A2m PE and price Forecast with increasing sales

Below i've summarised some rough calculations with some major assumptions based on the previous forecasts. What essentially these rough calculations suggest is that looking at the current price $1.875 and at the current monthly forecasted return on A2 powder sales we are sitting at a PE under 30 (disregarding revenue FYTD which have a lower revenue rate in the first half) which is extremely reasonable given the potential growth if anything undervalued. Now considering that sales of this product have increased say roughly 36% in one month, i would be of the opinion that there is enormous potential to increase sales if they have the resources to increase output. If the chinese are willing to pay 3x the market price for these products grey and their supply is not meeting demand i think a 30% increase in revenue per annum is highly reasonable given they have the capability to increase production.

Now you can also see that with incremental increases in powder revenue of 10% the PE ratio falls quite rapidly. If you factor in a 10% increase in sales the PE ratio at current prices (assuming no dilution and disregarding YTD sales) is 23 which in my opinion is highly undervalued given the potential for growth. In my price forecasts i have assumed a PE ratio of 30 given i believe this is fair value and conservative to say the least while the market has low saturation.

I've already loaded up my position and ill be holding as i believe in the growth prospects in this sector. While dips in the price are bound to occur, in my opinion it would be of less risk to hold (unless you are a gun trader of course, obviously i would like to increase my position too) if you believe there is potential for double digit growth especially with the one child policy now abandoned. Good luck guys here are some numbers to help you make an informed decision on your investment. It would be unfortunate for your stock to change hands with maybe some of the more critical posters on this forum. It appears some major funds have loaded up and i think those guys are seeing some similar figures to mine.  Their numbers might be a bit more optimistic though . BAL and BKL also reflect the direction of this sector at the moment. All the best!

P.S. I had graphs but they dont copy paste directly into this text box.

Note: these numbers are an opinionated guess of the possible inner workings of A2Ms forecast.

	Column 1	Column 2	Column 3
0	-	($ mil)	-
1	OCT15 Forecast16 Revenue	267	-
2	OCT15 FC16 A2 Milk Powder Rev	125	(47% component)
3	OCT15 FC16 Other Sales Rev	141	-
4	DEC15 FC16 Rev Update	300	-
5	DEC15 FC16 A2 Powder Rev update	159	(300-141)
6	6 months A2 Powder Rev total	68	-
7	FC16 for remaining 6 months	91	6 months remaining = AVG 15.2 mil/month
8	OCT15 FC16 for remaining 8 months	87	(125-38)/8 = AVG 10.8 mil
9			= 36% increase in sales in one month following october
10
11	OCT15 FC16 EBITDA	12	-
12	DEC15 FC16 EBITDA	33	-
13	increase in EBITDA due to DEC15 FC16	21	-
14	increase in Rev due to DEC15 FC16	34	(159-125)
15	Variable Cost of powder	(15)	(34-21) = 44% of Revenue *Fixed costs cancel each other out
16	Earnings from OCT15 disregarding fixed cost	70	(125*0.56) 56% is earnings after costs taken out
17	Fixed cost	(58)	(70-12)
18
19	Rev per month A2 Powder	15	-
20	A2 Powder Rev per year at monthly rate	182	-
21	Other sales Rev per year	141	-
22	Total Rev	323	-
23	EBITDA	44	(182*0.56-58)
24
25	Price at 23/12/15	1.75	-
26	Shares on issue	723,300,000	-
27	Market Cap	1,265,775,000	-
28	PE Ratio	28.6737722	-

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9
0		A2 Powder Yearly Revenue	Factor	EBITDA	PE			MC	Price
1	10% increase in sales	201	1.1	54	23		1630.752	1630752000	2.2546
2	20% increase in sales	219	1.2	65	20		1937.184	1937184000	2.678258
3	30% increase in sales	237	1.3	75	17		2243.616	2243616000	3.101916
4	40% increase in sales	255	1.4	85	15		2550.048	2550048000	3.525574
5	50% increase in sales	274	1.5	95	13		2856.48	2856480000	3.949233
6	100% increase in sales	365	2	146	9		4388.64	4388640000	6.067524
7	200% increase in sales	547	3	248	5		7452.96	7452960000	10.30411

Thanks,

Naomi