ATM - A2 Milk Corporation Limited

[bull....]

smart cookies should have sold at resistance just under 8 been resistance 5 times in last 3 - 4yrs.

[sb9]

Hmmm...bit of an average result, sideways movement until another catalyst or ASM time in Nov.

[winner69]

Share price down again today

Bear in mind that if it fell to $6.00 that’s still 50% above the recent low

That’s pretty good

[aperitif]

Synlait’s recapitalisation proposal includes a proposed equity raising of approximately NZ$217.8 million by way of a: • $185 million issue of new shares to Bright Dairy Holding Limited at an issue price of $0.60, which will increase its shareholding in Synlait from 39.01% to 65.25%; and • $32.8 million issue of new shares to a2MC at an issue price of $0.43, which will result in a2MC retaining its holding of 19.83%.

Another note, DB sounded disappointed with Synlait on the call with China Label supply constraints. Well this is a big **** you. Export data positive today on the English Label side(Higher margin) into HK.

[sb9]

Looks like Synlait overhang had bit to do with their supply chain issues. DB refused to go into detail around commercial sensitiveness on the call y’day.
That analyst from BoA, another David asked some probing questions as he always does.

[carrom74]

Looks like Synlait overhang had bit to do with their supply chain issues. DB refused to go into detail around commercial sensitiveness on the call y’day.
That analyst from BoA, another David asked some probing questions as he always does.

Synlait in its announcement- mentioned the supply chain issue briefly which the two David”s were muscle flexing over . It’s temporary and only until August.

[aperitif]

a2 and Abbott will buy Pokeno circa $300-400mm. It makes too much sense, this plant was built for a2's English label ramp up originally, Bodco BC facility(SAMR under Pharmalac) will get acquired too($50-60mm), do a "brand swap" and have a second China label in the market. Auckland facility will produce new EL and have supply from MVM. You have geographic diversification, a plant they know well, and a LARGE multinational(Abbott) who is ramping Soy/Hybrid powders, has recently pulled out of the China IF market and a massive presence in USA infant.

[aperitif]

China to probe European dairy imports as trade dispute escalates

https://edition.cnn.com/2024/08/21/b...ffs/index.html

[aperitif]

More Notes:

Pro forma capital raise $310mm Debt
a2 and abbott buy to form a JV $300-400mm, Synlait debt free and shareholders happy.
Milk supply not an issue and advanced nutrition facility (have MVM supply) less favorable conditions in NI, fonterra also...
Purchase Bodco B&C facility circa $40-50mm with (SAMR license under Pharmalac brand) and do brand swap, close association with MVM(circa 5% stake)

Abbott - a2 have indirect product diversification through Abbotts plant based initiatives and the Pediasure brand which is ironically the same color(purple) and have massive ambition also in adult nutrition. NZ FTA agreement handy here. Not to mention the USA opportunity for IF and higher margin products. Im sure they must have been interested last year when Synlait were "exploring options", makes you think if Bortolussi has had a "chat" to Abbott's team...Pulled out of China IF market 2023, strategic stake in a2? Exploring M&A -chat in their previous call, cashed up.

[aperitif]

"Bodco (Hamilton): While this is just a blending and canning facility (it is these operations that hold a SAMR license), we find it interesting given its previous strong ties to MVM, and was previously supplied by MVM (we understand this isn't the case now). The founding shareholders of Bodco are also the founding shareholders of MVM and China Animal Husbandry group, a Chinese state-owned commercial enterprise that invested in Bodco in 2016 and is ATM's current partner at MVM. Bodco had a 5.6% initial share in MVM. ​​​​​​​Bodco was a loss making entity and had net debt in excess of PPE (& working capital) value at its last available accounts in 2021. It appears as if Bodco already at least has its Pharmalac brand holding one of the three CL brand slots. As of December 2021 PPE value was NZ$12.6m, total asset value of NZ$30m, and NTA ~-NZ$10m. A reasonable scenario in our view is ATM acquiring Bodco's Hamilton based blending and canning facility for potentially NZ$50m–$60m and insourcing production at MVM. While currently regulatory settings allow this, we do note that this may not be the most viable option long term, with potential regulatory settings changes whereby processing and blending & canning facilities are required to be integrated (this currently isn't the case). We understand that acquiring a ‘brand transfer’ from one site to another isn't easy, and there are significant risks associated with it. We note speed to CL access, along with ability to gain it, is also an important consideration for ATM"