SML - Synlait Milk Ltd

[Beagle]

This from when they raised zillions -


• Synlait still expects volumes to increase in the second half of FY21 once stocks have cleared, however we are expecting our HY21 NPAT result to be significantly lower than HY20.


That was the optimistic story that H1 will be bad but we’ll be OK for the FY (like only slightly down on pcp)

That slightly down soon became about half of last year

And now they’ve stopped guessing


But the narrative is pretty dire and what they hint at for H221 is more than awful

So reading between the lines one has to assume the previous optimistic view that H1 will be significantly lower than $25m will now be really really bad after 2 downgrades ....and Leon will need to utter the words LOSS for H1

And H2 sounds like it’s going to be terrible as well - back out the hope from today’s update. — and probably another half year loss ....and unfortunately 2 negatives don’t make a positive in this game.

Astounds me that the share price has held up to the extent it has today ....future must be bright

Not looking good is it mate. http://nzx-prod-s7fsd7f98s.s3-websit...927/334702.pdf See last page...maybe if they painted the exterior of their processing factories all in pink that might help

Anyway....I decided I needed to declutter my main watchlist today. No room for more anyway so took AIR, ATM, THL and SML off to a new separate watchlist called Trainwrecks.

[GTM 3442]

Given that there are two parties to every trade, who is buying?

Will there be some interesting ssh notices bubbling up in a few weeks?

[Sideshow Bob]

Given that there are two parties to every trade, who is buying?

Will there be some interesting ssh notices bubbling up in a few weeks?

Two major holders have 59% of the company.

Wonder where is Bright Food in all this and their thought pattern?

At least their other major NZ investment is going OK.....at a (historic) PE of 2.4.......

[winner69]

Paying $5.10 a share a short time back for a company heavily in debt and so reliant on ATM, in one way makes ATM look like even better value. Less capital intensive and close to $800m in the bank, plus seemingly better management. Also appears that SML bear the brunt of increasing dairy costs and surplus dairy supply.
Perhaps A2's management aren't all that bad after all, they appear to have been quite diligent in constructing a supply agreement with Synlait which appears to be heavily weighted in A2's favour.

(disclosure: Im not a holder of SML).

Just as well A2 won’t be booking the loss of value on their Synlait investment through the P&L

Possibly turn their full year into a loss (probably quite a bit movement from June last year)

[Beagle]

Just as well A2 won’t be booking the loss of value on their Synlait investment through the P&L

Possibly turn their full year into a loss (probably quite a bit movement from June last year)

"Fabulous" move by Herdlicka, freshly minted as a CEO she couldn't wait to get her hands in the cookie jar and make this "brilliant" investment. ATM shareholders must still be thrilled with her far thinking foresight. https://www.nzx.com/announcements/321685

[Gregnz]

"Fabulous" move by Herdlicka, freshly minted as a CEO she couldn't wait to get her hands in the cookie jar and make this "brilliant" investment. ATM shareholders must still be thrilled with her far thinking foresight. https://www.nzx.com/announcements/321685

I doubt they forecast Covid happening when they made that investment back in August 2018. Hindsight is a great thing

[winner69]

As at June 2020 A2 had 35.575m SML shares at average of $7.00. Share price then was $7.10

They got another 7.778 m shares in capital raise so have 43.353 at average $6.66

So at $3.59 they are sitting on a $133m paper loss - they booked $65.7m of this at half year so have heaps more to account for in full year

Just as well this goes through Other Comprehensive Income and not Profit ....but does reduce the Equity value.

[Gregnz]

As at June 2020 A2 had 35.575m SML shares at average of $7.00. Share price then was $7.10

They got another 7.778 m shares in capital raise so have 43.353 at average $6.66

So at $3.59 they are sitting on a $133m paper loss - they booked $65.7m of this at half year so have heaps more to account for in full year

Just as well this goes through Other Comprehensive Income and not Profit ....but does reduce the Equity value.

Agreed, but quite meaningless unless they are actually plan to sell their SML stake? I also assume A2, being a substantial holder, know more than we do with regard to the 'global category leader' which will supposedly make a positive contribution to SML earnings in the future. A2 management obviously see value in retaining a sizeable stake?

[winner69]

Fonterra lift farm gate by 40 cents kgms - suppose Synlait need to follow

Fonterra says “A $7.60 per kgMS forecast Farmgate Milk Price also increases our input costs putting further pressure on
our earnings in the second half of the 2020/21 financial year. More details on our earnings will provided at
our half year results on 17 March.

Suppose this applies to Synlait as well .... no wonder they don't want to guess how big the LOSS is going to be

[Ferg]

Also posted in the ATM thread:

TLDR: statistics says you cannot predict the SP movement of SML based on the SP movement of ATM and vice versa, although they are pretty much in lock step with eachother so far for 2021.

I did some work on the correlation between the closing price of SML versus ATM. I also broke it down by year and also tried each stock leading the other by 1-5 days, also for each year.

The overall correlation between the two from 2017-2021 is +0.47. In other words about half the time each stock moves in the same direction as the other on a daily basis.

Looking at the different years, 2021 has the 2nd highest correlation at +0.82, the years 2018-2020 had correlations less than +0.5 and 2017 was +0.98.

Advancing each stock relative to the other by 1-5 days generally results in lower correlations versus those where we compare the closing prices on the same day. In other words, the movement of one stock cannot be used to predict the daily/weekly movement of the other. Although I note there was a slightly increasing correlation for ATM leading SML in 2018, but it was still less than +0.5.

Summary data FYI:

Correlations	= Date	ATM+1	ATM+2	ATM+3	ATM+4	ATM+5	SML+1	SML+2	SML+3	SML+4	SML+5
Daily Close 2017-2021	0.47	0.47	0.46	0.46	0.45	0.45	0.47	0.47	0.47	0.47	0.47
Daily Close 2021	0.81	0.79	0.77	0.74	0.69	0.64	0.76	0.73	0.68	0.62	0.58
Daily Close 2020	0.36	0.35	0.35	0.34	0.34	0.34	0.36	0.36	0.36	0.36	0.36
Daily Close 2019	0.22	0.20	0.17	0.14	0.11	0.09	0.22	0.22	0.22	0.22	0.22
Daily Close 2018	0.41	0.43	0.44	0.45	0.46	0.47	0.39	0.37	0.34	0.31	0.27
Daily Close 2017	0.98	0.98	0.98	0.98	0.98	0.98	0.98	0.98	0.98	0.98	0.97
Monthly Close 2017-2021	0.45