ATM - A2 Milk Corporation Limited

[MAC]

I found that a complex report to tweak the numbers off. I’d be interested in the thoughts and findings of the other FA’s ?.

The AUD is notably an influence and may require some short term consideration for the FY, although the exchange rate seems to have flattened off since the end of the HY reporting period.

Gross margins continue to climb as does the Australian market share. New products and new markets bring new forward revenue streams to consider. I would like to see some pick up now in the UK recognising though that it is a modest FY16 1.8% market share target.

Net margins should remain subdued as ATM reinvest heavily, I see this as a positive.

I’ve revised my FY14 DCF valuation to $1.19, may revise again if the AUD exchange rate were to approach and hold close to parity.

Disc: Accumulate

ATM Gross Margin.jpg
ATM Australia Market Share.jpg

[Ginger_steps_]

On a different note. We've had a tin of a2 infant formula sitting around for a month or so - for emergencies while Mumma is away. We've had 2 "emergencies" in the last week but my son refused to drink the a2 formula. So I thought I would give it a try myself - it tasted like chalk! I don't blame the lil fella for not wanting it. I sincerely hope some babies out there actually drink it! The a2 milk on the other hand we love. It was an expensive trial but at least I have contributed to the company. Neither of us have had the chance to try any other formula....

Disc: hold

[airedale]

Hi Ginger, as a shareholder you should email the company with the result of your "taste test". Will they give it serious consideration or will the fob you off.?

[Bjauck]

Bjauck, your observation has been kicking about in the back of my mind for a couple of weeks now and today I just happened to update my portfolio Beta calculation.

The twelve month trailing S&P500 Beta for ATM is -0.17, ie: negative.

So yes it has indeed proved to be a defensive stock over the last twelve months.

Interesting to see your analysis backing up my gut feeling! When I bought ATM, it was bought as part of my "tech growth/slightly speculative" portfolio (and CNU was part of my "defensive" portfolio). I guess it Just goes to show the changing dynamics of product lifecycles and the business/political environment.

[Ginger_steps_]

Hi Ginger, as a shareholder you should email the company with the result of your "taste test". Will they give it serious consideration or will the fob you off.?

Interesting read. I can't say I have had the pleasure of tasting a range of baby milk formulas, so I wonder, do other brands taste like chalk too?? IF not then maybe airdale's suggestion is a good one

Hmmm I do wonder what they would say. Well there are quite a few young mothers round here these days so I might ask to test taste their formulas. If I find any major difference I will let you know - Geez this sounds ridiculous! And if a2 is noticeably "chalkier" I'll fire off an email to a2. I guess the main difference to a baby would be that its not sweet like mothers milk. Understandably they wouldn't sweeten it for health reasons (or do some?) - I guess I should look at some ingredient differences at the super market too. Will keep you guys up to date on my findings - however weird they may be!

[airedale]

Hi Ginger, if nothing else an email to the Managing Director would give some indication as to how the company deals with shareholders and the public. I am not suggesting that they are not doing the right thing. But wondering if they will come right out and address your concerns.

[MAC]

“A further priority has been to participate with our contract supplier, Synlait Milk Limited (Synlait) in establishing the a2™ Platinum™ supply chain. This incorporates the integrated management of receiving A2 milk from farm, production of a2™ milk powder, blending and packaging of finished product and delivery to customer. As part of this, the Company has developed its own quality processes to manage product integrity throughout the supply chain. In consequence of implementing the new processes and an ingredient supply shortage, we experienced delays in a planned shipment to China and Australia in December.”

I suppose it could be good news that ATM are sucking the herds dry, hopefully this can be addressed quickly though, there maybe an intermediate opportunity to increase production via Synlait due to Synlait’s other customers falling away at present.

[Lease]

“A further priority has been to participate with our contract supplier, Synlait Milk Limited (Synlait) in establishing the a2™ Platinum™ supply chain. This incorporates the integrated management of receiving A2 milk from farm, production of a2™ milk powder, blending and packaging of finished product and delivery to customer. As part of this, the Company has developed its own quality processes to manage product integrity throughout the supply chain. In consequence of implementing the new processes and an ingredient supply shortage, we experienced delays in a planned shipment to China and Australia in December.”

I suppose it could be good news that ATM are sucking the herds dry, hopefully this can be addressed quickly though, there maybe an intermediate opportunity to increase production via Synlait due to Synlait’s other customers falling away at present.

Mac, what source of information you've got from that Synlait’s other customers falling away at present.

[MAC]

Hi Lease, nothing first hand, just information from the media reports and Synlait's disclosure on the matter;

“Penno said the changes were causing "considerable disruption" to Synlait in the short-term - as some Chinese infant formula customers were holding back on orders while the new measures were rolled out - and the company may not achieve its forecast target of 10,000 metric tonnes of infant formula and nutritional sales this financial year.”

http://www.nzherald.co.nz/business/n...ectid=11193307

[Ginger_steps_]

Hi Ginger, if nothing else an email to the Managing Director would give some indication as to how the company deals with shareholders and the public. I am not suggesting that they are not doing the right thing. But wondering if they will come right out and address your concerns.

airedale - I sent an email off to a2 this morning. Will let you know if it is replied to.

Still havent had the chance to taste other fomulas.

So, thoughts on todays interim report? At a glance lookinq quite positive - or at least moving in the right direction.