Ok, today is a tough day, all indicators are shit looking and in...

Ok, today is a tough day, all indicators are shit looking and in time like this, its better to shift our focus to FA. I am a firm believer that FA helps you to overcome your emotion especially during irrational market time.

I share some of the work i have done on A2M and encourage all the other FA experts to share their work as well on the forum.

Here we go:

This is a Price, EPS payoff table. it is constructed based on expected EPS increase and implied price level. In the last three years, the PE before reporting day has been around 38-40(shaded in green) i use this as a market PE for A2M and by using different EPS growth assumptions, it gives you implied price level.

The the table below is a sale segament analysis

As you can see from the table, ANZ sale has been flat while sale to Asia and Uk has been increasing, I use this sale increase trend as a base line for my sale prediction. Using this method, i have the below calculation:

Using very conservation number for these three regions*25%,100% and 25%), i have expected sale revenue of around 1.32B for this FY and using market impled PE number of 38,39 it gives a share price of $14 in AUD.

Interestingly, i was reading Jzhang's NZ data the other day and noticed that the actual NZ export date showed 17% increase over 2 months (M07,M08), assuming this trend continues, you would expect the full year increase will be around 30%(i.e. 17%*(1+17%)^5 ) this gives a expected full year revenue increase of 37.2% or $1.25B(not to far away from my 1.32B estimation. in either case, my forecast model tells me that implied share price should be $14AUD based on 0.92 exchange rate.

Also next table is the expense table (as % of sale) this helps me to understand gross margin this serves as an input table to my model:

As you can see, all costs have been relatively stable as a % of sale. I use the above average % to construct my pro morma income statement (which is the base of my forecast model)

Will continue to track sale forecast and adjust my model (after AGM) but at this stage, given available information and historical performance, A2M is at a very reasonable valuation. 

In short term, i will expect even more pain but the value proposition certainly is there if you can manage your fear and anxiety

As always DYOR