ATM - A2 Milk Corporation Limited

[blobbles]

The thing that I was puzzled about was that it wouldn't take much to fix the cash position.

660m shares on issue. A 1:4 cash issue at 30c would raise:

0.25 x 660m x $0.3 = $49.5m

All the cash worries would be over, for what is really peanut money in corporate terms. Around $50m is plenty of capital to fast track expansion into the US. Even a 1:8 issue at 30c ($25m) might be enough. So why sail so close to the wind with their cash?

My best logical conclusion: ATM have approached their major shareholders and those shareholders do not support a cash issue, even a modest one. They don't want to see their stake diluted and they don't want to part with more cash. But from the outside that looks like ridiculous gamesmanship. So much at risk for what is in corporate terms a very modest capital injection.

I think KW might be right. Get a new Chairman on board, and make sure a couple of directors are Aussie. Get an Australian institutional investor on board via a placement. Makes sense. But also makes for a soft share price going forwards until the new investor is bedded in.

SNOOPY

Why do major shareholders not support a cash issue? Because they are confident ATM have enough cash on hand to see them through to profitability. If they did not think this and did not want their shares diluted, would they not sell their shares? But they are not and for me that gives me confidence that they are happy with ATMs plan. The just released HY shows that ATM are on target or even a little ahead of target with a few unexpected but welcome surprises (biggest Australian fresh milk seller to China, a substantial increase in revenues etc). Next year they will need to achieve a similar growth rate to this year for revenues and they will hit their target of 230m. At that stage they would have been in UK and China for 2 years, USA for 1 and maybe experiencing rapid growth in 1 or more of those markets.

And you yourself just stated how easy it would be for them to raise cash. I would imagine a 50m share placement @50c each based on current SP would be about right, with their current cash burn that would last them 3 years. How long would it take for them to organise this? A month? How long until the cash runs out? 18 months.

Sorry, but your comments SNOOPY sound more and more like "the sky is falling! the sky is falling!". ATM aren't out of options. They have 18 months to see themselves through to profitability which is looking better and better. And what happens if they aren't where they want to be then? They could close 1-2 of their overseas operation and just keep growing in Australia/UK or China. This would likely see them making 20-30m a year or more in a year or more in pure earnings, which isn't too shabby to say the least.

But please keep posting, you do throw up some interesting arguments. Always good to have someone picking things apart!

[blobbles]

Alright peoples, because I was hit up for not telling anyone about XRO's breakout, here's the dirt on ATM in a timely fashion. ITS JUST CRACKED ITS 100 and 120 DAY MA. RSI is positive. There is volume supporting the move. Still waiting on MACD to move into the positive, and for the daily MA breakout to be confirmed - this should happen over the next couple of days. But remember, we have already had one Fakeout, this could be another.

As always, do your own bloody research and think for yourselves!

Attachment 7137

Good post KW, thanks for the TA, this time they have solid fundamentals behind them, I am picking its onward and upward.

[MAC]

Some commentary from Geoff summing things up;

https://player.fm/series/rnz-busines...ces-too-thinly

[Harrie]

My best logical conclusion: ATM have approached their major shareholders and those shareholders do not support a cash issue, even a modest one. They don't want to see their stake diluted and they don't want to part with more cash. But from the outside that looks like ridiculous gamesmanship. So much at risk for what is in corporate terms a very modest capital injection.

I think KW might be right. Get a new Chairman on board, and make sure a couple of directors are Aussie. Get an Australian institutional investor on board via a placement. Makes sense. But also makes for a soft share price going forwards until the new investor is bedded in.

Snoopy. Whats the difference between an institutional placement, and a rights issue to existing shareholders. Actually nothing because both have the effect of diluting the shares. If existing institutional shareholders are not happy to fork out more cash now and diluting their stake, why would they be happy to see another institutional investor take a placement of shares and acheive the very thing existing shareholders are supposedly trying to avoid?

[Jasemc]

very true. The logic is ATM think they have enough cash flow. If not Snoopy will pump in a few Million!

[Harrie]

very true. The logic is ATM think they have enough cash flow. If not Snoopy will pump in a few Million!

Yes Jasemc, Maybe Snoopy is trying to talk up a cash issue so that he can get in at a price with a 3 or 4 handle on it! Good luck with that one Snoopy.

On a more serious note, I like a number of posters on this site, appreciate the contribution Snoopy makes. Because most of us are donkey deep in the stock we are constantly looking for affirmation. Without alternative views we run the risk of getting blindsided by factors we are not taking into account or have not considered. The more alternative views the better as far as I am concerned.

[Harrie]

very true. The logic is ATM think they have enough cash flow. If not Snoopy will pump in a few Million!

yes, maybe snoopy is trying to talk up a cash issue so that purchases with a 3 or 4 handle on it can be made. Good luck with that one snoopy.

On a more serious note I like a number of others on this site appreciate snoopys contribution. We have to be careful that because a number of us are donkey deep in the stock that we don't get blindsided by something not taken into account or ignored because it does not reconcile with our affirmation process buying into the stock in the first place. The more negative views the better as far as I am concerned.

5 o'clock boys back in town?

[see weed]

yes, maybe snoopy is trying to talk up a cash issue so that purchases with a 3 or 4 handle on it can be made. Good luck with that one snoopy.

On a more serious note I like a number of others on this site appreciate snoopys contribution. We have to be careful that because a number of us are donkey deep in the stock that we don't get blindsided by something not taken into account or ignored because it does not reconcile with our affirmation process buying into the stock in the first place. The more negative views the better as far as I am concerned.

5 o'clock boys back in town?

Fully agree. But if the stock is only worth 20c or 30c, then why has over 24,000,000 gone through in the last week or so over 50c?

[MAC]

Well well, that’s sooner than the “later in the year” reported just a couple of days away.

Onward and upward big time !

“A2 milk which will be sold in half gallon cartons for $4.00 to $4.50 with the strapline ‘The milk that might change everything’ – will arrive in several leading grocery stores from Kroger and safeway to whole foods, supported by advertising , in store demos, radio ads and a digital marketing drive.”

http://www.foodnavigator-usa.com/Man...ornia-in-April

[blobbles]

Well well, that’s sooner than the “later in the year” reported just a couple of days away.

Onward and upward big time !

“A2 milk which will be sold in half gallon cartons for $4.00 to $4.50 with the strapline ‘The milk that might change everything’ – will arrive in several leading grocery stores from Kroger and safeway to whole foods, supported by advertising , in store demos, radio ads and a digital marketing drive.”

http://www.foodnavigator-usa.com/Man...ornia-in-April

Holy moly! Good find MAC!

Kroger stores = 2640
Safeway stores = 1335
Whole foods stores = ~400

Of course ATM won't be in all of them, only some on the west coast states, but being represented in probably over 500 stores (West Coast states ~15% of US population) is a damn good start. If they are successful and get a nationwide supply deal, that gives them the ability to be in ~4300 stores throughout the US.