A2 Milk share price up after UBS reveals 5% stake in the company

UBS stands by its research as it's revealed that the Swiss bank has taken a massive 5% stake in the Australian infant formula company.

a2m Source: Bloomberg

This morning a2 Milk Co Ltd revealed that Swiss banking giant UBS has built a 5% stake in the company.

When the markets opened in Australia, a2 Milk's share price was up 1.16%.

As we previously reported, UBS just recently upgraded their rating of a2 Milk to ‘buy’ from ‘neutral’ and slapped an increased 12-month price target of A$16.70 on the infant formula company.

UBS’s research report highlighted how a2 Milk’s unique product offerings, premium brand presence and the potential to expand its Chinese market share are all potential drivers of growth for the company.

UBS puts its money where its mouth is

It’s refreshing to see UBS Group AG stand behind its research, with the banking giant having bought some 36 million ordinary shares in a2 Milk over the last five months.

All up, this amounts to a 5.01% stake in a2 Milk.

The bank has been building its sizable position in the Australian company for some time now, with UBS’s London branch accumulating a2 Milk stock all the way back in March 2019.

Though not necessarily the price that UBS got in at, back in March 18, shares of a2 Milk Co Ltd traded for just A$13.44 per share.

By comparison, in the last month alone a2 Milk’s share price has risen 22.1% and currently trades at A$16.42 per share.

Analysts still mixed on a2 Milk

While UBS is evidently optimistic concerning a2 Milk’s prospects, other analysts seem less enthused.

According to the Wall Street Journal, of the 13 analysts covering the company: six rate it as a buy, four a hold and three a sell.

Ultimately, given that China remains a key part of a2 Milk’s growth strategy, potential head-winds from the US-China trade war may still be weighing on the minds of investors and analysts.

Even still, the company looks to be in a good financial position, having posted strong growth year-over-year in the first-half of 2019. In this period the company saw both revenue and earnings per share (EPS) increase 41% and 53%, respectively.

Year-to-date, a2 Milk (ASX: A2M) has far outpaced the ASX200, rising 57% since January.


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