should we buy shares in synlait, page-10

It just depends on your investment time frame and portfolio structure really Chianti.

Synlait are more of a low risk mature cyclical company than a higher risk growth company like A2M, so perhaps more a value investment at the right time rather than a growth investors toy.

They have quite a high debt burden with a debt to equity level of around 60%, so do keep an eye on that when working up the DCF valuations and what not.

Still, a very innovative company in my view, they only produce value added products, and seem to attract the premium brand customers like Munchkins and A2M, they wish to move their business further from lactoferrin and WMP to infant formula, and despite now probably being at full capacity, they may still build a second blending and canning plant to further skew production further toward infant formula.

They have some patents also, and I reckon that night milk product they have developed, for which they own the IP, could be of interest going forward.

A good producer company to have in one's portfolio, undervalued according to First NZ who just released a valuation at NZ$3.19.

Disclosure: I don't hold SML at present having sold earlier in the year between $2.90 and $3.00
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