ATM-A2 MILK

[Minimoke]

Just a small technical matter but what you suggest above Minimoke is normally done by receivers, not liquidators.  I agree, if this plays out as you suggest, its highly likely any receiver appointed by the bank would continue to trade the company and try and sell it as a going concern.  On the balance of probabilities, you would think a JV between Bright Dairy and ATM would be in a truly commanding position to negotiate an extremely attractive price and bondholders and shareholders in Synlait would be in an incredibly weak position.

On the other hand, would the market support another $200m capital raise ?  Does the company have sufficient credibility left to tap the capital markets for that sort of amount ?

Why would there to be a meed fopr a capital raise?

Banks wil just want their money back. They won't care about shareholders, bondholders or trade payables. Just their $350m

Of which A2 could do it out of their current $800m cash on hand.

[Basil]

I think we need to acknowledge there is a chance Synlait might try and trade their way through this and if so it would appear likely the banks will want to see their debt substantially reduced.  Whether the market would support a capital raise, that is quite another matter. 

Maybe the banks give them some room to accommodate a recovery as is?  I think shareholders would be "very brave indeed" to tip more money into Synlait with the current directors and management team.

I agree this has all the makings of a train wreck.  Synlait report next week on 25th.

[winner (n)]

I think we need to acknowledge there is a chance Synlait might try and trade their way through this and if so it would appear likely the banks will want to see their debt substantially reduced.  Whether the market would support a capital raise, that is quite another matter. 

Maybe the banks give them some room to accommodate a recovery as is?  I think shareholders would be "very brave indeed" to tip more money into Synlait with the current directors and management team.

I agree this has all the makings of a train wreck.  Synlait report next week on 25th.

Synlait been an impending train wreck for many years eh Basil ......told you so years ago and you listened and sold your shares for $12.80 or something like that

Jeez, $12.80 seems to be 10 times the current price

[Minimoke]

I think we need to acknowledge there is a chance Synlait might try and trade their way through this and if so it would appear likely the banks will want to see their debt substantially reduced.  Whether the market would support a capital raise, that is quite another matter. 

Maybe the banks give them some room to accommodate a recovery as is?  I think shareholders would be "very brave indeed" to tip more money into Synlait with the current directors and management team.

I agree this has all the makings of a train wreck.  Synlait report next week on 25th.

Oh - you meant Synliat doing another Capital raise. I can't see that working. A2 with its 20% shareholding is unlikely yo have an appetite for it. Why spend $40m on a deprecating distressed asset when you could spend $250m for the whole kit and caboodle.

At this point I think the banks would take any opportunity to get as much of their money out as possible.

SML still havent announced their new international customer. There has been no news on the sale of Dairy/works / Talbot and there has been no market up date - so results reported next week will be in range of "net loss of ($5) million to a net profit of $5 million". Of which I am picking it will be on the low side. And even if it is on the high side, with a $5, annual profit that debt isnt going to get paid down very quickly.

Then there is added risk of China market down turn which may also be impacting on the international customer - its not as if the banks have a rosey outlook.

And tie that into absolutely hopeless ESG led management and hands off Board - its a struggle to find any positives.

[Minimoke]

A2 hits an all time low today at $4.46.

They completed there share buy back at an average price of $6.87.

So no dividend, no buy back, no acquisitions on the horizon and $800m in the bank.

Time for the whole Board to go!

[Basil]

The arrogance of the board, never paying a dividend and yet throwing shareholders money around buying the shares back at more than 30 times next years earnings, (at the time), is breathtaking.

Still trades at 20 times average brokers forecast FY24 earnings which are forecasted to be little changed from FY23, where's the growth ?  https://www.marketscreener.com/quote/stock/THE-A2-MILK-COMPANY-LIMIT-11384022/finances/

Just as well earnings are going to come roaring back in FY25 and beyond, or are they ?

[Ferg]

A2 hits an all time low today at $4.46.

They completed there share buy back at an average price of $6.87.

That is a bit of a shocker.  I get it that a buyback increases EPS, and assuming NPAT and the P/E ratio is maintained, then we get an increasing share price.  BUT my understanding is that these should be done when a stock is undervalued.  On what basis do they think it is undervalued?  I would like to see their workings and logic.  Given the buyback price exceeds NTA then this is NTA dilutive to remaining shareholders which is not good....although given the number of shares on issue, any such adjustments may be minimal.

[Red Baron]

A2 hits an all time low today at $4.46.

All time low vor the year - maybe.   Zum of us have memories that go back rather vurther than that! 

The arrogance of the board, never paying a dividend and yet throwing shareholders money around buying the shares back at more than 30 times next years earnings, (at the time), is breathtaking

Still trades at 20 times average brokers forecast FY24 earnings which are forecasted to be little changed from FY23, where's the growth ?  https://www.marketscreener.com/quote/stock/THE-A2-MILK-COMPANY-LIMIT-11384022/finances/

Just as well earnings are going to come roaring back in FY25 and beyond, or are they ?

Exactly.    At 'Vour Veevty', in todays market, vith an all A2 eggs in a vone basket profit base (China)?    Theez company eez grossly overvalued - a zell.   Vrom a pilot who haz zeen many high flyers vall vrom the sky.

RB

[kiwi2007]

 Morningstar, in its NZ Equity Market Outlook for the fourth quarter, singled out a2 Milk as a "top pick".

"There is much to like about a2 Milk, notably in China, the key battleground," Morningstar said. A2's share of Chinese-language-labelled infant formula continues to grow, supported by the a2 'Platinum' brand, it said.

"We forecast 9% annual revenue gains to fiscal 2028 as channel inventory levels normalize and market share increases, alongside improved sales of higher-margin English-label product and operating leverage from higher revenue," it said.

A2 Milk finished steady at $4.50.

Morningstar also singled out power company Manawa (down 7 cents at $4.48) and casino operator Sky City (unchanged at $1.90) as "top picks" for the quarter.

[Minimoke]

All time low vor the year - maybe.  Zum of us have memories that go back rather vurther than that! 

Exactly.    At 'Vour Veevty', in todays market, vith an all A2 eggs in a vone basket profit base (China)?    Theez company eez grossly overvalued - a zell.  Vrom a pilot who haz zeen many high flyers vall vrom the sky.

RB

Yes - a bit of an exageration on my part. Indeed Since July 2017!

https://stocktalk.co.nz/index.php?action=dlattach;attach=1145;image

[Hectorplains]

BusinessDesk article this morning that doesn't add much clarity.

Key points: 

A2 Milks contract cancellation is probably an attempt to create opportunity to renegotiate how much product they take from Synlait.  It's only the exclusivity aspect they want gone, not the contract.

A takeover by A2 of Synlait didn't make sense for A2.  Too many facets of Synlait's operations are not core to A2's strategy.  Bright and other large holders are unlikely to agree.

Synlait may yet be to forced to sell the Dunsandel plant. Dunsandel would be attractive to anyone doing infant formula in China because of its Chinese formula registration.

If Synlait loses exclusivity rights with A2 the effect won't be felt for some time, and it would still have a product many other companies would want. 

Talbot Forest and Dairyworks had not added the expected value and Synlait was better off focusing on manufacturing. However; there appears to be little buyer interest in either. 

[Minimoke]

BusinessDesk article this morning that doesn't add much clarity.

Key points: 

A2 Milks contract cancellation is probably an attempt to create opportunity to renegotiate how much product they take from Synlait.  It's only the exclusivity aspect they want gone, not the contract.

A takeover by A2 of Synlait didn't make sense for A2.  Too many facets of Synlait's operations are not core to A2's strategy.  Bright and other large holders are unlikely to agree.

Synlait may yet be to forced to sell the Dunsandel plant. Dunsandel would be attractive to anyone doing infant formula in China because of its Chinese formula registration.

If Synlait loses exclusivity rights with A2 the effect won't be felt for some time, and it would still have a product many other companies would want. 

Talbot Forest and Dairyworks had not added the expected value and Synlait was better off focusing on manufacturing. However; there appears to be little buyer interest in either. 

There needs to be strong buyer interst because SML have to find $130m and have it in the bank acount by the end of March - which in reality isn't very far away at all.

So leaves the possibility of Dunsandel  being put on the blocks - which would be a decent buy for A2 at the right price. Synlait could then become a supplier to abbot out of Pokeno. Dunsandell is not that far from Mataura so some synergies could come into play.

[Minimoke]

A2 at $4.25 today. Lowest point in 5 years. The market has well and truly fallen out of love with a profitable cash rich company. Su remakes that buy back look expensive!

[KW]

That is a bit of a shocker.  I get it that a buyback increases EPS

Only if the shares are cancelled.  Often times they are simply held as Treasury stock and then handed out to management and employees as performance shares. 

[Hectorplains]

A2 at $4.25 today. Lowest point in 5 years. The market has well and truly fallen out of love with a profitable cash rich company. Su remakes that buy back look expensive!

Radio silence on MVM new boiler etc... They're supposed to be firing it up in November.