ATM-A2 MILK

[Minimoke]

Actually, government is quite clear on that proposal - "'No way': Finance Minister Willis opposed to proposed changes for infant formula laws"
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audio/nicola-willis-finance-minister-voices-disapproval-with-proposed-changes-to-infant-formula-laws/#:~:text=2024%2C%206%3A53pm-,The%20Government%20is%20strongly%20opposing%20proposed%20changes%20to%20infant%20formula,formula%20regulation%20%2D%20including%20labelling%20laws.

in which case there was zero need for yesterdays meeting. Nz shelves maybe ok. Perhaps not so Australian.

Ozzzies seem set on treating IF like cigarettes.

[Minimoke]

Actually, government is quite clear on that proposal - "'No way': Finance Minister Willis opposed to proposed changes for infant formula laws"
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audio/nicola-willis-finance-minister-voices-disapproval-with-proposed-changes-to-infant-formula-laws/#:~:text=2024%2C%206%3A53pm-,The%20Government%20is%20strongly%20opposing%20proposed%20changes%20to%20infant%20formula,formula%20regulation%20%2D%20including%20labelling%20laws.

An update

"The Infant Nutrition Council (INC) welcomes the announcement today from the trans-Tasman Food Ministers meeting in Adelaide that New Zealand has rejected proposals for infant formula label changes"

https://www.scoop.co.nz/stories/BU2407/S00441/infant-nutrition-council-welcomes-the-nz-ministers-decision-on-infant-formula-labelling.htm

[Left Field]

That's a very telling statement from NZ Infant nutrition council..... well done them.

[Minimoke]

A2 opened today at $7.68. 159,700 shares just changed hands at $7.915. Some one is keen.

Now trading at close to  12 month high
Edit. Now $7.98 - = equal to 12 month high.
Edit. $8.00. new 12 month high. with 250,000 shares in a trade crossing

[Left Field]

In the  ATM v SML match I'm picking ATM......
I've added to my holding today.

Posted this on the SML thread awhile ago.....Nice to have the support of today's purchaser!

[Breezy]

A2 opened today at $7.68. 159,700 shares just changed hands at $7.915. Some one is keen.

Now trading at close to  12 month high
Edit. Now $7.98 - = equal to 12 month high.
Edit. $8.00. new 12 month high.

Eons away from $21, at $8 id still be down 7 figures if I still had my original sized holding, perspective aye.

[Minimoke]

@leftfield.

A2 and Synlait tended to track along the same lines. Until last December

You cannot view this attachment.

[BlackPeter]

Hmm ... still working on understanding the human psyche - and admittedly, sometimes it feels like I am not getting closer ;

Anyway - looking at A2M:

It is these days a pretty boring milk company without any material IP. Anybody is allowed to sell A2 milk, whether it is healthier or not. Right?

Their major market (China IF) is going backwards (lack of money and babies) and their other big market (US) still sounds like a pipedream ... and if it ever makes money, there is nothing I can see stopping competitors to eat their lunch.

Their business is not anymore easily scalable. It used to be in the good old times they just sold marketing, but these days they have to invest into lots of stainless steel to ramp up production - as anybody else. Forget about cheap and easy growth ...

Which means, ATM should be priced like any other agricultural business - say PE between 8 (that's cheap) and (maybe) 12 (which would be borderline expensive and give still an IP or growth bonus they don't deserve).

However - at todays SP their forward PE (3 years) would be 28 (at a forward earnings CAGR of 5) and their backwards PE (10 years) would be 37. Sure - amazon used to trade at similar PE's (and worse), but this is not amazon. amazon is easily scalable and did grow like hell, but ATM - its just a boring milk company.

What makes people pay these stellar PE's for ATM? Based on which working assumptions of the fundamentals would the current share price for A2M be good value?

Or is this really just an example for an application of the greater fool theory?

[Minimoke]

Hmm ... still working on understanding the human psyche - and admittedly, sometimes it feels like I am not getting closer ;

Anyway - looking at A2M:

It is these days a pretty boring milk company without any material IP. Anybody is allowed to sell A2 milk, whether it is healthier or not. Right?

Yes - but you have to source a1 protein milk form somewhere. It take a while to convert herds from a1 to a1 free cows.

Their major market (China IF) is going backwards (lack of money and babies) and their other big market (US) still sounds like a pipedream ... and if it ever makes money, there is nothing I can see stopping competitors to eat their lunch.

Chinese baby numbers have bottomed out. Numbers are increasing. the door to Infant Formula powder into the US is open -

Their business is not anymore easily scalable. It used to be in the good old times they just sold marketing, but these days they have to invest into lots of stainless steel to ramp up production - as anybody else. Forget about cheap and easy growth ...

They arent yet really into stainless steel. Depite having nearly $1b in cash in the bank they havnt been out shopping for stainless steel in any meaning full way. Synliat is a prime opportunity - but appears not to have been taken up

Which means, ATM should be priced like any other agricultural business - say PE between 8 (that's cheap) and (maybe) 12 (which would be borderline expensive and give still an IP or growth bonus they don't deserve).

However - at todays SP their forward PE (3 years) would be 28 (at a forward earnings CAGR of 5) and their backwards PE (10 years) would be 37. Sure - amazon used to trade at similar PE's (and worse), but this is not amazon. amazon is easily scalable and did grow like hell, but ATM - its just a boring milk company.

What makes people pay these stellar PE's for ATM? Based on which working assumptions of the fundamentals would the current share price for A2M be good value?

Or is this really just an example for an application of the greater fool theory?

Year end was 30 June. Maybe someone has had a peak at year end accounts and seen that growth is in fact greater than anticipated. With more products coming out.

[Buzz]

Or is this really just an example for an application of the greater fool theory?

Even as a trade, the lessor fools have missed out on 100% increase in SP since the bottom in Nov'23. I doubt that the 'traders' give a toss about PE's, FA, or anything other than appreciating share price.

 

[BlackPeter]

Yes - but you have to source a1 protein milk form somewhere. It take a while to convert herds from a1 to a1 free cows.

Well, yes - it takes 5 to 6 years, but many farmers started already a decade ago (and are there ...). I hear its pretty hard these days to get A1 sperm (in case anybody would insist to) ...

Chinese baby numbers have bottomed out. Numbers are increasing.

That's not what the official data are saying, are you sure about that? I guess I hear that the Chinese government is pretty desperate to bring the numbers up, but so far Chinese women don't seem to comply ;p ):

They arent yet really into stainless steel. Depite having nearly $1b in cash in the bank they havnt been out shopping for stainless steel in any meaning full way. Synliat is a prime opportunity - but appears not to have been taken up

Did you forget the Mataura Valley Milk factory in Southland? And they already own a meaningful stake in Synlait (even if they admittedly work hard on running them into the ground);

Year end was 30 June. Maybe someone has had a peak at year end accounts and seen that growth is in fact greater than anticipated. With more products coming out.

Buy on the rumour, sell on the news?
Who knows, but apart from potential earnings blips which may or may not eventuate - I am wondering which sort of fundamentals would justify even todays share price?

[BlackPeter]

Even as a trade, the lessor fools have missed out on 100% increase in SP since the bottom in Nov'23. I doubt that the 'traders' give a toss about PE's, FA, or anything other than appreciating share price.

 

Fair enough - some people see the world as a big casino. And fair enough ... if it works for them.

Though the odds on that might be a bit scary - some win, some lose - though admittedly, one hears more often from the winners. I suppose its a bit like assuming everybody survived the last war, given that one only meets survivors after the war.

But yes, I think you helped me to understand. This is a game, and people just need to dance close enough to the exit (like last time). Some of them will get out in time, and the rest - who cares?

That's the problem with these scenarios ... for every winner there is somebody else who loses out. Its just not possible for everybody to leave the party while there is still money on the table.

[Left Field]

BP perhaps there is no right or wrong to sharemarket investing.

No black or white.

Just shades of grey.

1000 investors have 1000 different opinions.

At the end of the day.....it's their differing returns that measure them.

[BlackPeter]

BP perhaps there is no right or wrong to sharemarket investing.

No black or white.

Just shades of grey.

1000 investors have 1000 different opinions.

At the end of the day.....it's their differing returns that measure them.

I am not judging, just observing.

In the investing game everybody can win, given that the pie is growing due to the fundamentals. Its like farmers growing crops on their respective patches.

In the trading game for every winner there will be a loser (zero sum game). Its like pirates stealing the loot of each other. Somebody wins, and somebody loses.

And sure - both farmers as well as pirates can get rich ... but pirates have a significantly higher chance to find an early death.

Just to bring this back to subject - while one can make money with investing (looking at fundamentals) as well as with momentum trading - the risks for traders to lose their loot are higher. And while I agree that this is just a personal preference ... I think talking about the risks is quite topical.

If you buy into a share which is fundamentally overvalued by the market, you know that at the end somebody will lose their money. That's a fact - and a risk for everybody playing the game, but sure - whether people decide to gamble, this is a personal preference.

[Basil]

Looked at this yesterday.  FWIW Forward PE for FY25 at $7.99 is 29.8.
7 analysts average price target 1 year hence is $7.05 which suggests a spot fair value valuation of about $6.35 now noting its not a dividend payer.
Not my cup of tea on those metrics but each to their own and there's no denying the uptrend.  Just be positioned close to the exit door if a new downtrend emerges, I reckon.  Good luck to holders.  https://www.marketscreener.com/quote/stock/THE-A2-MILK-COMPANY-LIMIT-11384022/