The market value of Fonterra’s equity is $10.6 billion.  Fonterra’s NPAT in FY17 was $745 million.  That gives the company a P/E multiple of 14. The market value of The a2 Milk Company’s equity is now $6.1 billion – almost 60% of Fonterra’s. a2 Milk’s NPAT in FY17 was $91 million. That gives a2 Milk a P/E multiple of 66.  Clearly investors like a2’s story and its growth prospects. The graph below shows the change in the two companies’ market capitalisation’s over the last year.

a2 Milk is the Uber or Air BNB of the milk industry: it owns no cows, no milk processing facilities and almost no physical assets. Its real value is in its brand and IP.