Firstly well done on making some profit, that is what we are all here for after all. Whilst I was very aware the SP would dip, I have been caught out trying to time the market in the past so these days I am happy to ride out the storm. From my point of view even using technical analysis wouldn't help me catch that falling knife this time because an announcement can come at any point and whipsaw the SP back. At any rate I am holding long term and from my point of view nothing fundamentally has changed with the company, I just need to wait until this is corrected by the market on next update.
I'm sure the CEO and board wish they could jump in a DeLorean and change the past but my last post was just stating the reasons why I felt they did it in the first place. If you want to continue to grow your company long term then it would make sense to dilute the $8 billion market cap by 4 million instead of your $340 million cash on hand (current as at 2018 results) by $4 million.
As I stated I believe this is best for shareholders long term as the returns from the growth coming from the capital will far outweigh any miniscule dilution, therefore it does not concern me. What they needed to do though was really explain this in further detail to the shareholders. They left an opening and the shorters exploited it. I'm sure lessons have been learnt though and we will see major changes in the future, it will all come out sooner or later.
In my view the biggest problem that the company has is keeping up with demand. Whilst we know for a fact that Synlait are building at Pokeno and it will have 45 MT capacity, I think a2MC are looking far past the short term.
This is where you and I probably differ on opinion but I think as a2MC grows it will adapt as a company. Yes the current business frame is working well but net operating cash flow from the last report was $231 million. So do you want to stop growth here and make the company pay dividends? Start share buybacks? Or does a2MC continue to use that capital to further growth and in turn the SP? It all depends where you see a2MC going and of course opinions are going to differ. There are plenty of income shares around but I want more wealth than Smaug so personally I would much prefer the growth as this company has so much potential for expansion.
We have seen the company buy a 17.4% share of Synlait which was also smart blocking move but now a2MC is in a perfect position to really go forward in so many ways as a company. So yes I think the company business frame will change as the company matures and in my opinion it needs to if it wants to achieve its full potential.
What has happened to the SP is not a reflection on the company as nobody is disputing that there is anything wrong with the fundamentals or the future outlook of a2MC except the more obvious downrampers. It has just been caused by investors panicking without a logical justification. I can fully understand people like yourself that want to sell in order to buy more stock at a lower price, that is opportunistic and a good tactic if you can pull it off. But last week was nothing but a ridiculous overreaction by the market. Loyalty has changed so much it was like watching the red wedding all over again.
It has simply been a perfect example of the power of downramping a stock based on unsubstantiated fear. To be fair it has been done really well and I don't begrudge the shorters either, they have made a profit from those that didn't have the risk tolerances required.
Regardless what is done is done and we need to move forward despite of any of our views. You can't hold on to that anger as the past cannot be changed, let it consume your future outlook towards this company or move on. Nothing has changed for the fundamentals of a2MC and the SP will recover as the market realises that.
Apologies I am really trying to shorten my posts but they get away from me sometimes. Good luck in you future trades and enjoy the weekend.
A2M Price at posting:
$10.24 Sentiment: Buy Disclosure: Held
(20min delay)
