A2M

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$6.25 the a2 milk company limited

Synlait, page-241

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jossette

789 Posts.

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24/09/24

16:53

Post #: 75816941
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Originally posted by werdplaya58: ↑

Well in my view a lot of the things I mentioned the company is already doing, and just needs to do more of or progress more quickly.

The one exception on my list was 'supply chain investment to reduce manufacturing and logistics costs' where progress has stalled, unless you count the Synlait situation finally being resolved.

The key risks you mentioned

'Single market concentration (US been bleeding money now for 5 plus years)'

I think anyone who is an A2M investor needs to know that this will always be heavily dependent and overexposed to China market. It is absolutely a risk. Even in a completely ideal world anything the management could do to 'de-risk' e.g. new consumer segments/markets will only tinker around the edges. it's not to say they shouldn't be pursuing USA, SEA etc. but important to be realistic about what can be achieved in terms of diversification. USA is bleeding less and less so that is something.

Aussie / NZ credentials being damaged as sales slow in these countries

Talking about IF here I assume? Fresh milk seems to grow as normal and credentials seem just fine. My assumption is that there isn't much local market for IF in Aus/NZ. Previously it was all China-bound sales in one form or another - retail daigou, tourists, students etc. and now the company has shifted to a CBEC model which cuts out these middlemen, what we are seeing is the true local demand (or lack thereof). I could be wrong. The real metric to go by would be how A2M performs terms of Aus/NZ IF market share against its competitors.

Low product spread / diversification

Within the IF segment diversification is happening. Gentle Gold was just released, and we should hear about the higher-end English label product this half if memory serves correct. The other main vector for product diversification is nutritional powders and they released the senior one recently too. Also in terms of diversification, lactose free fresh milk seems to have been a massive success.

L&D no evidence of activity and very little "good" news - not sure what you mean by this

No dividends and 1 billion in the bank - yes - I think everyone agrees

MVN what's the go?

It boggles my mind still that they haven't built blending and canning capacity there yet, the only alternative explanation seems to be that they were hoping to pick up a facility on the market (e.g. following Synlait's asset review) but I think that possibility is running out of steam.

But it does seem they are transferring /in sourcing more manufacturing to MVM. Since they secured the removal of exclusivity rights from Synlait, possibly it could mean some more goes to MVM as well. Any new product (e.g. Gentle gold, nutritional powders etc) is being made there now. It is just the reliance on external partners like Yashili to plug the holes in the supply chain that irks me a little when they have had time to use their own capital to address it.

Expand

I say we should wait 2 weeks for the Synlait capital raising,
A2 / Synlait agreement and refinancing Synlait debt all becoming effective.

Then, A2 is free to announce their supply chain plans which involves MVM. The question here is whether they can takeover/ merge with another factory which incorporates blending and canning or whether they have bite the bullet
and build their own facility.

Another option is for Synlait to allow MVM powders in their facility for blending/ canning purposes.

A2M Price at posting: $5.43 Sentiment: Buy Disclosure: Held
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Synlait, page-241

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Synlait, page-241

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