The A2 Milk Company Ltd (ASX: A2M) share price has been one of the standout performers on the S&P/ASX 200 Index (ASX: XJO) during the coronavirus crisis. 

Despite a bit of a push back during May, the company’s share price has risen strongly since the end of January. Sitting at $14.51 only 4 months ago, a2 Milk’s shares are now trading at $17.26 at the time of writing. These gains also follow on from a strong share price rally throughout last November.

Is the a2 Milk share price still a buy?

Strong growth during the March quarter

Let’s first take a recap on a2 Milk’s recent financial and operational performance.

In a trading update in late April, a2 Milk outlined that it has continued to see strong growth since late February, across all regions.

Revenue for the March quarter was in fact, above expectations. The coronavirus pandemic saw many consumers stock up a2 Milk’s products, especially through online and reseller channels.

In particular, demand for its infant nutrition products sold in China and Australia has been very strong.

EBITDA margin predicted to exceed expectations

In addition, higher levels of marketing investment in China and the USA will hopefully pay off for a2 Milk. Both these markets still offer huge growth potential.

This investment is likely to help deliver higher overall revenue growth across key regions during FY 2020. It is also likely to lift a2 Milk’s full year EBITDA margin above the range it advised in February.

It is now predicted to be between 31% to 32%, assisted partly by favourable currency exchange rate movements.

A very healthy result, if it can be achieved.

Is it too late to buy shares in a2 Milk at today’s price?

a2 Milk has been among the top performing shares on the ASX since it listed back in 2015.

The company has cleverly evolved into a highly trusted and recognised brand, renowned for its quality. a2 Milk is now also a very profitable business, after initially running at a loss.

I see no reason why the a2 Milk success story can’t continue, driven by very strong growth opportunities in North America and China.

However, the a2 Milk share price is now definitely looking at bit pricey.

Furthermore, the coronavirus crisis has added some uncertainty regarding earnings growth over the short term with the possibility that both supply chains and consumer demand will be impacted. This could bring about further share price volatility for a2.

Having said that, I still think the company represents a reasonably good buy and hold option for investors with a long-term investment horizon.

I prefer it over other infant formula providers such as Bubs Australia Ltd (ASX: BUB) and Nuchev Ltd (ASX: NUC).

Over the next 5 years I think a2 Milk will continue to be a strong performer and that this is likely to translate to above average share price growth.

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Phil Harpur owns shares of A2 Milk. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX 200 shares:

Costa Group Holdings Ltd (ASX: CGC)

According to a note out of the Macquarie equities desk, its analysts have retained their underperform rating but lifted the price target on this horticulture company’s shares to $2.87. The broker felt that Costa’s annual general meeting update last week was reasonably mixed. And while there were positives in respect to demand and pricing, it wasn’t enough to warrant a change in rating by the broker. The Costa share price is trading at $3.15 this afternoon.

Lovisa Holdings Ltd (ASX: LOV)

Analysts at Citi have downgraded this jewellery retailer’s shares to a sell rating and cut the price target on them to $5.85. According to the note, the broker believes the recovery in the Lovisa share price over the last couple of months has been overdone. Especially as it believes Lovisa could fall short of consensus earnings estimates over the medium term. This is due to changing consumer preferences, lower shopping centre traffic, and a slowdown in its store network expansion. Lovisa shares are changing hands at $7.80 on Tuesday.

Vicinity Centres (ASX: VCX)

A note out of Morgan Stanley reveals that its analysts have retained their underweight rating and $1.25 price target on this shopping centre operator’s shares. This follows the company’s announcement of a $1.2 billion placement and the cancellation of its final dividend. Outside this, it fears that Vicinity’s rent rates will fall heavily due to the pandemic and weigh on its income. The Vicinity share price is trading at $1.55 this afternoon.

More reading

• Why Evolution, Iress, Pro Medicus, & Vicinity shares are dropping lower
• ASX 200 down 0.1%: Big four banks drag ASX lower ahead of RBA meeting
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• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire
• Why Costa, Freedom Foods, Sonic, & Westpac shares are tumbling lower

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bionomics Ltd (ASX: BNO) share price is charging higher today, up 16.67% at the time of writing on the back of a subscription agreement announcement.

Bionomics is a clinical-stage biopharmaceutical company that develops treatments for central nervous system disorders, such as anxiety, depression and Alzheimer’s disease.

Bionomics has a portfolio of drug candidates from early to mid stages of clinical development. This portfolio is fed by the company’s proprietary technology platforms for each step in the drug discovery and development process.

Before we dig into the announcement, it’s important to note that we’re very much at the smaller end of the ASX here. Bionomics shares are currently changing hands at 5.6 cents per share, taking market capitalisation to around $30 million.

Why the Bionomics share price is jumping higher today

This morning, Bionomics announced it has entered into a subscription agreement with Apeiron Investment Group to recapitalise the company and assist in securing further equity capital.

Over the last few years, Apeiron has made investments in several European and US-based biotech companies, with a particular focus on the development of novel treatments for various mental health disorders.

Under the subscription agreement, Apeiron agrees to subscribe or procure subscriptions of 135.83 million shares at an issue price of 4 cents per share – raising $5.43 million. This is to proceed in 2 tranches of 81.5 million shares and 54.33 million shares, with the second tranche being subject to shareholder approval.

On top of this, Apeiron also agrees to underwrite further capital raisings by Bionomics within a 15-month period from an extraordinary general meeting of shareholders (EGM) to be convened. This will have the effect that Bionomics will raise up to $15 million at a minimum issue price of 6 cents per share – subject to approvals from shareholders and the Foreign Investment Review Board (FIRB).

What does this mean?

Overall, if shareholder and FIRB approvals are received, Bionomics expects to raise between $20.4 million and $22 million. This would ensure that the company has significant funds to progress phase 2 clinical trials for its lead compound, BNC210, for the treatment of PTSD and other anxiety and stress-related disorders.

In November 2019, BNC210 received Fast Track Designation from the US Food and Drug Administration (FDA) for the treatment of PTSD.

The recapitalisation will commence with the issue within Bionomics’ existing placement capacity of 81.5 million shares – the first tranche raising $3.26 million. Following completion, Apeiron will own approximately 13% of Bionomics and will be invited to nominate a director to the board.

After this, Bionomics will then call an EGM seeking approval to place a further 54.33 million shares – the second tranche raising $2.17 million. If this proceeds, Apeiron will own approximately 19.9% of Bionomics and will be invited to nominate a second director to the board.

As part of the subscription process with Apeiron, after the completion of the second tranche, an entitlement offer will be launched for eligible shareholders to purchase up to 54.33 million shares at 4 cents per share – the same price as the Apeiron subscriptions across the 2 tranches.

Commenting on today’s update, Bionomics chair Dr Errol De Souza said:

“We are pleased to have secured the support of a world-class and like-minded life science investor of the quality of Apeiron . . . The funding will ensure that we can initiate our second Phase 2b clinical trial in PTSD, which the Board believes will provide shareholders the best prospects to realise value in the Company.”

More reading

• 3 investing secrets for success with ASX shares
• Is the a2 Milk share price too high to buy?
• Leading brokers name 3 ASX shares to sell today
• ASX 200 investor in your 40s? 3 shares to buy now
• Why Evolution, Iress, Pro Medicus, & Vicinity shares are dropping lower

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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