a2 Milk Company Ltd

A2M Details
· Reiterated confidence in the infant formula business: a2 Milk Company Ltd (Australia) (ASX: A2M) stock recovered over 6.2% on December 21, 2016 driven by the group’s reiteration of confidence in their business. Management reported that their revenues continue to deliver a solid performance, with revenues enhancing to NZ$155.2 million during the first four months of the 2017 fiscal year as compared to NZ$79.3 million in the same period of last year driven by their infant formula and milk products performance. The group continued to witness ongoing seasonal build in sales of infant formula ahead of their major China sales event, ‘11/11 Singles Day’, and A2M EBITDA reached NZ$35.5 million (representing an EBITDA/Sales percentage of 22.9%), during the period indicating an ongoing growth in infant formula sales. On the other hand, UBS Group AG and its related bodies corporate cease to have substantial holding in the group.

· Recommendation: A2M stock has been under pressure and fell about 4.9% in the last five days (as of December 20, 2016) impacted by the ongoing pressure witnessed by the group’s peer, Bellamy’s Australia. A2M stock has generated over 8.3% in the last three months, but is currently trading at a high P/E. With the ongoing uncertainty in the sector coupled with availability of cheaper products from players who are struggling to get registration in China, the company might face volatility ahead. We give an “Expensive” recommendation on the stock at the current price of – $ 2.07

Touchcorp Ltd

TCH Details 
· Softness in business update hurting the stock sentiment: Touchcorp Ltd (ASX: TCH) stock crashed on ASX by slipping 34.1% on December 21, 2016 due to the group’s weak business update. TCH forecasts a revenue in the range of $36m to $38m for financial year ending December 2016 from $42m in the prior corresponding period. However, profit before tax is forecasted to be in the range of $14m to $16m from $8m in the same period of last year. This is driven by the $14m gain from the group’s share of rising net assets of Afterpay Holdings. Moreover, transaction revenues growth has been below the expectations for the year. The group also announced that Mr Michael Jefferies (acting Chief Executive) and his associates have ceased to be substantial shareholders in TCH.

· Recommendation: The stock price of TCH already lost over 20.5% (as of December 20, 2016) in the last three months. Moreover, given their weak performance for 2016, TCH made efforts to enhance their sales team expertise to expand the present customer relationships and win new customers for existing service offerings. The group improved their sales team across Australia, Asia and Europe for second half of 2016 and is focusing on sales resources in Australia and Europe. Looking at some challenges, we give a “Hold” recommendation on the stock at the current price of - $ 1.10

 
Service offerings (Source: Company Reports)

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