the a2m story will be about another company that relies on china for a significant portion of their sales getting punished. in no point throughout the chinese economic expansion has it been more clear than now that china is a rogue market and clearly against the west. tons of people have made money there. but the attitudes and sentiments of investors are rapidly changing. they know that now the goose that laid the golden egg for years is being strangled to death.
a2m has fought and died by its own sword- rapid growth due to the chinese and now rapid deceleration due to the chinese. the fact they had to destroy nearly $100m worth of infant formula indeed renders the management presiding at the time as incompetent morons with tunnel vision, unaware of the substantial risk of being reliant on one market for an elastic product. these class actions will determine whether they were negligent or reckless in their disclosures.
the funny thing is that the chinese government are appearing stupid enough to believe that our labour party will kowtow to them like they did in the 70's. australia has spoken loud and clear and our trading relationship has changed forever. one shaped on necessity more than want.
gievn the a2m email response to the us infant formula market, it will need its cash reserve for market diversification, the question is how much and at what ROI. so far, their SP represents this transition to be a lot more difficult than anyone probably thought. lots of risk here in execution success. the company needs to report earnings already so that an appropriate PE can be allocated to a2m. is +31 adequate anymore? my guess is no and as long as that number exists i think shorters will continue selling rallies.
im all for making trades but now more than ever in terms of a long term investment proposition, exposure to china is becoming a real esg risk. and this doesnt consider the economic peril that the chinese find themselves in. any celebration for the most recent rate cut in china should indicate the desperation from the ccp to avoid a total economic collapse built upon a housing market that is a house of cards. im happy to punt again on this but now only with a $3 in front of the SP. their next financial report should be an interesting read!
A2M Price at posting:
$4.40 Sentiment: None Disclosure: Not Held
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