A2m PE and price Forecast with increasing sales, page-5

Thanks LF,

1. Your completely right. My mistake. At forecasted earnings at current average revenue from a2m sales (inclusive of the whole group revenue assuming no growth or losses in other sectors than originally forecast). the current PE is at 44 using a rough NPAT. This appears reasonable. The calcs of losses in the groups other operations have been taken into consideration in fixed costs. Minor bottom line costs (i would estimate 1-3 mil) have been disregarded for the sake of running rough numbers. I have updated the table below

2. These numbers are the forecasts that A2M have provided i would believe that they would be conservative in their estimate. In my opinion the operation has potential to increase sales purely from a production standpoint as production increases so will the sales as currently the operation is supply capped. Demand exceeds supply. How fast they can ramp up production and if that has any negative effect on market saturation is another topic. Im positive on both fronts. I have just run the average monthly forecast however their budget may be more reflective of the market e.g. some months 20mil+ others 10 mil+ to give an average of ~15mi but again i believe its currently more of a supply capped operation.

3. My analysis has taken into consideration the forecast A2M have set for the development costs of FY16. How these vary for FY17 is another story. All fixed costs that A2M has forecasted are the same unless they decide to deviate from their forecasted budget. This analysis also does not include potential growth in other sectors other than what A2m has forecasted themselves it is purely from an infant formula standpoint.

With revised values looking at a PE ratio of 30. The market has already factored an increase in sales of 20%. Looking at a PE ratio of 40, the market does not even factor an increase in sales of 10%. Depending on the growth potential you believe exists in the chinese infant formula market, ill let you guys decide the direction this stock will go. Realise that companies with PE of 30-40 roughly grow 30% per year. I believe the potential for growth in china may be significantly greater.

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10
0	-	A2 Powder Yearly Revenue	Factor	EBITDA	NPAT	PE	MC ($,000)	MC	Price (PE 30)	Price (PE 40)
1	Current 15 mil/month target	182	1	44	30.8	44.0320617	-	-	-	-
2	10% increase in sales	201	1.1	54	37.8	35.8779762	1134	1,134,000,000	1.57	2.99
3	20% increase in sales	219	1.2	65	45.5	29.8063187	1365	1,365,000,000	1.89	3.59
4	30% increase in sales	237	1.3	75	52.5	25.8321429	1575	1,575,000,000	2.18	4.15
5	40% increase in sales	255	1.4	85	59.5	22.7930672	1785	1,785,000,000	2.47	4.70
6	50% increase in sales	274	1.5	95	66.5	20.393797	1995	1,995,000,000	2.76	5.25
7	100% increase in sales	365	2	146	102.2	13.2699364	3066	3,066,000,000	4.24	8.07
8	200% increase in sales	547	3	248	173.6	7.81213998	5208	5,208,000,000	7.20	13.71

thanks,

Naomi