They have lost momentum in China, A2 is a branding/marketing...

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31/03/21

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Post #: 52189330
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Originally posted by jossette: ↑

I have been thinking about what would need to happen to re-rate A2 milks current share price. I've come up with these main events :

1. Obviously, International borders need to open in Australia to allow vaccinated asian foreign students by July 21 and eventually tourists/skilled workers by November 2021. For this to happen sooner than later, we need the Covid vaccine to be successfully rolled out to our older and more vulnerable aussies by July to facilitate a possible term 3 commencement by students.

2. A much Lower New Zealand dollar. Currently 1NZ: US 71.5 cents (by the way, a lower Aussie would also help marginally). A more normalised NZ dollar has averaged around the 65 cents range, this would help sales margins. Very possible scenario with the new zealand economy posting disappointing negative GDP numbers last week

3. Greater emphasis on CBOE & MBS channels in future marketing strategies. I think this is already underway with massive growth in MBS stores and more targeted in store spending to bring in new customers.

4. A greater focus on establishing new markets in South Korea, Vietnam, Taiwan, Hong Kong and Japan and determining what products and distribution channels that A2 would need to setup to break into these markets substantially. Obviously, partnering up with local players is the likely scenario and I understand they have already done this to some extent in South Korea.

5. A new 5 year plan for the US/Canada market. We have been there for 5 years now selling liquid milk only. Sales have increased to circa $70 million in annual sales but we have incurred nearly $100 million in earnings losses to get there. Is there a market for infant formula?

6. A strategy to take over or compete with freedom foods kids milk "popper " market (messy monkeys A2) for school age kids We need to offer dairy products to older kids so we can encapsulate the whole family which should provide a moat for family loyalty to the brand.

7 After a 1 in 100 pandemic or world war, there is usually a post baby boom as couples re-assess what i important in life and their economy booms for the next very years facilitating affordability to have larger families. In China, growth is at >6% so ever increasing middle class and there is even talk of relaxing 2 child rule to allow larger families.

From where A2 sits today with buying its own milk formula factory to secure self reliance and being at the start of the vaccine rollout, a successful implementation of some of these pending issues would significantly create serious intrinsic value to this company. The black swan event of Covid can be reversed pretty quickly on this new focus and with some some favourable macro events .

Any major food company looking at these fundamentals, would be eyeing out A2M as a M&A play with significant upside when the market returns to pre-civid conditions.

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They have lost momentum in China, A2 is a branding/marketing company more than a dairy company. A2 stopped being a growth company almost 12 months ago.

A2M Price at posting: $7.83 Sentiment: None Disclosure: Not Held
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0 Great analysis

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(20min delay)
Last $5.74		Change 0.040(0.70%)		Mkt cap ! $4.149B

Open	High	Low	Value	Volume
$5.71	$5.74	$5.55	$29.35M	5.184M

Buyers (Bids)

No.	Vol.	Price($)
1	22	$5.68

Sellers (Offers)

Price($)	Vol.	No.
$5.74	55601	6

View Market Depth

No.	Vol.	Price($)
1	22	5.680
1	482	5.670
1	352	5.650
3	8016	5.640
3	32034	5.630

Price($)	Vol.	No.
5.740	16601	4
5.750	47132	9
5.760	33436	5
5.770	13582	1
5.790	13582	1

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A2M (ASX) Chart

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