A2 Milk's Babidge, other shareholders cash in on high share price

Tuesday 5th January 2016

Geoffrey Babidge, managing director of A2 Milk, is one of a number of the specialty milk marketing company’s shareholders to have cashed in on the current high share price by reducing their stakes.

A2 Milk’s shares have soared in recent weeks, reaching a record $2.50 on Dec. 30, when Babidge sold 500,000 shares for about $1.18 million, or about $2.36 apiece. The shares are currently trading at $1.90 on the NZX and A$1.78 on the ASX.

Babidge has netted about $4.2 million since mid-October selling down his holding, which now amounts to 3.5 million ordinary shares and 5 million partly paid shares. He declined to be interviewed on the sell-down but a company spokesman said on his behalf that he had sold for his “own private purposes”, taking advantage of the narrow window in which directors can trade under stock exchange rules. The spokesman pointed out he continues to hold a significant number of shares.

Another active trader has been ASX-listed investment management firm Challenger Ltd which announced on Dec. 31 that it had ceased being a substantial shareholder by selling down its 5.02 percent stake to 4.84 percent.

It has made a number of trades since becoming a substantial shareholder in A2 Milk with a 5.03 percent stake in early November and its stake rose as high as 6.48 percent at one stage.

NZ investment management firm Harbour Asset Management also reduced its stake from 5.22 percent on Dec. 29 to 4.84 percent.

Portfolio manager Shane Solly said the firm felt A2’s share price had got ahead of its near-term value.

“We’ve been invested in A2 for some time and remain invested in it. While we think the share price has got a little ahead of value, we still see some longer-term opportunities and support management in its roll out globally,” he said. Solly wouldn't reveal the firm's valuation of the stock.

Solly said he was pleased to see Babidge, who has run A2 Milk since 2010, get some money out of his investment which he made before others saw value in the company, though it was good to see he had still retained some “skin in the game”.

Chairman David Hearn has also demonstrated his backing for the company, buying 100,000 shares in mid-October for $78,200. He announced to the stock exchange just prior to Christmas that he had spent a further $11,760 on 7,000 shares in the company which he gifted in three tranches to family members.

In mid-December A2 updated its forecasts for the 2016 financial year, saying it expected group revenue to grow to $285 million and group operating earnings before interest, tax, depreciation and amortisation to $22 million on an uplift in infant formula sales in both Australia and China.

BusinessDesk.co.nz

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