Hello all! Long term means different things to different people,...

Hello all!

Long term means different things to different people, and different people got in at different prices. My disclosure, I am in at $0.29 from a few days ago, horizon 1-2 years. My valuation based on information today (targeting 50-100million Ls of milk, small and lean corporate cost centre) has valuation today of ~$0.50 - $0.70 (depending on risk premium in the discount rate)

I thought I'd write down things about the company that make it a great long term investment (with the understanding that any outperformance in the below strengths would drive the share price even higher!)

1. These guys supply woolworths with milk, and woolworths are making a play in China's online marketplace via TMall. So these guys go out and buy Camperdown, 1 of only 2 quarantine licensed providers of fresh milk to China

2. They are the only active aggregator of farms out there. Victoria is a 2.2billion litre of milk industry, fragmented across 1,500 farms. They are targeting 50-100 million by the end of next year (a measly 4% of the market) . Their success in acquisitions so far is making them popular so that they are now being approached by pre-retiree farmers looking to exit.

3. With scale of production comes reduced costs per litre of milk to produce, AND increased price at which they can sell! With more volume they are able to set the price, rather than be price takers (the purchasers of milk, like woolies, currently source their stuff from all over the fragmented market, and would be much better off if they could source milk from a single producer, and hence incentivise the producers with a sliding scale up. ie they will pay more per litre, for higher volumes from a single producer)

This is great, because with scale comes fatter margins from both increased revenue per litre and reduced cost per litre

3. AHF is the only vertically integrated producing, processing and exporting company. This gives them scope to learn about processing over the next few years, and later expand into other lucrative product lines like infant powder

4. Management are a bunch of shrewd ex-bankers. I believe what Adrian Rowley is selling


I wrote this post mostly to make myself feel better, and anyone else out there reading. Please challenge if you disagree, or add to what I've missed. Interested to hear other long term holders entry points and planned exit points

cheers