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How to buy A2 Milk shares (ASX:A2M)

How to buy A2 Milk shares (ASX:A2M)

How to buy A2 Milk shares (ASX:A2M)

About A2 Milk shares (ASX:A2M) 

A2 Milk Company is headquartered in Auckland, NZ and dual listed in Australia (ASX: A2M) and New Zealand (NZX: ATM). The company offers branded milk that contains only A2 proteins. Most cows produce milk with both A1 and A2 proteins, but there is some research that suggests that the A1 protein is more difficult to digest and leads to cardiac diseases and Type 1 diabetes. A2 Milk’s products are sold in China, Australia, New Zealand, the United States, and Canada.  

History of A2 Milk shares 

In 2000, Corran McLachlan, a researcher working on the health effects of the A1 beta casein proteins found in milk, and Howard Peterson, a New Zealand agribusiness mogul, founded A2 Corporation to sell a genetic test that determined whether a cow would produce milk with the A1 protein. A2 was then sued by Fonterra, New Zealand’s largest dairy cooperative, over the health claims being made. In 2003, Paterson died suddenly while on a business trip and McLachlan died of cancer. The company reorganized, sold the Australian business, and concentrated on the New Zealand market. In 2006, the business improved enough that A2 Corporation bought back the Australian business and began expanding its markets and products. 
The company became public in New Zealand as the A2 Milk Company in March of 2013. The proceeds of that offering were used to enter the China market. Chinese consumers are enthusiastic about international dairy brands following a 2008 scandal in which Chinese milk producers adulterated products with melamine. This led to the deaths of six babies and soured Chinese parents on local infant formula brands. 
A2 Milk’s shares are now listed in both Australia and New Zealand, and its financial year ends on June 30. The A2M share price hit a high of $19.83 on 28 June 2020. It had EBITDA of NZD$123 million on revenue of NZD $1.21 billion in FY2021. Its product mix is 75.7% infant formula, 19.9% liquid milk, and 4.3% other products. The largest market is China and Asia, with 48.4% of revenue, followed by Australia and New Zealand at 46.4% and the USA at 5.3%. The most significant segment is China and Asia infant nutrition, which alone brings in 46.1% of revenue.  

Why buy A2M shares? 

The case for buying A2 Milk shares is based on the expanded distribution of and demand for milk containing only A2 proteins. The company recently entered the United States and Canadian markets, and it can expand into more of Asia and the Americas. An early entry into the UK market failed, but it could be tried again.
Within the markets in which it operates, A2 Milk has opportunities to expand the products that it sells. It does not have a full line of A2 dairy items, but it can add more creams, ice creams, and other items to grow its revenues. 
The company posted earnings per share of $0.11 for FY2021. For FY2022, the 11 analysts who follow the stock have a consensus estimate of $0.15 and a range of $0.10 to $0.17. They are expecting revenue of $1.23 billion. For FY2023, the consensus is $0.21 per share and the range is $0.17 to $0.24 on a revenue estimate of $1.39 billion 
A2 Milk does not pay a dividend.  

A2 Milk ASX competitors 

A2 Milk is one of 59 food, beverage, and tobacco producers trading on the ASX. The market capitalisation of $5.5 billion puts it second in size behind Treasury Wine Estates (ASX: TWE). The next-largest dairy producer is Bega Cheese (ASX: BGA), with a $1.64 billion market capitalization. Overall, A2M ranks 101 on the ASX and 16 on the NZX. 

Key growth factors 

A2 Milk’s management lists several factors that will drive growth. The first is gaining greater share in the Chinese infant nutrition market, followed by adding more distribution channels in English-speaking markets. Management believes more people will buy A2 Milk products if they have access. The market share in the United States, for example, is very small and the potential is large. 
The A2M stock price would also benefit from a successful re-entry into the UK or the entry into a new market, such as Latin America. Infant formula and powdered milk are shelf-stable, therefore local production is not essential for market entry.
Beyond that, the company plans to invest in new products to advance infant nutrition and to expand its range available in grocery stores. It will continue to develop brand positioning to convert new customers.

Key challenges 

Before you buy A2M shares, you need to know the risks. One of the major risks facing A2 Milk is disruption in the supply chain due to Covid-19. This affects Chinese shoppers’ (daigou) ability to import goods into China, and similarly, to bring Australian goods back to China should they be touring or studying here. Further, it negatively impacts A2M’s ability to get its products from the farm, into packages, and into grocery stores in all markets.  
A second challenge is the infant nutrition market, which has become increasingly competitive in China. The birth rate is low and declining in all of A2’s markets, which means that most revenue growth will come from pricing and market share gains rather than from organic increases. 
Also, A2 Milk’s product relies on the stewardship of land and the health of animals. The United Nations Food and Agriculture Organisation estimates that 14.5% of greenhouse gasses are emitted by livestock, primarily cattle. The fight against climate change may result in reduced demand and increased operating costs for A2 Milk. 
Finally, there is some controversy about whether the A1 protein has beneficial effects on human health. It is possible that the entire basis for A2 Milk could be disproved. 

How to buy shares in A2 Milk on the ASX 

ThinkMarkets offers services to investors and traders alike. Our proprietary trading platform, ThinkTrader, makes it easy to buy A2M shares as well as shares in all other ASX-listed companies. 

To get started, all you need to do is: 

  1. Download the ThinkTrader app from the App store or Play store
  2. Create a ThinkMarkets share trading account
  3. Deposit funds into your trading account
  4. Place your order to trade A2M shares.
It's that easy.

What are you waiting for? Buy A2M shares today with ThinkMarkets

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication only. No representation or warranty is given as to the accuracy or completeness of this information.

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Investing in derivative products carries significant risks and is not suitable for all investors. Please be aware that you do not own, or have any interest in, the underlying assets. We recommend that you seek independent advice and ensure you fully understand all risks before trading.

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