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A2 gets 'please explain' as shares slump

NZN 20/05/2016 Paul McBeth

A2 Milk Co brushed off a 'please explain' notice from the stock market operator after its shares plunged to a five-month low saying it complied with listing rules, while separately, brokerage firm First NZ Capital noted uncertainty creeping into the market as four new entrants start selling milk with the A2-type protein.

The Auckland-based, Sydney-headquartered company said it continued to comply with continuous disclosure rules after NZX queried a 22 per cent slump in the share price since May 17, which saw the shares fall as low as $1.40, the lowest since Dec. 18.

The shares were recently at $1.59, down 1.2 per cent on Friday and 11 per cent this week.

The query comes as First NZ Capital sent out a note to clients that the strength of A2's patents is set to be tested with a number of unrelated firms either launching or preparing to launch milk products with the A2 variant protein.

"From our perspective, albeit these parties appear to be small scale operators, the breadth and depth of ATM's registered patents may be about to be put through significant tests," the report said.

"Conversely, it (could) also be seen as an endorsement of the potential benefits that the A2-type milk could bring to some dairy consumer beyond the lone voice of ATM (A2 Milk) in the market to date."

First NZ notes Ohio,US-based Snowville Creamery, Origin Milk, and Hidden Acre Farms all separately make claims around the benefits of A2 proteins, referencing A2 on its packaging, while Netherlands-based Veco Zuivel has been reported as planning to make A2-type products available later this year.

"We note all of these four companies have made statements relating to the potential benefits of A2 type milk on their websites or in media releases, but did not make any reference to 'The a2 Milk Company' or the 'a2' brand," First NZ said.

First NZ kept its target price unchanged at $1.67, with its view based on whether the company can successfully execute its plan to sell A2-variety milk products in Australia, the UK, and US, and crack the Chinese and Australian infant formula markets.

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