Hi all including Hokey（want your input) Let's do some reality...

Hi all including Hokey（want your input)

Let's do some reality check here.

I am just going to do some calculation based on A2m's ANZ and China region valuation because I think it would not be accurate to take US and UK earning/ lost into consideration for now as the expansion to these regions are still in early stage and it can be considered as a one off investment. The management can always pull the plug if it doesn't work out. Therefore valuation below exclude US and UK region.

Based on dec. 15 profit upgrade report, the sales for IF is $30mil for nov and dec 15. Therefore IF sales = 6x30mil = $180mil per year. And based on fy15 result, in ANZ+China region the sales for other products (other than IF) = $111mil per annum so let's assume there is 10% increase in sales for this segment then Fy16= $122 mil per annum. So the total revenue forecast Fy16 to be= $302 mil for ANZ +China region. Then we apply margin rate from fy15= 18%. The ebit will be $54.36 mil. Then let's apply 3 different multiples into the valuation. with Pe 20= $1.55 per share, pe 25= $1.93 per share and pe30=$2.35 per share. Based on all this, I personally do not see why a2m couldn't achieve $2+ after the 17 February announcement. Given that a2m is a growth stock the Pe should be on high 20s.

Also note: when I do the calculation above I didn't include any upsides.
1) I just assumed there is no growth in IF sales. Entirely just based on nov and dec 15 sales result. This is extremely conservative, because I highly doubt there is no sales growth.
2)The profit margin rate that I used is just based on fy15 average when IF sales to the group is still not as significant compared to now. IF margin should be higher than other milk products. So when the percentage of IF in total group sales increase so the overall margin increase too.
3) No consideration of potential product price increase. Keep in mind given the current strong demand it might be a good strategy for management to increase price. This will potentially be a great catalyst to stock price


** the calculation above is based on my personal assumption only. The purpose is for discussion only.**

Please provide constructive feedback/ input and correct me in the area that I am wrong. Cheers.