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The Novonix Ltd (ASX: NVX) share price has been on fire again on Thursday.

In morning trade the shares of the integrated developer and supplier of high-performance materials, equipment, and services for the lithium-ion battery industry surged a further 36% to a record high of $2.84.

This latest gain means the Novonix share price has rocketed 78% in the space of just five days.

Why is the Novonix share price surging higher today?

Just two days since its last announcement, this morning Novonix announced another positive development.

According to the release, the company’s wholly owned U.S.-based subsidiary, PUREgraphite, has been selected to receive a ~US$5.6 million grant by the U.S. Department of Energy (DOE) for new technology development.

Novonix advised that the grant funding will support the development of a new, continuous high efficiency furnace technology for lithium-ion battery synthetic graphite material. PUREgraphite is partnering with Harper International and Phillips 66 for this funding opportunity.

The total project cost will be US$11.5 million, including PUREgraphite’s contribution of US$5.9 million which will be funded from existing reserves.

Novonix’s Chief Executive, Dr. Chris Burns, was very pleased to receive this funding.

He said: “We are excited to receive this show of support from the U.S. Government and to be working with Harper International and Phillips 66 on this project. This award demonstrates the commitment by the Government to support the establishment of a domestic supply of high-performance battery materials. It also highlights the expertise, progress, partners and technology we have assembled at PUREgraphite.”

“The new furnace technology to be developed under this award will be industry leading and state of the art in energy efficiency, environmental impact, and capital cost. This is all part of our roadmap for continued innovation to make the highest performance material at globally competitive costs, all based in the United States”, Dr. Burns added.

More reading

• Here’s why the Novonix (ASX:NVX) share price is surging 17% higher
• These 3 ASX shares all posted massive gains today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Novonix (ASX:NVX) share price rocketed 36% higher to a record high appeared first on The Motley Fool Australia.

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Shares in ASX specialty baby goods retailer, Baby Bunting Group Limited (ASX:BBN), surged to a new all time high price of $5.37 last week.

Despite the market upheaval caused by COVID-19, shares in Baby Bunting have climbed over 45% higher over the last 12 months.

They are now up an astonishing 250% since bottoming out at a 52-week low of just $1.51 at the height of the COVID-19 panic selling back in March 2020.

What does Baby Bunting do?

Baby Bunting is Australia’s largest retailer of specialty baby care, maternity, and nursery products. The brand caters specifically to children under three years of age. The company operates more than 50 stores across the country and also has a strong online presence.

What has driven the gains?

With no substantive news out of the company in recent months, it’s difficult to determine the cause for the rise in its share price. The most recent market update was released back in early October, providing a snapshot of the company’s financial performance for the first quarter of FY21.

The news was mostly positive, with comparable store sales growth of 17% versus first quarter FY20. Excluding metropolitan Melbourne, which was suffering through its most restrictive lockdowns during the September quarter, comparable store sales growth was still over 28%.

The company also saw a huge surge in online sales, including click and collect services. Sales through these channels surged by 126% versus the prior comparative period. Even excluding Victoria, online and click and collect sales were still up 92%.

Commenting on the results, Baby Bunting’s CEO and Managing Director, Matt Spencer, stated that the company’s strong performance reflected the “less discretionary nature of the maternity and baby goods category”.

In effect, babies and young infants have quite specific product needs, and new parents will still need to purchase these items even in an economic downturn – or a pandemic!

What is the outlook for FY21?

Citing market uncertainty surrounding the continued effects of COVID-19, Matt Spencer declined to provide earnings guidance for FY21. However, he did indicate that Baby Bunting would continue to expand its retail footprint, with plans to open a further 4 to 6 stores during this financial year.

In his AGM address, Company Chair Ian Cornell did give some insight into the growth pillars that Baby Bunting would be pursuing.

The first is to increase investment in the company’s digital presence to further grow online sales. The transition to digital sales is a key theme to emerge out of the COVID-19 pandemic and may permanently change the way many consumers choose to shop.

Beyond that, the company is seeking to expand its core business market share, while also seeking opportunities to enter new markets. And finally, it will look at ways to increase its profit margin.

More reading

• Top brokers name 3 ASX shares to buy today
• 2 ASX retail shares delivering stellar growth in FY 2021
• Why these ASX shares just stormed to 52-week highs or better

Motley Fool contributor Rhys Brock owns shares of Baby Bunting. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Netwealth Group Ltd (ASX: NWL) share price has been a strong performer on Thursday.

In morning trade, the investment platform provider’s shares are up 10% to $17.43.

Why is the Netwealth share price storming higher?

Investors have been buying Netwealth shares this morning following the release of another strong quarterly update.

According to the release, at the end of December Netwealth’s funds under administration (FUA) increased $4.8 billion or 14% quarter on quarter to $38.8 billion.

This was driven by favourable market movements of $2.2 billion and net FUA inflows of $2.6 billion. The latter was an increase of $0.6 billion or 33.7% on its first quarter net inflows.

This brought its calendar year net inflows to a total of $9.2 billion, which is an increase of $2.4 billion or 36.1% on 2019’s net inflows.

Also growing strongly were its funds under management (FUM). At 31 December, its FUM stood at $9.3 billion. This was an increase of $1.3 billion or 15.5% for the quarter. This comprises net inflows of $0.7 billion and market movements of $0.5 billion.

Finally, Netwealth’s Managed Account balance reached $7.6 billion at the end of the quarter. This was an increase of $3.2 billion or 74.1% increase on the prior corresponding period. Managed Account net flows of $3.2 billion were recorded for the 2020 calendar year, an increase of $1.2 billion or 63.9% over 2019.

Outlook

Pleasingly, management appears confident that its growth can continue thanks to ongoing industry consolidation and change. It also notes that its pipeline of new business and transitions remains strong.

And while it has warned that the impacts of COVID-19 continue to adversely impact the stability of global markets, this hasn’t stopped it from increasing its FY 2021 guidance.

Management now expects its FY 2021 FUA net inflows to be in the range of $8.5 billion to $9 billion. This is an increase on its previous guidance of FUA net inflows of $8 billion.

Following today’s gain, the Netwealth share price is now up a massive 118% since this time last year.

More reading

• The 5 best performing ASX 200 shares of 2020
• Why Mesoblast, Monash IVF, Netwealth, & Reece shares are dropping lower
• ASX 200 up 0.5%: BHP Samarco update, A2 Milk’s acquisition, Credit Corp rockets

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Netwealth. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Zip Co Ltd (ASX: Z1P) share price has been among the best performer this morning. This follows the release of its second quarter update.

In early trade the buy now pay later provider’s shares are up 8% to $6.47.

How did Zip perform in the second quarter?

As the Zip share price gain would indicate, the company was a very strong performer again during the second quarter. This was particularly the case in the United States. In fact, management notes that it is one of the fastest growing buy now pay later players in the massive market.

According to the release, Zip delivered a 103% increase in transaction volume during the second quarter to a record of $1.6 billion. From this, the company generated a 88% increase in quarterly revenue to $102 million.

This followed a very strong performance in December, which saw Zip achieve monthly transaction volume of $628.4 million. This was a 104% increase over the same period last year and annualises to transaction value of over $7.5 billion.

What were the drivers of Zip’s growth?

The main driver of Zip’s growth during the quarter was its US operations. The QuadPay business recorded a 217% increase in transaction volume to $673.1 million. This was thanks largely to a 180% lift in customer numbers to 3.2 million and a 655% jump in merchants to 8,400.

This was supported by a 60% increase in transaction value in the ANZ market to $908.7 million. ANZ customer numbers grew 39% over the prior corresponding period to 2.5 million and merchants lifted 43% to 30,100.

Pleasingly, Zip reported a reduction in its net bad debts in the ANZ market. Its net bad debts decreased from 2.43% to 1.93% over the three months. This was in line with management’s expectations. Monthly arrears in the ANZ market remain steady at 0.95%.

However, no figures were provided for the USA business or the company overall.

Management commentary

Zip’s Managing Director and CEO, Larry Diamond, commented: “We are extremely pleased to deliver another exceptional set of numbers with the quarter really delivering a significant step change for the Company, confirming our position as one of the fastest growing players in the sector.”

“A number of strategic initiatives were delivered during the quarter, in line with our mission to become the first payment choice everywhere, every day, and we are extremely well placed to continue this momentum into 2021 as the global shift away from the broken credit card model continues. Particularly exciting were the results achieved in the US with Quadpay rapidly accelerating in the largest addressable market for BNPL,” he concluded.

More reading

• Top brokers name 3 ASX shares to buy today
• Why Data#3, JB Hi-Fi, Ramsay, & Zip shares are charging higher
• 2 exciting ASX growth shares to buy for your portfolio
• What’s in store for the ASX tech sector in 2021?
• ASX 200 rises 0.4%

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In morning trade the Whispir Ltd (ASX: WSP) share price is storming higher.

At the time of writing, the communications workflow platform provider’s shares are up 4% to $4.10.

Why is the Whispir share price storming higher?

Investors have been buying Whispir shares this morning following the release of its second quarter update.

According to the release, Whispir had a strong second quarter with annual recurring revenue (ARR) increasing 29.2% over the prior corresponding period to $47.4 million. This was also an 8.5% increase on its first quarter ARR.

Management advised that this was driven by ongoing demand for communications software to automate processes and improve stakeholder engagement.

This was predominantly from existing customers, which are increasing their platform usage to solve communications challenges. Though, the addition of 42 net new customers during the quarter also boosted its ARR. Whispir now has a total of 707 customers, which is currently ahead of FY 2021 expectations.

Another positive was that the combination of revenue growth and optimal management of working capital delivered Whispir’s first operating cashflow positive quarter. Operating cash flow came in at $0.4 million for the three months.

At the end of the period, Whispir had a cash and equivalents balance of $10.9 million.

Whispir’s CEO, Jeromy Wells, commented: “Whispir is benefitting from existing customers continuing to increase their usage of the platform to improve internal and external communications and digitise their operational processes. Many organisations are evolving processes to cater to new operating environments, which require more integrated communications with internal and external stakeholders.”

“Strong revenue growth from our install base reflects the long-term nature of our customers, now supported by a larger customer success team. We’re seeing more organisations looking to implement our versatile and easy-to-use technology platform that can be used by multiple departments for a broad range of communication solutions,” he added.

Outlook

Management advised that it continues to expand its footprint across its three key regions and remains on track to achieve its FY 2021 guidance.

Furthermore, it notes that its ANZ and Asia operations continue to perform well, and the recently released North American strategy is preparing the company for long-term growth in the region.

Whispir is targeting ARR of $51.1 million to $55.3 million in FY 2021. This represents ARR growth of 21% to 30% year on year.

More reading

• The Whispir (ASX:WSP) share price is 30% lower than its 52-week high
• These small cap ASX shares have huge growth opportunities
• How to invest in ASX shares in a post-COVID world 
• 2 exciting small cap ASX shares growing fast
• 3 small cap ASX shares that could have a big 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Whispir Ltd. The Motley Fool Australia has recommended Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Northern Star Resources Ltd (ASX: NST) share price is charging higher today following the release of its quarterly update.

At the time of writing the Northern Star share price is up 2.5% to $13.75.

How is Northern Star performing?

Northern Star had a strong three months in what could be its last full quarter as a standalone company ahead of its proposed merger with Saracen Mineral Holdings Limited (ASX: SAR).

According to the release, the company reported an 11% increase in gold sold to 252,899 ounces during the second quarter. This was at the high end of its guidance range of 226,000 ounces to 254,000 ounces.

Underpinning this was its strong operational performance. Its Australian operations (including its 50% KCGM) sold 198,701 ounces at an all-in sustaining cost (AISC) of A$1,526 per ounce (US$1,115 per ounce). Whereas its Pogo operations sold 54,198 ounces at an AISC of US$1,365 per ounce.

This brought its first half gold sold to a total of 480,431 ounces, which is comfortably in line with its FY 2021 guidance of 940,000 ounces to 1.06 million ounces.

What about costs?

Northern Star’s all-in costs were A$1,825 per ounce (US$1,333 per ounce) including the A$63 million (which equates to approximately A$250 per ounce of gold sold) invested in growth capital and exploration during the period.

This expenditure saw the amount of material moved at KCGM increase by 22% from the previous quarter and included significant progress on Pogo’s mill expansion to 1.3 million tonnes per annum, including the Jameson cell installation which helped increase gold recoveries to 91%.

Despite these investments, Northern Star’s free underlying cashflow still totalled A$93 million and its unaudited net profit after tax came in at A$100 million for the period.

Management commentary

Northern Star’s Executive Chair, Bill Beament, commented: “It was a very robust performance with strong production and margins generating significant cashflow and enabling us to invest in further growth while strengthening our balance sheet in the process.”

“Our Australian operations, including KCGM, performed very well. The results at the Yandal Operations were again exceptional and further progress was made in our push to increase production and lower costs at our Kalgoorlie Operations.”

Mr Beament also spoke about its merger with Saracen.

He said: “I am very confident that the combined group is on track to meet the production and financial targets we have outlined. The potential productivity gains and growth opportunities are immense and are particularly valuable to investors given the lack of growth in so much of the global gold industry.”

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here’s why the Newcrest (ASX:NCM) share price is underperforming
• 5 things to watch on the ASX 200 on Tuesday
• Think you saw growth in 2020? Just wait for 2021: fundie
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The PointsBet Holdings Ltd (ASX: PBH) share price will be on close watch today. This comes after the company announced it has obtained approval to operate within the state of Michigan (United States).

At yesterday’s market wrap, the sports betting company’s share price finished the day at $14.71.

What did PointsBet announce?

According to this morning’s release, the Michigan Gaming Control Board (MGCB) has granted approval for PointsBet subsidiary, PointsBet Michigan LLC, to begin online sports betting operations effective tomorrow.

The favourable outcome now places PointsBet in offering its online betting platform across 6 states within the United States. These include New Jersey, Iowa, Indiana, Illinois, and Colorado.

The company highlighted its recent partnerships with several teams across the country’s most popular sports. It drew attention to a deal made with NBA’s Detroit Pistons allowing full usage of marketing and sponsorship opportunities. In addition, the sports betting company included former NBA Champion Rip Hamilton to serve as a brand ambassador.

PointsBet went on to mention that it also has diversified its commitments to other national team sports. Just this month, it signed on a multi-year deal with NHL Detroit Red Wings. The official partnership gives PointsBet access to marketing material and exclusive offers, as well as featuring a PointsBet Sports Bar in the club’s home stadium.

 PointsBet also became the official gaming partner for Detroit Tigers of the MLB. Again, the multi-year agreement gives the sportsbook operator to provide access to unique experiences, content, and promotions at Comerica Park, Michigan.

What did the CEO say?

Mr. Sam Swanell, PointsBet Group CEO, welcomed the positive news, saying:

PointsBet is pleased to have been approved to launch in Michigan in the first wave of operators. We look forward to providing this sports-loving state with a fast, premium sports betting product.

About the PointsBet share price

The PointsBet share price has gone from strength to strength since falling to an all time low of $1.10 in March. At the current price, its shares have gained over 1200% in less than 9 months.

It’s worth nothing that the PointsBet share price is nearing its all-time high of $15.25 reached in late August.

More reading

• Why the PointsBet (ASX:PBH) share price is hitting record highs
• The Pointsbet (ASX:PBH) share price is up 10% this year
• Why PointsBet, Santos, Sayona, & Splitit shares are charging higher today
• Leading broker names the emerging ASX shares to buy in 2021

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Link Administration Holdings Ltd (ASX: LNK) share price is one to watch today after the company provided a half-year 2021 (1H 2021) update this morning.

Why is the Link share price on watch?

The funds administration group has today upgraded its 1H 2021 earnings guidance. That means the Link share price is one to watch on Thursday as investors react to the news.

In today’s release to the ASX, Link upgraded its 1H 2021 revenue guidance from $594 million to $597 million. This comes after the group’s latest performance update on 9 December 2020 following positive revenue momentum in December 2020.

Operating earnings before interest and tax (EBIT) has been upgraded from $77 million to $79 million. Link’s operating net profit after tax adjusted amortisation (NPATA) was upgraded from $57 million to $65 million.

It wasn’t just the earnings guidance that improved in Link’s latest update. The group’s debt covenant metrics also strengthened as debt leverage ratio improved to 2.4x (from 2.8x). Link’s interest cover ratio is expected to improve to 11.2x (from 11.0x).

It will be interesting to see how the Link share price performs in early trade after the earnings upgrade, which has been attributed to revenue momentum, strong Property Exchange Australia (PEXA) performance and a lower than anticipated effective tax rate. PEXA is a leading Aussie electronic property payments platform and a potentially lucrative target. Link has an indirect interest via its 44.2% stake in PEXA’s owner, Torrens Group Holdings.

Link Group CEO and Managing Director Vivek Bhatia said revenue was above expectations with strong operating expense control. A record month for the PEXA Exchange and increased penetration of the national electronic conveyancing market were other big positives in the latest update.

Mr Bhatia said the company achieved “strong cash flow conversion” in excess of 100% for the first half. Link is set to release its first half results on Thursday 25 February 2021.

What else is happening for Link?

As well as this morning’s update from Link, there was also an article in yesterday’s Australian Financial Review (AFR) suggesting private equity groups are circling the Aussie tech group.

Macquarie Capital and UBS are reportedly kicking off talks with the likes of KKR and Partners Group to purchase Link’s Torrens stake. This comes after a proposed demerger of PEXA as a separate listed company failed to launch.

More reading

• These were the worst performing ASX 200 shares last week
• ASX 200 rises 1.5%
• ASX 200 up 0.8%: CBA storms higher, Link sinks, tech shares rise
• Why Corporate Travel Management, Link, Strike Energy, & Sydney Airport are dropping lower
• Why the Link (ASX:LNK) share price is dropping 11% lower today

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends KKR. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Link Administration Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Netflix Inc (NASDAQ: NFLX) were flying higher today after the company topped expectations in its fourth-quarter earnings report, and offered strong guidance for the year ahead. It also said it was done taking on debt, projecting break-even free cash flow for 2021, and putting to rest concerns about its cash burn, a favorite bugaboo of Netflix bears.

As a result, the stock was up 14.4% as of 11:19 a.m. EST today.

So what

Netflix added 8.5 million subscribers in the fourth quarter, much better than its forecast in October of 6 million, thanks to a strong content slate and the pandemic still gripping much of the world.

Revenue jumped 21.5% to $6.64 billion, outpacing its guidance at $6.57 billion and analyst expectations at $6.63 billion. Operating margin came in at 14.4%, also ahead of guidance at 13.5% due to higher-than-expected revenue, and the company posted $1.19 in earnings per share (EPS), down from $1.30 a year ago, though that result includes an accounting loss on euro-dominated debt of $258 million. Adjusting for that, EPS would have been above $1.50. Analysts had expected EPS of $1.39.

What also delighted Netflix investors was that the company said it would no longer have to take on debt to fund operations. It also forecast break-even free cash flow for 2021, better than its prior expectation of negative $1 billion in FCF.

Now what

For the current quarter, Netflix expects to add 6 million new subscribers, and sees revenue growth accelerating to 23.6% as it benefits from recent price hikes in the United States and other regions. 

Netflix also lifted its operating-margin guidance for the year from 19% to 20%, a sign that its growth plan is delivering results faster than expected, and management said it continues to expect its operating margin to improve by an average of 3 percentage points each year.   

More than any prior quarter, this report makes clear the company’s transition from a risky growth stock to a stable profit generator. It just wrapped up a year with 18% operating margin and it’s done burning cash. That, along with another round of better-than-expected subscriber growth, is reason for investors to celebrate.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Netflix is considering a stock-buyback program
• Netflix has a lot to prove to investors this week
• Netflix just lost nearly 1 billion hours worth of content
• Netflix earnings: 3 trends to watch
• FAANG stocks make their case to lead the Nasdaq in 2021

Jeremy Bowman owns shares of Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The A2 Milk Company Ltd (ASX: A2M) share price has been suffering in recent months, but there some reasons why the company could be worth looking at.

What is A2 Milk?

A2 Milk is the nutritional business which offers a variety of products like infant formula, liquid milk, milk powder and ice cream.

The company started out in New Zealand but it’s now sold in many countries across the world.

Here are three reasons why the A2 Milk share price could be worth looking into:

International earnings

A2 Milk is an ASX share that doesn’t just rely on Australia and New Zealand for its earnings, unlike plenty of other large ASX shares.

It also generates significant earnings from China and the US.

In FY20 it made $965.7 million of revenue from its Australia and New Zealand segment, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $465.6 million. The China and other Asia segment made $699.4 million of revenue, generating NZ$224.9 million of EBITDA.

The USA saw revenue of NZ$66.1 million, representing growth of 91.2%. It also boasted about the brand awareness more than doubling and the conversion rates went up significantly. It said in the FY20 result that over 50% of its sales growth was driven from existing stores. The USA distribution grew to 20,300 stores at the end of the financial year, up from 17,500 stores at December 2019 and 13,100 at the end of FY19. The company continues to aim for US$100 million of annualised sales from the US division.

Growing market share

A2 Milk has been building its market share in various categories for some time now, which could help increase customer loyalty and repeat demand.

In China’s mother and baby stores (MBS), its market share according to Nielsen was 1.3% in June 2019, 1.7% in December 2019 and 2% in June 2020. According to Smartpath, the cross-border e-commerce (CBEC) market share grew from 18.6% in June 2019, to 20.5% at December 2019 and 21.5% at June 2020.

A2 Milk is currently suffering from problems relating to Chinese demand, but the long-term growth of the market share could be a positive sign for the future. Indeed, despite A2 Milk’s overall difficulties – which I’ll get to soon – its MBS market share had grown to 2.3% at the end of October 2020 with increases in both same store sales and the number of new stores. In the first half of FY21, A2 Milk revenue growth for China label products in MBS is expected to be 40%.

Valuation

The A2 Milk share price has fallen heavily, it’s down almost 50% over the last six months. A2 Milk is now expecting FY21 first half revenue to be in the order of NZ$670 million, with a group EBITDA margin of around 27%.

Total FY21 revenue is expected to be between NZ$1.4 billion to NZ$1.55 billion, with an EBITDA margin of between 26% to 29%.

The reason why A2 Milk’s performance has been dropping is because there has been much lower demand in Australia from the local daigou. A2 Milk had hoped this trend would have reversed, but it hasn’t yet. The daigou can be important in activating demand in other channels like CBEC. A2 Milk is going to invest in the daigou channel to ‘reactivate’ it. 

But all of this disappointment has led to the A2 Milk share price fall, and a reduction in the valuation looking at longer-term earnings numbers on Commsec.

According to Commsec, the A2 Milk share price is valued at 22x FY22’s estimated earnings.

More reading

• Here are the 10 most shorted shares on the ASX
• Leading broker downgrades a2 Milk (ASX:A2M) shares
• Why the a2 Milk (ASX:A2M) share price is sinking lower again
• These are the 10 most shorted shares on the ASX
• Why a2 Milk, AVZ Minerals, Nanosonics, & Premier Investments are dropping lower

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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