The question that needs to be asked, page-15

Imo they should have paid the sign on bonus in cash even allowing for the following. Merely to prevent the bad look from the option they did take.

However, the reasons they may be keeping hold of more of their cash than you guys want them too may be due to the following:

In the last few presentations they have flagged they will likely invest in a blending and canning facility in the not to distant future - there would be uncertainties around cash required as it depends on size, location, buy new or build and if they partner with someone else and to what degree.

In addition, they've already had to invest more in the US market in FY18, and will again in FY19, than originally planned. They say it's due to the opportunity to expand now in a bigger way than thought this time last year. This has pushed back forecast breakeven in the US. This takes more money than originally earmarked even if the long term payoff will be bigger.

The daigou channel, while perhaps not the biggest margin channel for A2M, was most definitely the one that required the least marketing expenditure from the company as the daigou essentially did it for them. With the uncertainty around this channel going forward A2M may be thinking they need to spend more on direct marketing of their China label, via ecommerce and within China for the mother and baby stores, to pick up the slack if volume via the daigou channel is reduced. In other words more marketing dollars are required in China... more than was earmarked 6-12 months ago.

IMO the market is more gun shy on A2M at the moment due to the uncertainty around the CBEC channel regs. Obviously, in the medium to long term, the introduction of China only label via CBEC will be a positive for A2M given they have SAMR approval for a2 Platinum. Problem is the possible short term disruption, not least of which is the lead times associated with ordering a2 Platinum. Having spoken to A2M, they believe China label only labelling via CBEC is one possible outcome but as yet isn't confirmed. This is one uncertainty they don't need when they are trying to manage the supply change and marketing budget efficiently. What this means for FY19 revenue and profit is difficult to determine and hence the market weakness until it's clarified.