Shareholders of a2 Milk Company Ltd (Australia) (ASX: A2M) were able to breathe a huge sigh of relief this afternoon after the dairy company put investors at ease with another trading update.
In light of the drama that has unfolded at Bellamy's Australia Ltd (ASX: BAL) this month, a2 Milk's own share price has come under heavy selling pressure.
But investors can put all of these concerns to bed now, with management confirming that business is still booming since its last update. Today's release states that:
"The Company notes the higher level of recent commentary and interest from shareholders relating to the infant formula market. In this context, the Company wishes to confirm that, consistent with the trends communicated at the Annual Meeting, the business continues to trade very strongly reflecting, in particular, significant year-on-year growth in its infant formula business."
Unsurprisingly a2 Milk's share price rocketed on the news. At one stage its shares were up by almost 10% to $2.14. They have since given back some gains and at the time of writing sit 6% higher at $2.07.
Despite this its shares are still trading almost 20% lower than a recent 52-week high and at a price which I think is great value for buy and hold investors.
But I would caution against throwing all your eggs in the one basket. Whilst I have faith that a2 Milk has a talented management team that will navigate the changing regulations in China, it certainly is a volatile place for foreigners to operate. Regulations can change in the blink of an eye, causing businesses to almost collapse just as quickly. Just ask Bellamy's management.
