SML - Synlait Milk Ltd

[bull....]

I am trying to recall if this is my bad that I can't recall it or whether this new lower margin ATM supply contract has previously been communicated to the market at any stage ?

you just know when a company agrees to a new supply contract with there biggest customer that its bad for sml

Pricing terms that reflect the commitment on the part of both companies to an ongoing market-competitive pricing regime

https://www.nzx.com/announcements/320294

it was a give away they got screwed

[stoploss]

$A10.49 is the current match price on pre-market in Aussie.

NZ version only $9.59

Cross rate = 1.03
??

Way too early to take any consideration of the Aussie match , you know the professionals are going to hold off till the very last second .......

[Beagle]

Quite different to Penno, isn't the new CEO.

Yes, very very different...about as different as the change in CEO at ATM but in different ways.

I am not convinced that the change in pricing on the ATM contract was clearly communicated by the company but they were at great pains to highlight cultural and diversity initiatives at the last reporting period and we see that continue on in this one.

To those that expect the more experienced here to predict the future with complete clarity, try and remember that predicting the future is extremely difficult.
We had a professional analyst predicting $47m just the other day...and we get just $37m. These professional analysts have access to special company visits outside of normal reporting periods that private investors (unless they have a really big stake simply do not) so theoretically they're in a better position to make a professional assessment.

Anyway..the company still thinks full year will see growth but I think the growth will be quite modest now. https://www.marketscreener.com/SYNLA...61/financials/
I expect analyst downgrades to the previously expected 18% eps increase and the share price fall today may be warranted, although at face value it seems extreme but a $37m result when some analysts were expecting $47m is a major miss, by some 22% !

If the company can make say 43 cps for the full year at $9.60 that puts the company on a forward FY19 PE of 22.3.
I don't see the prospect of a divvy for many years with all the capex.

[Beagle]

I don't recall that being communicated to the market, as they say the agreement is confidential.

Anyone here managed to listen to conf call hosted by CEO and CFO this morning, was bit busy myself with other things.

I think that's very poor...should have been disclosed. Sorry was too busy to listen in, results speak for themselves.

you just know when a company agrees to a new supply contract with there biggest customer that its bad for sml

Pricing terms that reflect the commitment on the part of both companies to an ongoing market-competitive pricing regime

https://www.nzx.com/announcements/320294

it was a give away they got screwed

Not a giveaway and I don't recall anyone saying that at the time, (you might have) but I don't recall. Hindsight is always 20/20.

I think the agreement is obviously at a considerably lower margin and with the lack of registration of other initiatives yet and the implications of supplying ATM at a considerably lower margin for the reminder of that 5 year deal...my growth assumptions have been materially reduced.

I think analysts will trim back future eps growth assumptions too. Savage share price reaction now looks logical considering everything.
John Penno did a stellar job as the former CEO as did the former CEO of ATM.
I have real reservations about both of these new CEO's now. When they start trumpeting achievements on diversity initiatives as though they have really achieved something absolutely marvellous one does start to wonder...

[bull....]

I think that's very poor...should have been disclosed. Sorry was too busy to listen in, results speak for themselves.



Not a giveaway and I don't recall anyone saying that at the time, (you might have) but I don't recall. Hindsight is always 20/20.

I think the agreement is obviously at a considerably lower margin and with the lack of registration of other initiatives yet and the implications of supplying ATM at a considerably lower margin for the reminder of that 5 year deal...my growth asperations have been materially trimmed.

yes i did mention it , but of course you would have written the comment off as not fitting your bullish case lol

[Beagle]

yes i did mention it , but of course you would have written the comment off as not fitting your bullish case lol

Even a broken clock is right occasionally, actually twice a day lol

Aussie price action this afternoon could be interesting.

[Balance]

Even a broken clock is right occasionally, actually twice a day lol

Aussie price action this afternoon could be interesting.

Some short coverings to lock in nice profits or relief at being able to get out without horrendous losses.

[Beagle]

I've had a really good look and think about this now.

http://www.sharechat.co.nz/article/0...r-margins.html

FCNZ analyst unimpressed and the same applies to me.

The lack of transparency in terms of Synlait not telling the market about the terms of this new contract has blindsided minority SML shareholders and explains why a major gap has opened up between the relative share prices of these two companies in recent months. Some major shareholders were obviously "in the know"
John Penno was a great CEO but as with ATM we now get an unknown quantity with a whole lot to prove... but we do get lovely pink colours and heaps of slides and details about diversity programs...its just absolutely marvellous, that's exactly what I have been hankering for all these years (sarcasm intended).

I think both ATM and SML are very fully priced and an awful lot of future growth is already priced in but in all sincerity I wish the best of luck to shareholders of both companies. Beagle

I'm completely out. I expected a minimum of $45m and it is only now we learn about this much lower contract margin to ATM which has enduring effects on future profitability for all time going forward. Broker DCF model assumptions will be in for a big change ! Lack of progress with registration of other product is a real concern in this new much cooler climate of relations with China. When will these ever achieve certification approval ?

I note the current average 12 month price target of professional analysts is just $9.73 (no dividends so I discount this by at least 8% to get implied fair value today of just $8.95) and I am expecting multiple significant analyst downgrades as a result of this announcement today.

We've been blindsided here and I for one won't wait around to see the disappointment going forward as I feel now with much lower margins many years of future growth is already fully priced in.

[RTM]

I'm out at 10.01. Average buy 2.35ish so not to disappointed. Will have another look if they approach 8.00.
But I think I am better to look for something that pays a dividend.

[peat]

just like OCA, this is why I dont overexpose myself to any particular company, there are often surprises and disappointments and an individual human can not be expected to anticipate and avoid them. I'd reduced on this one a little while back due to the preference of having a balanced portfolio. Still a reasonable chunk at 15% but allows me to cope with volatility.
I dont quite understand how we got screwed by ATM though. They wanted lots of our product , couldnt go anywhere else to get it (afaik) and yet managed to beat us down in price. Hmmm