I think this hype is over rated. The price reflects the hype curve. As per a number of articles such as:
https://www.thehindubusinessline.co...hype-over-branded-a2-milk/article23605826.ece
There are similar articles being released in Korea.
"Easy for competitors to enter and also compete in the market"
So the A2 source itself, can be found widely. Also if you look at the life of a cow and replacing cows (e.g. the beef industry). It is easy for other competitors to enter the market. In fact, we are seeing a significant increase of me toos with over 15 competitors recently entering this space alone this year and over the last year a number of others have been probably looking in to this space too.
So there's no medium or long term particular differentiator or inhibitors for multinational companies.
So, what has created this hype? It is obvious. The hype surrounding A2 milk came about after the patenting of a genetic test by the
a2 Milk Company. The A2 company is the marketing company as previously discussed before. Any of the major players can easily enter this market. Another one announced was Nestle. These players have huge marketing and purchasing powers across the globe.
The funny thing with a2a2 cows, is that they can easily be found "naturally" around the world. As well as easily be brought or supplier to countries around the world similar to the current beef industry.
https://www.lifehacker.com.au/2016/08/is-a2-milk-better-for-you-than-regular-cows-milk/
http://theconversation.com/science-...k-better-for-you-than-regular-cows-milk-62486
SM1 shares have increased, as they are one of the "processing companies" behind the production of A2 milk. So how easy is it to convert a current factory to process A2 milk? It's trivial. It only relies on the source of A2 milk, of which large multinationals already have strong links with and have far more purchasing power than A2 currently does.
The current milk companies that you know of today, do not really have much to fear about the A2 trend, but can easily enter the market and easily compete on price if they have to.
The outcome for consumers, if that if this trend continues, or if A2 continues to use shareholder money from the public to fund marketing campaigns, then the other dairy companies do not have to spend as much to enter this market.
There was low fat, then lactose free etc. This is another hype and preference. Also easy to copy and be a "me too".
Therefore I would also agree with other analysts such as Morningstar that the quantitative rating is overvalued. Especially when comparing the market cap to other similar companies in the same segment such as Bellamy's etc
What about health?
https://www.researchgate.net/publication/273596715_Myth_about_A2_milk
The bottom line is, there appears to be NO changes to life expectancy.
What about the patents?
These are actually of value. But they have already been valued. Also, as with science, there are a number of ways to test for proteins and we keep reinventing and finding new ways to do this, like wise in the cow herds, but also in the milk itself. Since the mutation for A1 has only been around for about 1000 years.
My personal thoughts:
Valuation Rating: Overvalued
Liquidity: High
Uncertainty by country: Very High
Uncertainty by Sector: High
Uncertainty by Industry: High to Very High
Currently:
The optimist in me says hold till $13. Maybe $15. Depending on greed and the market conditions. Three times up is profitable.
The value investor in me says sell while I can since almost ALL major analyst place this currently around the $7-8.50 mark. This is up from the previous $4.50 mark when the share price doubled. I can live with double.
I think it can still hold a little more with the current hype and news as well as marketing companies used. However, any news announcement from any of the other competitors could seriously affect the share price without much notice.
The larger players, seem to be using A2m to create this market without paying much for their own marketing and then quickly enter it.
You can already see how easy it is for any company even A2 to enter this market fairly quickly. So anything can change, especially with the larger companies probably already strategising around this for the last 18 months.
I think some of the comments like reach $20, for now it seems absurd based on market cap. That would seriously be over investing by more than two times the value, and you would see major investors probably sell on the profit, as I do not think the company is worth that much. I was surprised people are buying shares based on prices? and comparing it to Bellamy's. That's another indicator that mums and dads could be left hurt if they do NOT follow value investing. That's just pure speculation.
I feel there is not a lot of certainty on any exclusivity here... long term
It would be different, if it was not just a2a2 milk which can be found widely and processed by any plant.
Would I as a consumer prefer A2 branded milk or not care if other companies had naturally producing A2 milk but used other brands. I really would go for what was the cheapest, if there was a price difference.
Right now, the main use of the shareholder's money appears to be for marketing and paying off people working in the marketing company. The manufacturing appears to be mainly Synlait with some third parties companies.
Would be different if it was a special cow only found in Australia (with the 12,000+ herd), New Zealand and could not be exported to any other country. Or a special process. Or a special technology. The reality is not like that at all. And there are too many factors, restrictions that other countries and external factors can impose any time in the future. Remember, almost all cows produced the A2 protein... until about 1000 years ago... and how fast it is to replace cows like in the beef industry.
Cows produce a calf every 12 months.
Australian has over 1.6 million milk producing cows
UK has around 1.5 million
US has about 9 million
12000+ "certified" cows in Australia. This number can go up. A2 would be one of the places to help certify and they would make money off this.
How many are uncertified? What about the total population of cows in the world? How many indigenous cows are there?
What is the current number of A2 milk pools in China? Fonterra's quote on their Darnum plant is 51% owned by Chinese seems to already know of plans for A2 milk pools to increase within China, however this will not be imported back to Australia to then export back to China.
People, who talk about saving the earth?
Dairy cows are not always dairy cows forever. Some are sold as beef on average after 4 years of age. What kind of meat industry are we supporting?
Companies like Fonterra seem to have such a large stake in this too and already have rights with so many farmers.
https://www.weeklytimesnow.com.au/a...k/news-story/afd4b0701a31634593e49bcf8a0d2316
