Great growth, but Mr Market expecting more?
ATM even after falling 14% is probably still a bit overvalued,fair(er) value I reckon more around $12 mark .
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Great growth, but Mr Market expecting more?
ATM even after falling 14% is probably still a bit overvalued,fair(er) value I reckon more around $12 mark .
Hopefully it falls to $10-$12 ...... someone can surely justify this? I can't.
hrdlicker just on cnbc says investing in heaps more people for us market etc and heaps more on marketing to grow the brand. glad to see she more on growing the business than the share price
This is the time when you really want this stock to be buying I guess. Last bought some at 1590 so I will need to average down a bit again. Just think of XRO then, no correlation for sure, when the price was really low when it was announced it will be moving to ASX. That's was gut feel on believing the dream for XRO. And this is when ML really helps. Still, GL to all holders and let's include the sellers as well :)
was the price that much ahead of itself - appears so
be interesting what happens in Aus
This is a classic example of why I seldom trust the market because it doesnt know how to price this stock, it's all over the place, trust yourself is the way to go when your dealing with the future this company has. PS-I am down a very large sum right now but still smiling and shaking my head at the overreaction.
the asx players will savage this i reckon down 20%? today
The market will react like a jilted lover.
I had no choice I bought more.
Very good value at these prices, simple as that.
Hits target and slaughtered :confused:
NEW GS TPs A$17.40/NZ$18.30 on CL BUY................
A2 is a high growth stock so it's always going to be volatile, as the instos adjust their forward looking projections.
Like the momentum building the US (although costly.)
Mmm just catching up with the results and market reaction. Not a happy day for my portfolio.
NZX SP price slaughter looks like an over-reaction to me (but time will tell.)
My biggest negative is the increased advertising/marketing spend, I just hope it is well targeted and well thought out.....in David Ogilvly's words, "I know half my advertising spend is wasted, trouble is I don't know which half."
Completely agree, time will tell on that one. However when you know Gross Margins pretty much stay consistent and their revenue just grew by 41% of an already large base, strip out those costs as assuming they will decrease in the future and this beast is really spitting out some cash and is highly profitable.
Craig off-loaded few volumes at open to shake up and the retails followed with that....compete over-reaction ....
The 9 million dollars in options going to one employee is a bit of a shock
The increased spend on marketing above expectation is the only reason that all projected metrics were not beaten, it's really that simple.
Current pre-market matching on ASX at A$14.90. Maybe this time it was the NZX's turn of overreacting?
Still a great company btw. Happy to hold.
https://www.fool.com.au/2019/08/21/a...th-in-fy-2019/
Excerpt : "According to a note out of Morgans, it was expecting the company to deliver EBITDA of NZ$431.3 million in FY 2019. Morgans was one of the most bullish brokers covering the company, with the market consensus estimate a little lower at NZ$420.6 million. As you can see above, a2 Milk Company has fallen a touch short of expectations."
https://www.shortman.com.au/stock?q=a2m
Shorts had been building up ahead of results so there will be short coverings today by recent shorts to lock in profits.
Have taken the opportunity with the current sp lift from the lows now to sell a few to lighten up on my over-weight position.
I just struggle to understand why so much credence is put on brokers and analysts opinions before a result. These people usually have no idea of what is going on anyway, so why should any company have to 'meet analysts predictions' or get scorched?? As noted above, great result, ton of cash, and only marketing spend increase stopped the company hitting the 'targets'. Hopefully the Aussies are smarter.............
It's all about Fear and Greed, make a nice cup of tea and sit back and watch the games being played and have a laugh to yourself.
Some feedback from a broker :
1. $44m loss from US of concern. Much higher than their expectations.
2. Second half margin at 28.2% lower than expected.
Exit from UK and huge increase in spending in US (est $90m) - both countries have not been happy hunting grounds for NZ companies.
Marketing
Other Costs
Salaries
high % increases here
China ebitda margin a miserable 23% in H2 .....was 40% in H1
Hope it doesn’t stay this low
Of course, did take some profits around $14 mark in Feb'18 when they announced Fonterra tie up along with HY results and market just went berserk. And my reason for buying back is seeing that price (nearly) presented itself again.
And yes, they missed the expectation a bit for this FY due to higher marketing spend and its easily fixable.
It's disappointing from the consensus perspective but nothing that an uplift in management quality couldn't rapidly fix. I have no unique perspective on that variable unfortunately, A2 just isn't in my wheelhouse, so I'll leave further commentary to others.
Just a question of time IMHO. Way oversold today. Some big gaps in the TA above your purchase price waiting to be filled.
Been hard work sitting on my hands today, but I'm not a trader and am in for the long term. I still see this one outperforming most on the NZX. Safer than money in the bank IMHO!!
(ps even with today's decline, Share Site tells me ATM has averaged 110% pa over the last 5 yrs.)
GL to those buying today.
She has already started doing the rounds...not very surprised with the fall...
Its managing director Jayne Hrdlicka said investors had little reason to be disappointed with the result.
"I don't think you can argue with the quality of the result, either with what we delivered in fiscal year 19 or the investments we're making... we don't focus day to day what happens on sharemarkets," she said.
https://www.rnz.co.nz/news/business/...a2-milk-result
And she is right the company is just getting on with growing an awesome business, they cant divert attention to medicating a Schizophrenic market.
Congrats to all the low 14ers. You are already up a good 60c. So where to from here, after all the wobblies have wobbled? Looking good to me with a new up trend forming from 1.10 this arvo.
I'm more than a little partial to a cup of milk with my supper and recently switched to A2 milk and the marketing hype is true as far as I am concerned. Feel the difference !
Still got to get you to trade shares in the cafeteria at Coronet ski field, on the chairlift going up, (nothing new so far) but also while skiing downhill on the M1 lol...I have to see this trade while skiing happen and am offering my guide dog services for free to ensure it does :D
Tomorrow will be when the official downgrades are released by the analysts and brokers - recommendations based upon revised lower forecasts & valuations will drive the sp over the short term.
A quick calculation shows the impact of lower EBITDA margin (-3.4%) of $56m on F20 forecast revenues of $1.66 billion. That will translate to an adverse NPAT impact of around 11% in F20.
Can see why the market shaved 12% off the sp today.
Then there's the increased marketing spend flagged for F20 (from 10.4% of sales to 12% of sales) = $26m increased cost. The unknown is whether this is to maintain or accelerate current sales trajectory.
Anyway, we will see tomorrow - can imagine the analysts furiously reworking their numbers (after being very positive) to less lofty numbers after discussions with the company.
https://www.moneymorning.com.au/2019...ions-asxu.html
"A2 Milk expects FY20 EBITDA as a percentage of sales to largely align with their 2H19 EBIDTA margin of 28.2%. And The Australian Financial Review reports that the EBITDA margin outlook consensus was 31.6%. Consequently, with downgrades potentially in the offing, the A2 Milk outlook section of the results presentation played a big part in today’s fall."
Balance you talk as if the market is rational and knows what it's doing, I'll let you in on a little secret, most of the time it doesnt. PS-Watch the big game players like UBS/Goldman lower their targets to mop up as many cheap shares as they can and extract mega fees from the shorters at the same time. Lol
The market reacts short term to what the brokers and analysts say - recall how we were all rejoicing at the sp going ever higher a month ago as one broker after another issued upgraded valuations?
We are going to see the opposite from the brokers tomorrow so bracing oneself for the ride is simply prudent - irrespective of whether the market is rational or irrational.
Brokers/analysts upgrade ramp it selling into the rise. Same downgrade buying into the weakness. Rinse and repeat.
If you know their game and are prepared to either trade it just like they do, or ignore it completely, you’ll be winning. Fight it and feel the pain.
Very little changed today for ATM, still an outstanding company on a incredible growth trajectory.
Was quite busy doing real work today so here is my belated detailed analysis and thoughts.Quote:
"A2 Milk expects FY20 EBITDA as a percentage of sales to largely align with their 2H19 EBIDTA margin of 28.2%. And The Australian Financial Review reports that the EBITDA margin outlook consensus was 31.6%. Consequently, with downgrades potentially in the offing, the A2 Milk outlook section of the results presentation played a big part in today’s fall."[/I]
For my money Balance has a good point. Herdlicka is spending money on staff and marketing with little or no restraint and it will obviously materially affect the EBITDA margin. Only time will tell if this is a better way to grow the company than Geoffrey Babbage's more conservative approach. The considerable inventory build suggests they could have sold more if the demand was there but it wasn't. In fact demand was short of production capability by quite a bit and that's a first to the best of my recollection. Maybe that's why marketing is being seriously ramped up ?
The other thing to keep in mind is sales and profit growth, (despite all the extra staff and marketing spend in FY19) has slowed quite considerably compared to last year. Net profit after tax grew 116% last year so ~ 47% growth for FY19 is clearly not nearly as impressive.
Likewise sales growth last year was 68%, just 41% for FY19 and that with heaps more marketing and headcount.
When we look at the 1H FY 19 v 2H FY19 split we see 1H sales of $613m generating $152.7m net profit and 2H sales of $691m generating just $135m net profit and its the margins in 2H shareholders get to "enjoy" going forward.
Its looks to me like Herdlicka is throwing a heck of a lot of money at the operation and growth is slowing quite materially whereas Geoffrey Babbage's approach was far more successful. Don't suppose he can be coaxed out of retirement ? Could be a rough few days ahead as analysts seriously revise their numbers.
Cash on hand amounts to 63.2 cps.
https://www.marketscreener.com/A2-MI...22/financials/
Prior to this announcement average analyst view is for sales of $1,660m next year and 32% EBITDA margin.
Retuning this to the 28.2% EBITDA margin the company is now forecasting and everything else in the above average broker forecast for FY20 staying constant this gives revised NPAT of $326m for FY20, only 13% net profit growth next year on 27% sales growth and all this on vastly higher marketing and human resources costs.
$326m gives 44.4 cps earnings and at a closing price of $14.81 that puts ATM on a forward PE of 33.4. That looks a bit pricey to me for the expected growth rate, (has traded at lower rates in the past with much higher previous eps growth rates) and caution appears to be warranted.
Finally, no analysis is complete without a look at TA. Very clear break down through the 100 day MA today and the bounce this afternoon was fairly muted in comparison to the initial drop and did not recover above the 100 day MA.
Hmmmmm. Some real caution appears to be warranted here. All the numbers I am looking at tell me very clearly that profit growth is slowing down at quite a worrisome rate !
Disc Not holding and not intending to directly hold. Hold Kingfish and they hold heaps of ATM.
Solid result, what other company with over 1b revenue is growing at 40% p.a. with 400m cash and no debt.
What ever did happen with the Fonterra partnership? Was such a huge announcement more than a year ago and now it's hardly ever talked about.
https://www.afr.com/companies/retail...0190820-p52ix4
"The a2 Milk Company boss Jayne Hrdlicka says the easy revenue gains made in Australia and via daigou personal shoppers are a thing of the past and the milk and baby formula maker is building capacity for the long haul in China."
Game is changing and ATM is positioning itself with increased marketing and promotional spend in China (& Australia) to maintain growth momentum.
Let's hope the increased spend will result in significantly higher sales to offset the reduced margins.
A good chunk of the extra inventory hold may well be related to the build up to 11\11 which has historically seen them struggle to keep shelves stocked. This will be what they're referring to when they talk about adding flexibility to their inventory, the ability to respond rapidly by putting a lot of product into big sales events.
Feeling a lot better after a good sleep! Another interesting day ahead.
Agree with Mondograss that inventory build likely to be related to 11/11.
Yesterday I expressed concern at ATM's Marketing spend going forward. The former CEO Geoff Babbage was adept at signalling increased advertising spending and then juggling that spend as the year progressed to ensure healthy end year financials. I hope the CEO Jayne learns from this.
My other concern was the foreign exchange impacts caused by Trump's trade wars. The high US$ makes ATM's planned US promotion more expensive, while devaluing the Chinese Yuan lowers ATM's sales returns.
Looking ahead, I see ATM's growth slowing to about 30%, however I'm not as pessimistic as Beagle with his FWD EPS of 44.4, rather I see FWD EPS at around 51c ( a 30% increase on current levels) which at a PE of 30 equates to a forward looking SP of around $15.33
That's all for me for a while. GLH.
IMHO this feels similar to the early days of Xero. A polarising share that people either like or loathe. Each side will read the results & attach meaning to it as 'proof' of their position. Lots of volatility based on the mood of the day and analysis of every announcement and rumour.
Facts are if you bought in this time last year, you are still better off than having the money in the bank. My guess is, if you bought in today, this time next year you will still be on the winning side.
I bought Xero at around $5, rode the rollercoaster until $42 thinking only way is up. It plunged & felt sick at all the 'money I was losing' ..... fear got the better of me and sold out completely at $24 and took comfort as it kept sinking to $15 ...... now it is about $63 .... hindsight is a wonderful thing but it doesn't pay the bills ... or pay for the holidays.
Sit tight, ignore the volatility and learn the lessons that are best provided when you have skin in the game.
Morningstar has updated their research - valuation up 50c to $15.00 and for what it is worth, threy did have this one right when they valued ATM at $14.50 before!
I'll play the game with these Turkeys now the price has stabilised(Sort of) sell some for a loss and buy back more shares cheaper, see if the Kiwis are being the opposite to yesterday(A bit too enthusiastic)
Well thought out post.
Yes, the landscape is changing (in China), gone are days where easy money could be made through daigou channel as it was prevalent when Geoff was around. Now with changes in chinese online laws for personal shoppers, the company needs to look at long haul with more sustainable channels of sales penetration and that's what Jayne is doing.
As per article written in AFR, you can't expect continued growth in top line without investing bit like saying "can't have your cake and eat it too" ..
I am out of 2/3rd of my shareholding this morning - the game has changed for ATM (as articulated by Jayne herself) and the market will be cautious about how well the repositioning will deliver imo until the next update.
Nice to lock away some of that triple digit gains. :)
I am quite happy with the company's progress - the easy China gains could only last so long, time to plough the proceeds into building a more robust, diverse and sustainable business. Again with the Xero comparisons, they are better off churning their cash pile into building the company than sitting on it or throwing it back to shareholders for now.
Some are seeing the increased marketing spend as a downside, I am quite happy as the company's marketing had produced incredible results in the past and we are seeing this again with the huge growth in the US market.
Happy to hold and see how things go.
I think it might be time to take a step back and reevaluate things mate. All the signs are there that growth is slowing quite considerably despite the really massive ramp up in marketing costs last year, up 83% and will be up massively in FY20 for even significantly lower profit growth. 12% of all sales going into marketing is a very serious marketing position to take. Surely the trend here is quite clear ! Massive growth in marketing to sustain much slower growth rates. Game changer !
I continue to hold long, as the product is good and the valuation represents less than the size of the market opportunity.
I guess the question is around the cost of sales going forward.
https://www.livewiremarkets.com/wire...the-bath-water Another perspective
Selling out of Xero due to fear caused me more angst as I had a sum of money sitting idle in the bank.... Better the devil you know or in this case ... As a A2 holder I have made it my business to research, read and question aspects of the company, the people, the product and the market etc. If I had found a better place (for me) to invest, then my money would already be there.
The results announced yesterday is ONE piece of the puzzle with historical information and plans for the future. Multiple interpretations have come forward.
Certainties ....Jayne will sell her shares, Singles day sales results, Trump will tweet ... and uncertainties will surprise / spook the market.
didnt take out yesterdays high so might be bearish for the rest of day. probably all the people taken to the woodchippers yesterday still havnt sold yet as well still in disbelief
Went for a browse at the newly opened Chemist Warehouse in my neighbourhood.
Plenty of A2 IF on the shelf - wall to wall. No restriction on cans per customer.
Sign of the higher inventory carry or sign of the times?
Yesterday when the price went sub $14.50 I dived in the deep end, having dipped my toe in a few weeks ago. Between pressing the buy button and the order getting to the market the price dropped significantly and I bought at an average of $14.16.
I think I have a bargain.
All this sub 100MA and little profit growth ahead I dismiss. This company knows what it is doing and is thinking medium & long-term.
Glad they have dropped the UK. It has been obvious, to me at least, that they were wasting their time there.
Today I move into long term accommodation for the first time in years and so, at last, I have a bottom draw to keep stocks in.
So are shorters covering or are they adding to their short positions?
If they are covering, Sp will come under pressure once they have completed the current round of covering.
If they are adding, then there will be a sharp rise in the so post their latest round of shorting.
Guess we will know in a week!
should get our bearish down move soon
Clear break down through the 100 day MA adds further concern to the situation.
As a youngster paying my way through University, (no interest free student loans back then) I worked on my Uncle's farm each summer for a few years.
One thing he taught me and said its been that way since Adam was a boy is that low hanging fruit are a heck of a lot easier to pick than the others.
Even Jayne admits the low hanging fruit in terms of growth have now been picked...
Whatever happened to the much touted Fonterror link up ?
Beagle and Bull singing from the same songsheet, that there is as strong a buy signal as you'll ever get. Lol
I bought more. It wont last IMO (the hammering). Bought at 14.55 which I consider good value for a company I like.