOFY2018. We also know that this 225 million litres represents 65% of all certified A2 milk produced globally. One thing we do not know is how much of the A2 milk from Synlait in NZ, processed or not, is supplied to the NZ market. However, I would assume it is not a high percentage of total A2 Synlait output:

The question I would pose to shareholders is this.

1/ If the total A2 raw product supply of milk to Synlait in NZ has gone up by 225% over two years AND
2/ This 225 million litres represents 65% of world certified supply AND
3/ During this period A2 Platinum production out of NZ has grown by 890% (i.e. the increase in formula production is growing four times faster than the increase in raw material supply).
4/ How much raw A2 milk we be needed to increase A2 platinum production my another factor of 3 above our baseline 2015 figure?

The answer is I believe a lot more milk than the total certified global production of A2 milk right now. Even if you could get away with 'only' increasing the herd by 100% within three years, that is still three times faster than the maximum rate of herd breeding rate that the best genetic testing and herd culling is able to achieve.

In summary there is nothing wrong with the A2 business plan and every reason to believe it will be achieved. But the absurd growth implied by investor bid PE levels will not be achieved. IMO the fair value for A2 milk shares today is something less than $3 on biologically possible business prospects.

SNOOPY

$3 fair value - Snoopy™ Time stamped for 2020...

[Beagle]

$3 fair value - Snoopy™ Time stamped for 2020...

I think one of the hounds on here is desperately short of some A2 protein. Maybe A2 could make some A2 milk powder based dog biscuits to help with cognitive function.
Actually come to think of it, A2 milk powder based muesli bars might interest this hound too. Surely the sky is the limit with various A2 dairy product iterations