Everyone loves milk - quality milk - especially the Chinese. Chinese consumers and daigou have all switched to A2 Platinum to the point where they believe it is a far superior product leaving Bellamy’s behind
There is no other comparable company in the market with such a great potential in the next 12 - 24 months
In Australia, “milk is still seen as a staple, everyone has a bottle of milk in their fridge,”
Migration trend, population keep rising
On fundamentals, A2M looks expensive but it’s easily justifiable on a ROE of 31.80% which is forecast to rise to 44.69% the next year.
213% expected Earning Growth over 3 years (SimplyWall)
ROE = 43.98%
Plan to accumulate this stock below $5.0 and hold for at least 1 year
Portfolio Starting Equity = $100k
Risk = 1%
ATR Multiple = 2
Stock ATR Weekly (5) = 0.3
Recommended Quantity = 1,000 shares
Initial Buy = 1,000 shares @ 3.68
Pyramid #1 = 500 shares @ 4.06
Pyramid #2 = 1,500 shares @ 4.36
Pyramid #3 = 2,000 shares @ 4.65
Pyramid #4 = 3,000 shares @ 6.12
Target Price: $10
Heavily leveraged to the Chinese infant formula marketHigh FY18 PE of 32x, which indicates that most of A2M's short term earnings growth is already priced in (GR4).
OPPORTUNITY- large Chinese market (now only 3.1% market share in China- US and UK markets
THREATSChinese regulation is at the best of times, unpredictable, hence we have limited transparency of the company's future earnings (GR3). . The recent news that A2M’s infant formula manufacturer, Synlait Milk, had received Chinese Food and Drug Administration (CFDA) approval well ahead of the deadline removes a key risk for the stock.