Analysis of the A2, but does not forecast stock prices, page-15

Current China's infant milk powder market size is $13B. 3% of china's infant milk powder market will mean $390M of sales of A2 infant milk powder. Last Financial Year's revenue from its infant milk powder is only $40M ish. If A2M really captures 3% of current infant milk powder market, that will mean it grows 10 times from now!! That will cause it to have circa $40M EBITDA, which will mean that the PE ratio will be circa 13-14 once the share placement is completed. Obviously this is something that may be 2-years away, but this hope is sufficient to lure many investors to want to jump into the game. However, this is assuming that A2M is not getting increasing sales from their other products, or sales from UK or USA, which I believe will grow rapidly in the near future. I would be quite happy for them to capture just 1% of China's infant milk powder this year, which will mean their infant milk powder sales continues to grow by 3 times as compared to last Financial Year.


The future still look very rosy for the company. The earnings for the coming year is anticipated to increase by 150%, with A2M getting $10M net profit this coming year, that makes the forward PE Ratio of circa 50. However, don't be alarmed as the PE Ratio for growth companies are usually very high as there's a lot of growth expectations. The PEG ratio is a better measurement for growth companies. The PEG ratio for A2M is only 0.33 (take PE of 50 and divide by Earning growth % of 150)!! The lower the PEG ratio, the more attractive the valuation of the company.