SM1 – UBS rates the stock as Initiate coverage with Neutral

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UBS initiates coverage with a Neutral rating and NZ$9.70 target, believing the downside is priced into the stock. The broker’s analysis suggests 60% of the company’s profit comes from manufacturing infant milk formula, mainly for a2 Milk ((A2M)) under contract until FY24.

Synlait Milk’s profits and valuation have mirrored that company’s success. The relationship has broken down in 2019 because of concerns, which the broker suggests are overblown, about legal proceedings at the new Pokeno factory and stalled US FDA approval for the Munchkin.

Sector: Food, Beverage & Tobacco.

Current Price is $8.64. Target price not assessed.

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