Suddenly shares in the a2 Milk Company are back in vogue, three months after they lost their attraction for a bunch of greedy investors who reckoned the trading update issued with the 2018-19 results wasn’t good enough.
Surging sales; a growing market share in the China infant formula market, not to mention strong results in Australia and New Zealand combined to push a2M to a record full-year net profit, but it was not enough to please some investors.
a2 Milk shares jumped to new all-time highs yesterday after the company revealed a very solid set of figures for the December half that showed no sign of any damage from the trade war between the US and China, or growing tensions between Australia and China.
a2 Milk provided solid revenue guidance and margin upgrades at its AGM, thanks to price increases, product launches and benefits from the Synlait Milk ((SM1)) contract renegotiation. Improved disclosure addressed a number of market concerns, Macquarie notes.
Macquarie takes a closer look at the US fresh milk opportunity, the largest consumer market in the world. A2 Milk is currently building its market share, experiencing a similar development profile to Australia, which the broker finds encouraging.
UBS has surveyed institutional investors and finds the market is bullish on a2 Milk, which signals that earnings upgrades and/or positive news on geographic or category expansion is needed for further outperformance.