a2 Milk rebounds despite change in Chinese infant formula market

Robert Frost

OC Funds Management

The a2 Milk Company (ASX:A2M) rebounded in June after announcing a profit upgrade at a time when the market was becoming increasingly nervous about regulatory change in the key Chinese infant formula market. China represents a key growth market for A2M and, in recent months, the Chinese government has announced a raft of changes to the infant formula regulatory environment. These changes have included the taxation of Cross-Border E-Commerce (CBEC) traded commodities, publication of product lists for CBEC traded commodities through China’s free-trade zones and, more recently, an Infant Formula Registration Rule for both domestic and imported infant formula products into China. Management has confirmed it is well placed to respond to the changing regulatory environment in China and the company upgraded its full-year revenue and EBITDA forecast in mid-June. We remain upbeat on the global growth prospects of A2M and are attracted to its capital-light business model. (VIEW LINK)


Robert Frost
Head of Investments
OC Funds Management

Robert was appointed Head of Investments in 2009 and has been a Portfolio Manager since joining OC Funds Management in 2001. Robert is also an Executive Director of parent company, Copia Investment Partners.

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