ATM - A2 Milk Corporation Limited

[GTM 3442]

Pretty self-explanatory. . . the cuts include baby formula.


http://www.scmp.com/news/china/polic...consumer-goods

[winner69]

Marginal expansion is alive and well with A2M, forecasted to continue expanding as economies of scale takeover.
CAPEX is almost negligible, huge possibility they will put capital to earnings accretive opportunities (not forecasted possible upside)
Assuming* that 4M18 will be a higher proportion of FY18 revenues than 4M17 was to FY17... lower Q seq. growth.
4M17/FY17A = 28%
4M18/FY18E = 32%
Room for upside if sequential growth performed similarly with last year.
31% revenue growth over the next 3 years, I am told, is on the conservative side as well.
However the marginal expansion forecasted could be considered optimistic as net profitability rises to 24%

A2 MILK COMPANY		FY13A		FY14A		FY15A		FY16A		FY17A		FY18E		FY19E		FY20E	CAGR
OPERATING REVENUES GENERATED		94.5		110.8		155.1		352.8		549.2		817.0		1025.0		1240.0	31.19%
Cost of goods sold as a proportion		64.30%		64.00%		64.80%		57.20%		52.03%		49.00%		47.00%		45.00%
Cost of marketing as a proportion		4.80%		8.90%		9.40%		10.30%		7.65%		8.00%		7.50%		7.50%
Cost of logistics as a proportion		7.90%		7.20%		6.00%		4.40%		3.67%		3.60%		3.50%		3.50%
Cost of corporate + other as a proportion		10.70%		15.00%		15.30%		11.40%		11.47%		11.00%		11.00%		11.00%
Operating Expenses - NZDm		-84.8		-106.6		-151.0		-297.3		-410.9		-585.0		-707.3		-830.8	26.45%
UNDERLYING EBITDA GENERATED		9.7		4.2		4.1		55.5		138.3		232.0		317.8		409.2	43.57%
EBITDA margin		10.26%		3.81%		2.64%		15.73%		25.18%		28.40%		31.00%		33.00%
Depreciation and Amortisation		-		-		-		-2.74		-2.69		-2.80		-2.80		-2.80
Interest income		-		-		-		0.50		0.89		2.10		2.79		3.80
Finance costs		-		-		-		-0.20		-0.14		-0.80		-0.80		-0.80
Income tax expense		-		-		-		-21.86		-48.71		-64.55		-88.74		-114.63
UNDERLYING NPAT - NZDm		4.0		0.7		-1.1		31.4		90.6		166.0		228.2		294.8	48.18%
Net Profitability		4.20%		0.60%		0.00%		8.90%		16.50%		20.32%		22.26%		23.77%
Operating Cashflow - NZDm		-		-		-		21.50		99.90		164.74		227.19		296.67
Capital expenditure		-		-		-		2.10		2.50		2.50		2.50		2.50
DISTRIBUTABLE CASHFLOW		-		-		-		19.40		66.20		162.24		224.69		294.17	64.40%
Cash and equivalents - NZDm		20.20		16.00		6.10		69.40		121.00		185.00		320.00		480.00
DCF per share - CPS		-		-		-		2.68		9.15		22.83		31.06		40.67
Underlying EPS - CPS		-		-		-		4.32		12.29		22.95		31.55		40.75

ATM.NZX	2017	2018	2019	2020
EARNINGS PER SHARE	12.29	22.95	31.55	40.75
FORWARD PER AT $850	37.00	26.94	20.86	19.54
SP AT 30 x FORWARD PE	688	946	1223	1500
PEG RATIO AT 30 x EARNINGS	0.35	0.80	1.03	1.22
SP AT 40 x FORWARD PE	918	1262	1630	2000
PEG RATIO AT 40 x EARNINGS	0.46	1.01	1.37	1.63
FORWARD EARNINGS GROWTH	90.01%	35.09%	29.17%	22.70%

Good stuff hardt ....but whenever you post one of your big tables it plays havoc with the screen settings for all of that thread (both on laptop and mobile). Same on the TGH thread. The page becomes so wide you can’t read it ...or you miss half the page and the good stuff

Anybody else have this problem and what’s the fix.

[hardt]

*Reposted without trying to sabotage format*

Marginal expansion is alive and well with A2M, forecasted to continue expanding as economies of scale takeover.
CAPEX is almost negligible, huge possibility they will put capital to earnings accretive opportunities (not forecasted possible upside)
Assuming* that 4M18 will be a higher proportion of FY18 revenues than 4M17 was to FY17... lower Q seq. growth.
4M17/FY17A = 28%
4M18/FY18E = 32%
Room for upside if sequential growth performed similarly with last year.
31% revenue growth over the next 3 years, I am told, is on the conservative side as well.
However the marginal expansion forecasted could be considered optimistic as net profitability rises to 24%

A2 MILK COMPANY		FY17A		FY18E		FY19E		FY20E	CAGR
OPERATING REVENUES GENERATED		549.2		817.0		1025.0		1240.0	31.19%
Cost of goods sold as a proportion		52.03%		49.00%		47.00%		45.00%
Cost of marketing as a proportion		7.65%		8.00%		7.50%		7.50%
Cost of logistics as a proportion		3.67%		3.60%		3.50%		3.50%
Cost of corporate + other as a proportion		11.47%		11.00%		11.00%		11.00%
Operating Expenses - NZDm		-410.9		-585.0		-707.3		-830.8	26.45%
UNDERLYING EBITDA GENERATED		138.3		232.0		317.8		409.2	43.57%
EBITDA margin		25.18%		28.40%		31.00%		33.00%
Depreciation and Amortisation		-2.69		-2.80		-2.80		-2.80
Interest income		0.89		2.10		2.79		3.80
Finance costs		-0.14		-0.80		-0.80		-0.80
Income tax expense		-48.71		-64.55		-88.74		-114.63
UNDERLYING NPAT		90.6		166.0		228.2		294.8	48.18%
Net Profitability		16.50%		20.32%		22.26%		23.77%
Operating Cashflow - NZDm		99.90		164.74		227.19		296.67
Capital expenditure		2.50		2.50		2.50		2.50
DISTRIBUTABLE CASHFLOW		66.20		162.24		224.69		294.17	64.40%
Cash and equivalents - NZDm		121.00		185.00		320.00		480.00
DCF per share - CPS		9.15		22.43		31.06		40.67
Underlying EPS - CPS		12.29		22.95		31.55		40.75

ATM.NZX	2017	2018	2019	2020
EARNINGS PER SHARE	12.29	22.95	31.55	40.75
FORWARD PER AT $850	37.00	26.94	20.86	19.54
SP AT 30 x FORWARD PE	688	946	1223	1500
PEG RATIO AT 30 x EARNINGS	0.35	0.80	1.03	1.22
SP AT 40 x FORWARD PE	918	1262	1630	2000
PEG RATIO AT 40 x EARNINGS	0.46	1.01	1.37	1.63
FORWARD EARNINGS GROWTH	90.01%	35.09%	29.17%	22.70%

[whome]

Good stuff hardt ....but whenever you post one of your big tables it plays havoc with the screen settings for all of that thread (both on laptop and mobile). Same on the TGH thread. The page becomes so wide you can’t read it ...or you miss half the page and the good stuff

Anybody else have this problem and what’s the fix.

Hey Winner, turn your iPad sideways and it fits! Makes PT's tiger beer advert look better too! Thanks hardt for the analysis. Much appreciated.

[Beagle]

http://www.4-traders.com/A2-MILK-COM...22/financials/

[Leftfield]

Thanks for the detailed analysis Hardt. Nice to have your forward looking estimates (and thankfully not too far from my own.)
In my forecasts I didn't go beyond 2018 so good to have your thoughts.

[dreamcatcher]

a2 Platinum infant formula sales from recent 11/11 Singles Day

No.1 on Kaola.com
No.2 on JD.com
No.3 on Tmall.com

Looking forward to 12/12 next month

[NZSilver]

Here are my numbers estimated for 18

REV approx 900 Million
EBITDA approx 270 Million
Net Income approx 195 Million
Giving EPS 27 cents
27 x PE 30 = $8.21
27 x PE 40 = $10.80

[moka]

The simplest way to manage the fear is to put in place a stop loss. I Haven't worked out what mine will be on ATM yet. probably around 20% that way I know the most I can loose is 20% thus taking any fear of the markets out of the equation. (that number will need to be firmed up as I am setting up a growth portfolio which I expect will be moderate to high risk - but while some shares will plummet for a while others will fly. So I need to come up with a number that suits my long term aim. I'll end up with something that views the portfolio as a whole rather than purely one share.)

If you want to buy and hold stocks as long as you can, simply use a 25% trailing stop as an exit, adjusting it up whenever the stock makes a
new high says Van Tharp in his book Supertrader.
In the book the Art of Execution it says kill all losers at 20 – 33%.
ATM hit a high of $8.84 on 31 October and a low of $6.80 on 8 November so a 25% stop loss on $8.84 = $6.63 would have worked well in this case.

[44wishlists]

Pretty self-explanatory. . . the cuts include baby formula.


http://www.scmp.com/news/china/polic...consumer-goods

In the article it mentioned "Tariffs on some special infant milk formulas...have been cut to zero, from 20 per cent. But standard infant milk formula is not included in the tax cut."

So is A2Milk categorised as Special Infant Milk Formulas?