a2 Milk Company Ltd

A2M Details

a2 Milk Company Ltd (Australia) (ASX: A2M) has a commercial relationship with Synlait and had also acquired an 8.2% shareholding in Synlait in March 2017 to boost their relationship with the organization. Recently, the group reported that Synlait has got registration to enable exports of the group’s China label infant formula to China. Primarily, manufacturers of infant formula need to register brands and recipes with the China Food and Drug Administration (CFDA) to import products into China, via traditional import channels, from 1 January 2018. Synlait already submitted the dossier application to the CFDA for the registration of the a2 Milk Company’s infant formula in May 2017.It is worth noting that the group’s relationship with Synlait started in 2010 to manufacture best first infant formula made from milk containing only the A2 beta casein protein type, and free from the A1 protein type. After the huge success and growth, the group made a five-year agreement with Synlait in August 2016. A2M stock rose a little post the above announcement but ended flat on September 28, 2017.

Meanwhile, A2M had delivered gains in revenue and earnings in FY17 based on the outstanding performance in infant formula, and growth in liquid milk in each of its core markets. There has been increased consumer acceptance of the a2™ brand and the benefits of dairy-based products free from the A1 beta casein protein type. 

Strategic Priorities (Source: Company Reports)

However, group’s marketing spend was up owing to building awareness in the US and China. Further, A2M invested on patents, trademarks, and research and development, and business expansion activities. A2M now expects marketing spend for 1H18 to be ~NZ$5 million higher than 2H17.

The shares of A2M generated outstanding returns of 196.53% this year (as of September 27, 2017) placing the stock at higher levels; and the same now look touch “Expensive” at the current price of $ 5.99


A2M Daily Chart (Source: Thomson Reuters)

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