SML - Synlait Milk Ltd

[winner69]

Don't they say downgrades come in threes? Lets face it - they have not really seen the full impact of the CUVID-19 hype in their sales numbers ... probably only coming in over the next couple of months (given they ship this stuff by ship - i.e. a month or so lag time).

These days downgrades comes in more than threes ...it becomes a habit and one follows another for years

[BlackPeter]

These days downgrades comes in more than threes ...it becomes a habit and one follows another for years

Just crunching the numbers. If we believe for a moment the NPAT forecast for FY20, then this would be EPS of 43 cents. Last year it was 46 cents, and the year before 42 cents. This means Synlait stopped being a growth company and had an earnings peak in 2019. Great job Leon, but this is another story ...

Even if we believe they might be able to keep the current earnings of a bit above 40 cent per share ... how much is a cyclical agricultural company which stopped growing really worth? PE of 10?

This would put a fair share price somewhere between $4 and $4.50 ... still some way to drop.

And above is assuming no more margin squeeze from ATM, no significant market issues with Corona virus and a happy outcome with Pokeno.

Ouch.

[bull....]

heaven forbid if a2 has a slowdown in growth

[BlackPeter]

heaven forbid if a2 has a slowdown in growth

I recon A2 can always buy or better franchise some more factories and herds ... but yes, A2 without growth would be like champagne without bubbles ...

[Beagle]

Just crunching the numbers. If we believe for a moment the NPAT forecast for FY20, then this would be EPS of 43 cents. Last year it was 46 cents, and the year before 42 cents. This means Synlait stopped being a growth company and had an earnings peak in 2019. Great job Leon, but this is another story ...

Even if we believe they might be able to keep the current earnings of a bit above 40 cent per share ... how much is a cyclical agricultural company which stopped growing really worth? PE of 10?

This would put a fair share price somewhere between $4 and $4.50 ... still some way to drop.

And above is assuming no more margin squeeze from ATM, no significant market issues with Corona virus and a happy outcome with Pokeno.

Ouch.

I estimate total value destruction from an adverse outcome with the Supreme Court as much as $500m inclusive of new land acquisition, rebuild of facility and all downstream effects with customers, suppliers and staff, not far short of $3 per share. Well worth remembering that this company is very highly geared.
Good luck to shareholders, you're going to need it as this has the potential to get extremely ugly.

I would not be a buyer at the price you mentioned BP. Factor in the above possible impact of Pokeno on a 50/50 likelihood of losing this suggests fair value about $1.50 lower than you suggest, ouch !!

[bull....]

These days downgrades comes in more than threes ...it becomes a habit and one follows another for years

pokeno result might see them paying out millions. way overvalued

[couta1]

heaven forbid if a2 has a slowdown in growth

Without A2 this business would be toast.

[BlackPeter]

Ouch - this is a bloodbath. Just looked into the depth. SP dived through the $7 handle and at current it looks like the next deal will have already a 6 handle (both bidders and sellers are there, they just can't agree on the exact amount) - this was fast ...

[bull....]

Without A2 this business would be toast.

no chance of them losing a2 business only margin , manufacturers always get screwed on price over time more and more a2 wont be any different.

[BigBob]

Ouch - this is a bloodbath. Just looked into the depth. SP dived through the $7 handle and at current it looks like the next deal will have already a 6 handle (both bidders and sellers are there, they just can't agree on the exact amount) - this was fast ...

It doesn't look great does it.... !! Fairly light volume though....