New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>The a2 Milk Company (ATM)'s 12 month forward PE has de-rated materially year-to-date, while EPS estimates are up modestly.</li><li>ATM is now trading on ~23x 12 month forward PE (~19x cash adjusted), which is a near all-time low.</li><li>Following recent robust data suggesting market share gains across offline and online channels, and an improving gross margin outlook, we think FY23 earnings guidance may prove to be conservative. </li></ul>

The a2 Milk Company (ATM)'s 12 month forward PE has de-rated materially year-to-date, while EPS estimates are up modestly.ATM is now trading on ~23x 12 month forward PE (~19x cash adjusted), which is a near all-time low.Following recent robust data suggesting market share gains across offline and online channels, and an improving gross margin outlook, we think FY23 earnings guidance may prove to be conservative. 

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.</li>
<li>Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.</li>
<li>Short interest on <a href="https://www.smartkarma.com/entities/amp-ltd" target="_blank" data-smartkarma-citation="entities:678:1" rel="noopener">AMP Ltd (AMP AU)</a> has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.</li>
</ul>


There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.
Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.
Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.


MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes

<ul><li>We upgrade our ATM rating to NEUTRAL from UNDERPERFORM following recent share price weakness in what we view as a more balanced risk/reward.</li><li>Risks remain on the outlook and we are circumspect on ATM's margin expansion</li><li>ATM is trading on ~24x 12 month forward PE (~20x cash adjusted) which is below its five year average (~29x) and against a three year forward EPS CAGR of +16%.</li></ul>

We upgrade our ATM rating to NEUTRAL from UNDERPERFORM following recent share price weakness in what we view as a more balanced risk/reward.Risks remain on the outlook and we are circumspect on ATM's margin expansionATM is trading on ~24x 12 month forward PE (~20x cash adjusted) which is below its five year average (~29x) and against a three year forward EPS CAGR of +16%.

The A2 Milk Company: Shaken, Not Stirred; Upgrade to NEUTRAL

<ul><li>Slight guidance tweak: ATM now expects revenue growth of ~+10% in FY23 (at the low end of previous expectations) and still expects an EBITDA margin similar to FY22</li><li>FY24 implications?: Unsurprisingly, no reference has been provided to FY24 forecasts in ATM’s release</li><li>Potential one-off costs: ATM “is in discussions with Synlait regarding the allocation of certain one-off production/supply chain and other related costs between the two companies.”</li></ul>

Slight guidance tweak: ATM now expects revenue growth of ~+10% in FY23 (at the low end of previous expectations) and still expects an EBITDA margin similar to FY22FY24 implications?: Unsurprisingly, no reference has been provided to FY24 forecasts in ATM’s releasePotential one-off costs: ATM “is in discussions with Synlait regarding the allocation of certain one-off production/supply chain and other related costs between the two companies.”

The A2 Milk Company (ATM): Slight FY23 EBITDA Downgrades Likely

<ul><li>The a2 Milk Company's (ATM) 1H23 result continues to highlight its success and discipline controlling the controllables</li><li>We remain comfortable on the revenue outlook (~NZ$2,050m FY26 forecast versus ATM's scenario of ~NZ$2,000m), and forecast ongoing market share gains but there is no hiding from the intensely competitive and difficult China Infant Formula (IF) backdrop</li><li>On an underlying basis, ATM is set to report two consecutive years of flat EBITDA margins (~13-14%) after ~11% in FY21</li></ul>

The a2 Milk Company's (ATM) 1H23 result continues to highlight its success and discipline controlling the controllablesWe remain comfortable on the revenue outlook (~NZ$2,050m FY26 forecast versus ATM's scenario of ~NZ$2,000m), and forecast ongoing market share gains but there is no hiding from the intensely competitive and difficult China Infant Formula (IF) backdropOn an underlying basis, ATM is set to report two consecutive years of flat EBITDA margins (~13-14%) after ~11% in FY21

The A2 Milk Company: 1H23 Result — Crawling Ahead

Australia

a2 Milk Company Limited produces cow milk which is free of a protein called beta casein A1.  The Company 
offers its products in Australia and New Zealand.

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A2 Milk Co Ltd (A2M AU)

The A2 Milk Company - Wheying Up FY24

The a2 Milk Company (ATM)'s 12 month forward PE has de-rated materially year-to-date, while EPS estimates are up modestly. ATM is now trading on...

Forsyth Barr

MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes

There could be 3 deletions for the MVIS Australia Equal Weight Index in June. Capping changes could result in one-way turnover of 4.1% and a one...

Brian Freitas

The A2 Milk Company: Shaken, Not Stirred; Upgrade to NEUTRAL

We upgrade our ATM rating to NEUTRAL from UNDERPERFORM following recent share price weakness in what we view as a more balanced risk/reward; Risks...

Forsyth Barr

The A2 Milk Company (ATM): Slight FY23 EBITDA Downgrades Likely

The a2 Milk Company (ATM) has this morning provided commentary following Synlait Milk’s (SML) profit downgrade, which states that in ATM’s two...

Forsyth Barr

The A2 Milk Company: 1H23 Result — Crawling Ahead

The a2 Milk Company's (ATM) 1H23 result continues to highlight its success and discipline controlling the controllables; Brand health metrics and,...

Forsyth Barr

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