Australian (ASX) Stock Market Forum

A2M - The A2 Milk Company

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I'm surprised that A2M isn't receiving more discussion, considering that it's holding up fairly well compared to the rest of the market and has formed some good support in recent times.

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For further discussion, check out the weekly chart review at



where you'll find details at the timestamp located within the description under the video. Enjoy!
 
Good morning
Today (20/02/23) A2M reported an interim profit of $NZ68.5m ($62.2m), up 22 per cent.

Half-year revenue growth rose 18.6 per cent to $NZ783.3m as sales in China and Asia surged 54 per cent while US surged 62 per cent. But Australia and NZ sales fell 24.6 per cent. Infant milk formula sales surged 18 per cent with China label sales up 43.5 per cent and English label sales up 1 per cent.

Earnings before interest, taxes, depreciation and amortisation rose 10.5 per cent to $NZ107.8m with an EBITDA to sales margin of 13.8 per cent. Its on-market share buyback of up to $NZ150m is 60 per cent complete, but no dividend was declared for the first-half.

A2M reiterated its guidance for full year revenue growth of low double-digit and EBITDA per cent margin similar to FY22.

Have a very nice week.
Not holding

Kind regards
rcw1
 
qldfrog said:
I bought today after the fall for long term..probably too early
Click to expand...
Good evening qldfrog
Reckon medium/long term shareholders wouldn't be to disheartened by today’s decline. Plenty of positives in the overall mix - more babies in China ... :D ; takeover possibility ..... ?;):oops:

AFR article of interest, enjoy:

A2 Milk faces headwinds from China ahead of interim results​

039161c78a9359b22568d0daa76ce60e42594364.png

Carrie LaFrenzSenior reporter
Feb 20, 2022 – 4.40pm

The a2 Milk Company will look to put the negative events of 2021 behind it and update the market on the progress of a major strategy overhaul flagged last year when it presents its interim results on Monday.
The company had an incredible growth story, but its steep fall from grace last year has split the market over its prospects for recovery. Full-year sales in 2021 fell 30 per cent, underlying earnings plunged 76 per cent, and net profit tumbled 77 per cent.

Chief executive David Bortolussi has been at the helm of the dual-listed baby formula and fresh milk company for one year.
Last October he presented a detailed, fresh approach at the group’s investor day, with guidance that first half 2022 sales would be down for both English and Chinese label formula. This was due to a2 Milk deliberately constraining product in an attempt to deal with its ageing inventory issues. Mr Bortolussi skipped earnings guidance at the November annual meeting.
The consensus of analysts’ earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecasts sits at $NZ81 million ($75.63 million) for the first half of fiscal 2022.

CSLA analyst Richard Barwick recently cut his call to “underperform” from “outperform”. His latest channel checks indicated mixed signals for both a2’s pricing and age of in-market inventory. “In short, the previous trend of improvement for both seems to have stalled over the last month or so, which throws up question marks on the pace of recovery,” he said. Mr Barwick downgraded his 2022 revenue forecasts for the English label formula, which dragged his price target down $5.80 from $6.10 per share.

He said with fresher inventory being supplied into the channel, the age profile of a2 Platinum formula has improved slightly and the proportion of inventory over 12 months old has declined across all stages. This is important, since Chinese mothers view formula over 12 months old as aged and spurn it. The $3.9 billion company is a top 25 most-shorted stock on the ASX, with 5 per cent of its register held short, according to shortman.com.au.

The stock closed on Friday at $5.26, down 4¢. A year ago, it was fetching about twice that – $10.53 per share. In mid-2020 it traded at its all-time high of nearly $20 a share. Further pressure on the price led Perpetual to continue to top up its stake last year, with the fund manager now controlling 6.1 per cent of a2 Milk, making it the largest shareholder.

Wilsons head of research James Ferrier said a2 Milk still faces conjecture from investors over the macro picture in China, such as the falling birth rate, consumers favouring local brands and the related increase in competition, which is driving up marketing spend. “The question is, is this temporary? Do these trends reverse and provide a more favourable trading environment for a2?” Mr Ferrier told The Australian Financial Review.

“While the dust has settled a bit more around inventory issues, channel partner margins and new management, investor attitudes are still divided around the uncertainty in this macro environment.” Mr Ferrier has a “market weight” call and $6.02 target price. Consensus estimates have a2 Milk trading at 29 times fiscal 2023 earnings. “A2 still has that attraction of premium brand and offshore growth opportunities with China front and centre, so they tend to trade on a higher multiple than a traditional FMCG [fast-moving consumer goods] business that is purely a domestic story,” Mr Ferrier said.

A2 Milk plays in the premium end of the market for both baby formula and fresh milk. It has solid share of Australian fresh milk and also is sitting on a cash pile, although Mr Bortolussi is investing for growth rather than deploying capital management or paying dividends.

Infant formula is its main earnings generator. The China infant formula market remains the largest and most attractive in the world, with retail sales of about $NZ47 billion ($43.9 billion). But in 2021, volume growth started to decline, with retail pricing now under pressure. Chinese consumers are no longer prioritising international brands, and are looking to local competitors such as Feihe, Junlebao, Mengniu and Yili. Beijing is also pushing more breastfeeding.

Barrenjoey’s head of consumer research, Thomas Kierath, sees China’s birth rate as the key earnings driver, while the rising cost of living in China (notably housing) and the rising average age of marriage will act as a drag on the number of marriages and ultimately births. “A2 faces an uncertain future, given unfavourable demographics in China, greater competition, little innovation and a changing channel mix,” he said.
1676894318297.png

Mr Kierath thinks a2 Milk is a takeover target, and so does Credit Suisse hedge fund sales trader Sujit Dey.
Citi analyst Sam Teeger has a “buy” call on a2 Milk, and agreed that the birth rate is the key risk for a2 Milk.
But he also said that if more foreign players exit the China market due to lower growth prospects, higher cost of compliance and a greater need to invest in the market, it could allow a2 Milk to differentiate its product and snare market share.

Mr Teeger added that the daigou channel could also potentially start to recover from a low base, with Australia re-opening its border for international tourism on Monday. Time will tell if the once highly profitable retail daigou sector – an informal channel of imports to China – will return. With the onset of travel restrictions amid COVID-19 nearly two years ago, this channel to market disappeared virtually overnight.

Have a very nice week.

Kind regards
rcw1
 
Never really been a follower of A2M – way too many external influences exerted by various political parties & various countries for my liking…..

So I have not really been heavily involved in A2M’s Analysis over the years…..

If ever I do look at stocks outside my preferred lists, I usually rely on other analysts, like the Trading View mob…..

The following TV Analysis includes the 20/2/23 Half Year Results from A2M…..
20230221 A2M Financial Analysis.png

20230221 A2M Tech Analysis (1).png

20230221 A2M Tech Analysis (2).png


A quick look at the A2M Chart shows Total Lack of Direction by the A2M Punters beginning late Dec 2022 right through to 20/2/23, and the candles for 17/2/23 & 20/2/23 support that confusion theory by the "Knee Jerk Mob"….
20230221 A2M Cht.png


And, A2M is still under the spell of that 27/10/21 Gap Down…..

So, there are now 5 or 6 Resistance Lines directly above the current SP of $6.49…..

Then if you look at any ST Indicators you get the message that they are all very unhappy languishing around in Oversold Territory (pages 37 to 43)…..

My vote is ‘wait n see’…..

I need some confirmation TA over the next few days B4 I make a call on A2M’s ST Future……

Cheers…

DrB.
 
Last edited:
rcw1 said:
Good morning
A word from da analysts .... :)

a2 Milk Cut to Underperform: CS
a2 Milk target price raised 10pc to $7.70: Barrenjoey


Kind regards
rcw1
Click to expand...
Thnx for that rcw - sorta confirms my thoughts for A2M in the ST.
Should that be GS instead of CS ??
 
DrBourse said:
Thnx for that rcw - sorta confirms my thoughts for A2M in the ST.
Should that be GS instead of CS ??
Click to expand...
Good morning DrBourse,
Hoping find you well. Thinking CS is acronym for Credit-Suisse Australia.

Have a very nice day.

Kind regards
rcw1
 
From a technical analysis perspective, those former support levels up at $6.68, $6.86 and $7.00 are now resistance.

Intriguing that the share price stopped dead-centre on $6.08 at the end of today though - right on the support level formed from the open of 30-Nov-2022. Big question now is whether this support with hold or not?

If not, the share price will most likely be bound to try to find and test the next support level - previous support levels were $5.83 (from the open of 05-Sep-2022) and $5.56 (from the open of 05-Oct-2022).
 
Updating the previous chart from 20th February, the prior resistances formed after the announcement in mid-February are holding strong. That rally up until 9th March tested the $6.86 resistance perfectly and the share price has fallen away completely since. An Elliott Wave 5 formation has formed on the daily chart, as you can see below too, which suggests that the share price could return to the low of the trading range from September 2022, which would be $5.08 as a price target (shown at number '4' in the chart).

In the short-term, I'm particularly interested to see how price action reacts to the upcoming major support level at $6.07, which was formed on 22-Feb-2023, since we could see some short-term bounce-back in price action from the short-range support level at $6.32 from 27-Feb-2023.

1679179244467.png
 
Good morning
The a2 Milk Company has completed its on-market share buyback program, buying up to $NZ149m worth of shares since November 7.
The buyback resulted in the purchase of 21.7 million shares at an average price of $NZ6.87 per share (excluding brokerage costs).
The acquired shares have been cancelled and the total outstanding ordinary shares in the company following the completion of the buyback is 721.9 million.

Not holding.
Have a very nice week.

Kind regards
rcw1
 
goin' off.
.
a2 Milk has cancelled its long-running exclusivity deal with supplier Synlait.

The exclusivity rights relate to stages 1 to 3 of a2 Milk’s current infant milk formula products, which are sold in China, Australia and New Zealand.

“Synlait has advised that it is considering the notice of cancellation, it reserves its rights, and it will respond formally in due course.”
Click to expand...

a2 Milk claims Synlait’s delivery of “full and on timeperformance” fell below the level required to maintain the rights.
 
A2 Milk Co boss David Bortolussi has warned that China’s infant formula market is in a steep decline and will be a more challenging place to do business this year.

The company is heavily reliant on the Chinese market, which fell by double-digits in 2023 due to fewer newborns and lower shelf prices.

Even so, a2 Milk stuck to prior guidance and is still expecting low, single-digit group revenue growth, with EBITDA margins in-line with last year.

Mr Bortolussi told shareholders at a2 Milk’s annual meeting in New Zealand on Thursday that the Chinese market was headed for “a further double-digit decline in market value”.
.
sounds like a must to avoid.
 
Dona Ferentes said:
..........China’s infant formula market is in a steep decline and will be a more challenging place to do business this year.................
............due to fewer newborns and lower shelf prices................the Chinese market was headed for “a further double-digit decline in market value”.
.
sounds like a must to avoid.
Click to expand...
That all lines up with the commentaries about the Chinese younger generation not only avoiding marriages but those who do marry saying they will not have children (or no more than 1) resulting in continuing decline in the fertility rate. The new 3 child policy looks doomed to failure. Interesting article on China's demographic challenges.

Edit: I posted this in the China thread where it really belongs
 
Last edited:
Country Lad said:
That all lines up with the commentaries about the Chinese younger generation not only avoiding marriages but those who do marry saying they will not have children (or no more than 1) resulting in continuing decline in the fertility rate. The new 3 child policy looks doomed to failure. Interesting article on China's demographic challenges.

Edit: I posted this in the China thread where it really belongs
Click to expand...
So no more fighting for cans of baby formula in the supermakets, perhaps.
 
Not too sure how much this relates, but heard a very startling statistic over the weekend which related to the Asian region also. South Korea. I'll let the statistics speak for themselves, but found this fascinating. Chinese demographics in isolation may require expansion to neighbouring regions with respect to economics analysis from a fundamental perspective.

www.straitstimes.com

South Korea’s fertility rate marks record low in Q2 of 2023

The count represents the lowest since 2009 and marks 91 months of consecutive decline in births. Read more at straitstimes.com.
www.straitstimes.com www.straitstimes.com
 

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