ATM-A2 MILK

[Minimoke]

Gee. NZ market didnt like it. Down 9.44% open

[Minimoke]

Lets not forget they have committed to giving some of their cash to Synlait. Lets call that $70m out of their bank account.

[Teitei]

Strip out the net interest income of $14.25m from the result and ATM's underlying result is hardly impressive - almost zero growth in earnings!

Strip out the cash of $900m from market cap and ATM is trading on a pretty ritzy multiple of 24 times for a stock with single digit earnings growth.

Cannot see the appeal of investing or owning this stock at current levels.

[Minimoke]

Just for a bit of context, after looking at todays SP fall, A2 is holding $1.34 a share in cash. Time for dividends!

[Minimoke]

Think this has been over sold. So bought a few more. No Not all of that 400,000 share trade was mine.

[winner (n)]

See David the CEO got remunerated A$6.0m ....with another A$1.0m of LTI earned to be paid in future

He not complaining about being low growth

[Shareguy]

Craig's say

The FY25 outlook is however disappointing, with mid-single digit revenue growth undershooting recent sales data – with ATM pointing to supply constraints in 1H25 – and flat margins implying FY25 EBITDA 11% below current consensus

[Minimoke]

Craig's say

The FY25 outlook is however disappointing, with mid-single digit revenue growth undershooting recent sales data – with ATM pointing to supply constraints in 1H25 – and flat margins implying FY25 EBITDA 11% below current consensus

How can there be supply constraints. Synlait is sitting on over $316m in inventory.

[Breezy]

SML nearly up as much as A2 down, sibling rivalry.

[Teitei]

How can there be supply constraints. Synlait is sitting on over $316m in inventory.

Ever heard of wrong inventory mix?

[Left Field]

SML nearly up as much as A2 down, sibling rivalry.

Selling ATM to buy SML?

[Breezy]

Selling ATM to buy SML?

Was thinking the same at least punters on the NZX.

[BlackPeter]

And here it is folks......pretty healthy result at first glance

 https://api.nzx.com/public/announcement/436310/attachment/424903/436310-424903.pdf

• Revenue growth of 5.2% to $1,675.5 million
- Regional revenue: China & Other Asia segment up 14.1%, ANZ segment down 14.6% due to a change in English label IMF distribution strategy, USA segment up 8.2% and MVM external sales down 11.0%
- Category revenue: Total IMF up 4.6% with China label up 9.5% and English label down 0.3%6
, liquid milk in ANZ and USA up 3.3% and 7.4% respectively, other nutritionals7 up 36.7%
• EBITDA up 6.9% to $234.3 million with an EBITDA margin of 14.0% (up 0.2ppts)
• Net profit after tax (NPAT) attributable to owners of the Company up 7.7% to $167.6 million8
• Basic earnings per share (EPS) up 9.2% to 23.2 cents
• Closing net cash9 of $968.9 million up $211.7 million on June 2023 with operational cash conversion of 125.7%10
• FY25 guidance for revenue growth of mid-single digit percent and EBITDA margin (% of revenue) to be broadly similar to FY24 (see FY25 Outlook in the "FY24 Results Commentary and Outlook" announcement)

The following also looks promising for future growth

 Improved USA profitability significantly and commenced distribution of IMF with selected retailers in-store and online
under FDA Enforcement Discretion and progressed long-term IMF approval which is on-track for FY26 subject to FDA
approval
• Resolved Synlait arbitration disputes, including Synlait's acceptance of the validity of a2MC's notice of cancellation of
exclusivity, subject to Synlait completing its equity raise and the refinancing of its existing banking facilities. The Company
has agreed to support and subscribe for shares under Synlait's equity raise on terms to be agreed
• Progressed the Company's supply chain transformation by gaining access to a potential additional China label IMF
product registration slot with Synlait to be developed by December 2029 subject to SAMR approval. The Company
remains focused on securing further China label registrations and exploring other investment opportunities, mainly in
New Zealand and China

Presentation details; https://api.nzx.com/public/announcement/436310/attachment/424906/436310-424906.pdf

healthy result?

The "improvement" in the US market is just a reduction of their running loss. They pump for years money into it and still don't see a return (unless you consider a reduced loss a return).

Pretty dark clouds around the Chinese market - number of babies keep dropping (and even the smaller drop last year just temporary - they even mentioned in the report "longer term decline expected due to socio-demographic trends", which basically means that China does not have anymore enough women able (i.e. young enough) to carry babies to arrest the population decline.

The outlook statement (as well as the outlook) is highly unsatisfactory, except for investor who like risks and uncertainty, and even if we take the numbers at face value ...

forward PE (3 yrs) is 23 (after todays price correction), and this with an EPS forward CAGR of 4.5. Hmm - pretty stiff for an eternal "growth" company which always promised lots and delivered nothing. OK, there have been times when traders could make lots of money with them, but investors? And even for traders - it looks like they are price-ways again in the stratosphere.

Even if I ignore all the history of hyped up share prices and no shareholder returns at all. 23.2 cts EPS on a share price of $6.34 NZ is a PE of 27. Pretty stiff for a boring agricultural company pretending to be a growth company ... and the outlook is clearly not talking about increased revenues, but about plenty of risks for them to drop.

Ah yes, and than there is their legendary cash buffer. For every share they have $1.59 NTA (which includes all this amazing cash they never used). What a bargain - pay $6 (or wherever the SP drops) for the share to get $1.59 of assets.

Oh - dear, I better stop before the SP keeps falling and I need to redo my numbers above ... but here is the silver lining: No matter what the fundamentals, one can never predict to which heights or lows hype will move the share price.

[Basil]

Agree 100% BP.  Forward metrics, even after the share price fall today look very demanding for a company with such modest growth this year and for the foreseeable future.

[Teitei]

Agree 100% BP.  Forward metrics, even after the share price fall today look very demanding for a company with such modest growth this year and for the foreseeable future.

And really a single product company too.