Maiden Dividend of 23cents probable, page-3

No debt...A2M as far as I am aware. Just something I found tonight on 3 stocks from the herd. Looks like I will be buying more A2M.


A2 Milk (A2M) – $8.58 – Recently announced that it was expanding across the North East region of the United States from January 2018. Since entry into the US market, the business has been focused on achieving sales based targets prior to expanding its footprint on a region-by-region basis. Sales velocities are now achieving sustainable levels in California, the South East region and select natural retail chains, which supports the expansion into an additional region. The a2 Milk brand has been accepted for ranging in a number of major retailers in this region including Ahold, Shoprite, Safeway, H-Mart and Fairway Foods. As a result of this initiative a2 Milk will increase it’s ranging from 3,600 stores to potentially 5,000 retail stores across the US from January.

Broker View: Deutsche Bank (HOLD $8.57 – The broker expects A2M to report a strong 1H with EBITDA of NZ$120m when it reports on the 21 Feb (Wed). The brand has been a China facing success story but for the brand to take the next big leap volume needs to be scaled up at a higher price in offline MBS channel. The broker is on Hold.
Unconventional View: We agree with Deutsche. We’ve had a few questions on A2M and everything rests on its results next week. We think it is better off being reactive and waiting for the results rather than selling prematurely. A2M has to be one of the most watched stocks by the market. It is of course the market darling having risen a whopping 271% over the year. The magic number brokers are expecting next week is a 56% rise sales to NZ$400.6m and EBITDA of 80% to NZ$120m. The expectations are quite high and hit these numbers A2M will need to achieve a gross margin of 48.5% from 46.5% in FY17. Our prediction is that sales growth will be maintained in the 2H due to growing Chinese demand and US expansion. Bellamy’s recently upgraded guidance and that highlights the fact that demand is staying well ahead of supply. For that reason we think A2M is a hold heading into results.