Rising COVID-19 cases in China and the administration’s focus on zero-tolerance are likely to be the final nails for our position in A2 Milk (A2M). While their last update in February was a positive one providing evidence that new management had a solid handle on the business, the turnaround discussed at the time underpinning a return to revenue growth in FY22 is now likely to be delayed, in MM’s view. While we can see a more positive story in outer years if they execute well, we’re losing patience in our position which has continued to decline. We see a better opportunity for recovery with lower risk in Treasury Wine Estates (TWE) which has also been hit by China-related factors.
MM is considering cutting A2M for a loss, switching the funds into TWE
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