Comvita - CVT

[Paper Tiger]

Reading the Fisher Funds October newsletter I notice that they have added Comvita (on the NZAX) to their NZ Growth Fund Portfolio.

Comvita sell natural health care products based on bee related stuff such as honey etc.
The results for the year are now expected to be $1.1 giving a P/E of 26.6, lower than expected due to the delayed introduction of product and the strength of the NZ$.

Going forward I would expect some improvement in profit in the next year and can see that things could expand nicely with time.

Personally given what I currently know (not much) about these guys I would put them on the watchlist for a while and dig a little deeper

Anyone have any opinions/information on this company?

[k1w1]

PaperTiger, I am interested too but I don't know too much about them. They seem a bit expensive and capital consuming from what I can see.

[Bling_Bling]

PE 26.6 is pretty high.
Cant see $NZ coming back.

Which country does comvita export to?

They have quality products, but cost more. Mainly trourist buys it.

[lobo]

I buy their toothpaste.

[James K]

CVT recently announced a profit warning saying 2004 NPAT would be same as 2003, due to higher NZD and delayed product launch. From memory, revenues had grown ~20%p.a. last 5-7 years, but that was on back of first overseas expansion - would it slow? Agree with k1w1 too about capital requirements - ROE was poor: couple of rights issue pre listing, big raising earlier this year, and a DRP. My conclusion was that it had reasonable growth potential but it was largely in the price. i.e. repeat of 2003 NPAT of 1.15m = eps of ~9cps. Pe of 25. Fisher Funds can have them!

[James K]

PT, their website had lots of info: www.comvita.com
A lot of their products seemed a bit nutty to me

[Enumerate]

Their Manuka honey with UMF is very popular in Australia. Apparently, for healing burn wounds - it is very effective.

Aussies are shelling out big $$ for this special honey.

[Paper Tiger]

Comvita in sticky patch over forecast (http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=9003641)

[k1w1]

quote:Originally posted by k1w1

PaperTiger, I am interested too but I don't know too much about them. They seem a bit expensive and capital consuming from what I can see.


Gotcha !!!

[goodguy]

I have been interested in Comvita for some time. When they announced they were moving to the main board their price went up until it doubled...making it unrealistic. I use some of their products which are good and their premises are impressive and their displays well worth seeing. They are in a business that is said to have a future. They do some things that look right, but the shares have been tightly held and hard to buy at an attracctive price. At times they look as though they could do with more hard business experience, but I wouldn't like to be too hard on them, because some of the things they have done have been sensible and, if they can just get their act together a little more smoothly, the future could be good.

[Paper Tiger]

Comvita profits buzzing (http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10011042)

[whiteheron]

A P/E of over 25 is extremely high for a small company like CVT , for any company for that matter in my opinion so you would need to be totally convinced about their future earnings potential

I think that it is a company that appeals to quite a number of people and as there are not too many shares to be had I feel that the price has been bid up above what would be a "normal " price for a share in similar companies , although because of its unique nature comparisons would not be easy

I took some CVT up at the public offering but sold out when I felt the price had reached quite a bit above what could be justified

Having said that the long term prospects for the company may be okay , if you are prepared to wait
It is the high P/E that puts me off

Do your homework
My opinion is just that , an opinion --- time will tell

[JAMP]

I purchased a small-holding in Comvita late June/early July of this year.

To my mind many of the agreements they have entered into of late show that their earlier endeavours were not in vain. With increased access (http://www.nbr.co.nz/print/print.asp?id=12621&cid=2&cname=Australia) now negotiated, the signals for the future continue to improve.


They are never going to set the world alight with the dividends, but as well as the generally positive vibes attached to their recent market announcements, they have plenty of upside potential from a weakening exchange rate (it will weaken won't it?).

The shareprice will often drift between announcements - an occupational hazard of being too small to show on the radar for many market observers. Keep an eye out for an attractive entry point, and you too could soon be in the <s>honey</s> money...no guarantees mind.

Regards JAMP
NZX: AIA CHA LPL MCH MVN NOG PPG RBD SAN SKX SPN
NZAX: CVT
Unlisted: BRK

[winner69]

Jamp - wonder if a portfolio reflects its owner

You seem to be a fish and chip person with the odd pizza and chipsd thrown in for a change washed down with orange juice (as the billboard says there's no P in Charlies) ..... and then to fix the neglected body need a good dose of Comvita from your local Lifestyle Pharmacy.

[BRICKS]

W69 this would be a good time for you to list your holdings for old times shake.. [8D]

[JAMP]

W69, I too "wonder if a portfolio reflects its owner". I guess it does to an extent...although the pizzas I consume are hand-made.

CVT FY announcement to 31/12/05 now due. I have been keeping an eye out for it for the past two days, so maybe tomorrow! My expectations for the result are reasonably modest. However, my expectations for FY 31/12/06 announcement in 12 months time are a lot higher. I expect this company to be buzzing about the prospect of further softening in the TWI.

Regards JAMP
NZX: AIA LPL MCH MVN NZO NZOOD PPG RBD SAN SKL SPN
NZAX: CVT NWFOA SAT
Unlisted: BRK

[Footsie]

I'm suprised there isn't more discusion about this stock.
Its a great little company.

If phaedrus were able to complete a chart, evidence would suggest the trend is now your friend.

Also, the registry is very tight with only 13m shares on issue, if they get up a bit of steam the price could rocket. as Jamp says FY06 will be they key to getting the s/p really moving.

[Nevl]

Interesting response to what was an excellent profit announcement.

Comvita seems to have a good sales channel and improving prospects and trades at a historic low. No wonder people avoid the sharemarket.

[Phaedrus]

CVT is in an ongoing downtrend and has been for over 18 months, so far. What's worse, there is no sign of the downtrend weakening - in fact it is accelerating.

A selection of indicators are shown here with their associated Buy signals marked by green arrows, Sell signals red arrows. All of these got you out of CVT before the downtrend began. It is clear that none are anywhere near triggering buy signals.

The chart also features a 200 day moving average. These are commonly used by conservative, long-term investors, to keep them on the right side of major trends. Even this very slow ma signalled an exit before the downtrend began.

Note the abrupt "step" in the OBV plot. These often mark where the "smart money" sells out. Didn't they do well?

http://h1.ripway.com/78963/CVT212.gif

Once a "great little company" - now in a great big downtrend!

[Nevl]

Will be interesting to keep watching. After all any company improving sales and profits in this enviroment deserve a bit watching brief. Will keep my powder dry for later. Still expect Comvita to be a good performer when they finally change direction.

[bull....]

I think the smart money is on to it.
This company will struggle going forward that is why the price is going down.

[Paint it Black]

Agree with you Nevl the latest profit announcement was very positive and there should be some upside very soon with their niche market and American approvals in place. I'm averaging down against the TA advice I know.

[Phaedrus]

Hi PiB, here are some trading rules that you might like to take a look at. The first 2 are the most important, but you will see that most are directly applicable to your case.

Click here. (http://spahiu.wordpress.com/2006/05/27/the-not-so-simple/)

[Bob Marley]

Not by my calculations mon. Here's what they've been saying:

June 2008: "We expect net profit for the year ending 31 March 2009 to be in the range $2.0-$2.5m."

Nov 2008: "We are not confident of meeting the $2.0-$2.5m target."

Feb 2009: "We still expect to post a positive year end result."

Looks like a series of downgrades to me mon, at a time when the NZ$ has sank quite rapidly and CVT should be big beneficiaries given that 80% of its earnings are now derived offshore.

[Paper Tiger]

Trying not to be too cynical here but there are no actual numbers.

"We expect to post a positive year end profit result. We have a good working relationship with our bankers, Westpac, and have recently rolled over our long term debt positions"
can be translated as
We should make a profit but don't bet the farm on it, and the bank reckons they can get their money back at this stage.

regards
Paper Tiger

[Dr_Who]

I like the branding and products of Comvita.

They now need to get their act together and reduce cost. This can be a good long term portfolio stock if they can crack the Chinese market. It is a big ask, but patience is the key.

[modandm]

wasn't sure whether to bump this or the hillarious kill carmel CVT thread but this one seems most 'on topic'.

http://www.investor.comvita.com/ - annual report is out today.

makes for interesting reading. Doesn't seem like much new information - board as been stressing a create sh value mantra for a wee while now.

Can't aregue with their big sales growth though - or is this all by acquisition?

As a long term holder - bought pre-ipo and regret not selling at 270. I should have remembered the rules:

1. growth co's are often overvalued due to analyst optimisim
2. ipos usually underperform once ititial buying has subsided

anyone care to comment on the result and whether this co is a buy hold or sell and why

cheers

[Phaedrus]

Anyone care to comment on the result and whether this co is a buy hold or sell and why?This chart is an update of the one posted here almost exactly 6 months ago - the indicators are the same and all parameters are the same. (So let's have no accusations of hindsight eh?) Anyone following these indicators would have bought CVT at around 76 cents on the basis of the trendline break, which was confirmed at that time by an OBV trendline break. The other, more conservative indicators featured here triggered much later, as you would expect. The 200 day EMA (as used by very conservative investors) worked surprisingly well, getting them out reasonably early (at around $3.80) and, more importantly, keeping them out as CVT's downtrend continued.

Pay close attention here to the movement of the Big Money (assumed to be the "smart" money.) Notice the particularly timely exit. They bailed before the downtrend got under way. Notice also the very timely entrance at 83 cents. Anyone selling when the smart money did and re-entering when the smart money did would have done pretty well. Now, the "smart" money is assumed to have more knowledge than "retail" investors. Mug-punters like us can never hope to know as much as insiders. Theoretically this puts us at a distinct disadvantage. But does it?

Look at the trendline-break and OBV trendline-break Sell signals here. BOTH of these preceded the "smart money" exit by nearly a month. Look at the recent trendline-break and OBV trendline-break 76 cent Buy signals. Again, BOTH of these preceded the "smart money" 83 cent entry by nearly a month. Kindergarten level TA outperformed the smart money by a handsome margin.

Spare a thought here for the poor fundamentalists. Forbidden by their faith from utilising TA, they miss out on all this useful information on market sentiment and are forced to rely on dated company reports for their analysis. This makes it very difficult indeed for the poor sods to buy anywhere near the bottom - let alone sell anywhere near the top. The annual report that came out today is reasonably positive but the shareprice began moving up over 3 months ago and has now risen over 70% from its lows. Time for the fundies to buy perhaps?

Technically, CVT was a Buy 3 months ago. Right now it is a Hold.

Modandm had made a good profit on CVT but lack of any exit strategy meant that this was all given back to the market. Their initial investment is now worth half what is was.

Market sentiment is at least as important as analysts "valuations".

http://h1.ripway.com/78963/CVT814.gif

[STRAT]

Thats beautiful Phaedrus but sleep light. The fundies will be coming for ya with torches and pitch forks in hand.:D

[winner69]

Picture tells it all eh Phaedrus

Modandm mentioned the kill carmel thread whatever that is but the last big spike in volume was Carmels last throw of the dice with CVT.

In the period 20/5 to 10/6 Fishers sold down the last 2 mill odd shares at an average price of 75.6 cents .... so one could say that once again Fishers lost heaps on quitting a position they didn't like too hold any more

But what a bargain for those since ... now 50% plus up since they bailed.

Suppose this could sort of be a case of techos following the fundies in reverse .... fundie saying no value left so techos pouncing

Would have to think that the price will continue to rise more

[re@der]

I doubled holding at 84 cents but for me this is all about the business strategy of buying an incountry distributor to cheaply create a multinational structure as well as being earnings aquisitive. (earnings cheaper than the P/E rate) eg. Greenlife hong kong purchase. Other great strategy is multiplying the premium earnings that they make on the food products with medical and skincare products. ie Why sell food at just over commodity prices when the value ad products give huge multiples. If only more NZ exporters were like this one could see some purpose in investing in them.

[winner69]

McDouall Stuart continue to rate CVT as a BUY ..... this time citing improved prospects from selling higher margin products .... looks like this broker sees value here

Now the value investors have recognised this as a good thing and made the share price to go must be time for the techos to get on board and keep the momentum going

http://www.sharechat.co.nz/article/4e55dfef/daily-sharechat-comvita-limited.html

[modandm]

thanks for the chart Phaederus.

So seems like a good hold for now. Will definatly watch for sell indicators in future.

In terms of diagnosing my failings:rolleyes:do you have a longer term chart which might show the long term uptrend prior to the 1st uptrend in the chart you posted? When did that uptrend chart indicate a sell?

Also is kind of hard to use a large volume spike as a sell indicator isn't it? I mean it may indicate strength too?:confused:

In hindsight seems like the fall from the support level of 350 and the 200day ema break was the most credible sell indicator. do others agree? what are standard moving averages used by many techies? 30, 100, 200?

[snackpack]

$100k of Comvita shares traded today probably due to their upbeat 6 monthly report. Sales of 40m, Npat of 1.6m and a 2c divvie declared for December. Good effort all round in this retail environment. Stronger gains are anticipated for the upcoming Northern Hemisphere winter.

[GR8DAY]

.....yep solid company selling top products for todays markets.......plus a solid future by all accounts.

[snackpack]

Share price still rising markedly. Note that CVT are selling the licencing rights for Medihoney to Derma Sciences for the sale to the professional medical market. It seems CVT will retain manufacturing and some selling rights to other markets.

[Paint it Black]

Share price still rising markedly. Note that CVT are selling the licencing rights for Medihoney to Derma Sciences for the sale to the professional medical market. It seems CVT will retain manufacturing and some selling rights to other markets.

CVT always has had tremendous potential, it just needed to clear away some of the distractions it had with the Waikato University and infighting with other suppliers over branding which it seems to be sorting out. It still has a long way to go to recover the lost ground from an SP of $3.40 more than 2 years ago when I started buying them but deals like this are what CVT should be very good at with their experienced management.

Is it a buy now Phreadus?

[Zito]

I don't know whether CVT is a "buy" right now, but it certainly is a "hold". The price action smashed through resistance of $1.25 late last week and has gone like a steam train since to $1.48 today.

Those traders who had recently been looking for an entry point (I was one) would have bought on Friday when it pushed through resistance and closed at $1.30.

[Phaedrus]

Is CVT a buy now?No it's not. See how oscillators show it as OverBought? Look at what happened previously whenever this occurred. Now is a time to hold - NOT buy.

Here is a list of Buy signals, ranked according to my very approximate estimate of their strength/reliability :-

(1) Breakout above previous resistance.
(2) Break of a confirmed trendline.
(3) Price/Volume breakout
(4) Break of On Balance Volume trendline.
(5) Exceptional Volume spike on Up day.
(6) Bullish oscillator divergence.
(7) Moving Average crossover.
(8) Oscillator Buy signal.
(9) Trendline respected

These signals are all marked on the chart below.

That's when CVT was a Buy.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/CVT1119.gif

[Paint it Black]

No it's not. See how oscillators show it as OverBought? Look at what happened previously whenever this occurred. Now is a time to hold - NOT buy.

Here is a list of Buy signals, ranked according to my very approximate estimate of their strength/reliability :-

(1) Breakout above previous resistance.
(2) Break of a confirmed trendline.
(3) Price/Volume breakout
(4) Break of On Balance Volume trendline.
(5) Exceptional Volume spike on Up day.
(6) Bullish oscillator divergence.
(7) Moving Average crossover.
(8) Oscillator Buy signal.
(9) Trendline respected

These signals are all marked on the chart below.

That's when CVT was a Buy.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/CVT1119.gif

Thanks Phaedrus - from what I see we have had in the past couple of days type 1 and 4 buy signals which have been countermanded by overbought warnings - is then why it is a hold?

[Phaedrus]

From what I see we have had in the past couple of days type 1 and 4 buy signalsThere have been four recent Buy signals - one each of Types 1, 3, 4 and 9.


..... which have been countermanded by overbought warningsA stock reaching OverBought levels does not countermand previous Buy signals and neither does it constitute a warning. Uptrending stocks often spend considerable periods of time at technically "OverBought" levels and these simply mark bad times to buy. When stocks are trending up, oscillators give good entry signals and a string of misleading "Sell" signals. With falling stocks, oscillators give a string of misleading "Buy" signals but useful Sell signals. In short, never act on any oscillator signal in isolation.


....then why it is a hold?Because it is in an uptrend.
Because that uptrend is supported (confirmed) by a rising OBV.
Because price action is above a confirmed trendline.
Because there have been no Sell signals.

[Paint it Black]

There have been four recent Buy signals - one each of Types 1, 3, 4 and 9.

A stock reaching OverBought levels does not countermand previous Buy signals and neither does it constitute a warning. Uptrending stocks often spend considerable periods of time at technically "OverBought" levels and these simply mark bad times to buy. When stocks are trending up, oscillators give good entry signals and a string of misleading "Sell" signals. With falling stocks, oscillators give a string of misleading "Buy" signals but useful Sell signals. In short, never act on any oscillator signal in isolation.

Because it is in an uptrend.
Because that uptrend is supported (confirmed) by a rising OBV.
Because price action is above a confirmed trendline.
Because there have been no Sell signals.

Thanks again Phraedrus - if the SP continues to slowly rise, as it would with a series of positive announcements, is there a point where the overbought line on the top 2 charts rises to a point where it overtakes the SP which then clears the way for the SP to be at last considered a buy?

[Phaedrus]

If the shareprice continues to slowly rise, is there a point at which the RSI and Stochastic oscillators as shown here will give another Buy signal?

No. At this stage, they have already done their job. To generate new Buy signals, these oscillators would have to drop below their "OverSold" threshold and then climb above it. This would require a reasonably significant drop in the shareprice followed by a rise.

Very active traders might well want more frequent entry/exit signals. They could use the same oscillators but utilising shorter time periods than those shown here. A fast Stochastic oscillator could use a 5 day period, for example. The default RSI period is 14 days, but use of a 9 day period gives a Buy signal in tandem with that of the Stochastic oscillator, giving an entry at $1.16. The time period controls the sensitivity of the indicator. The idea is to select a period that suits your preferred trading frequency.

[Paint it Black]

If the shareprice continues to slowly rise, is there a point at which the RSI and Stochastic oscillators as shown here will give another Buy signal?

No. At this stage, they have already done their job. To generate new Buy signals, these oscillators would have to drop below their "OverSold" threshold and then climb above it. This would require a reasonably significant drop in the shareprice followed by a rise.

Very active traders might well want more frequent entry/exit signals. They could use the same oscillators but utilising shorter time periods than those shown here. A fast Stochastic oscillator could use a 5 day period, for example. The default RSI period is 14 days, but use of a 9 day period gives a Buy signal in tandem with that of the Stochastic oscillator, giving an entry at $1.16. The time period controls the sensitivity of the indicator. The idea is to select a period that suits your preferred trading frequency.

Excellent Phraedrus - that's what I needed to get understand this properly.

[tango]

I bought into CVT ages ago about 102, then the price dropped to 82 cents so I ended up buying more to drop my average cost. There are times I worry they don't have the financial resources to develop and market all their products

[snackpack]

Seems CVT have signed off on the agreement for Derma to make and market Medihoney. CVT still retain the right to sell to non-medical professionals and are suppliers of Manuka Honey to Derma. All subject to Derma capital raising. CVT to gain $3.2 mil cash and $2.8 mil of Derma shares. CVT gets on-going royalty too anticipated to be about $500k in 2010/11.

[tango]

Seems CVT have signed off on the agreement for Derma to make and market Medihoney. CVT still retain the right to sell to non-medical professionals and are suppliers of Manuka Honey to Derma. All subject to Derma capital raising. CVT to gain $3.2 mil cash and $2.8 mil of Derma shares. CVT gets on-going royalty too anticipated to be about $500k in 2010/11.

I think that's very promising, but it seems to be a lousy time to do capital raising

[snackpack]

CVT rising steadily (jumped today 12 cents) to $1.72 albeit on very low volume. Lack of liquidity making the shares scarce? Any ideas why going so high so quick?

[kiwi_on_OE]

Regarding price increase, could it be related to figures from half yr profit?

6 months to 30 September 2008
NZ$000''s
Sales 31,650
EBITDAF(i) 2,036
NPAT (ii) 203

6 months to 30 September 2009
Sales 40,108
EBITDAF(i) 4,258
NPAT (ii) 1,621

Simple doubling of 1st half figures could give FY NPAT of 3.2M.

Prev 2nd half sales 40m, could current 2nd half sales be 50m? EBITDAF 6m? NPAT 3m? Could some think FY NPAT could be 4.6m?

Current year only has two months left to run. What about next year? Base a guess on double proposed current half figures ie. sales 100m, EBITDAF 12m, NPAT 6m?

Mkt Cap ~50m, so current yr PE 11, next yr PE 8.

If anyone believed figures like those I could see why they were buying and the price was rising.

[snackpack]

Comvita and Derma Sciences have formally signed their agreement so the share and option issues and cash are heading Comvita's way.

[snackpack]

Comvita has slowly risen to $1.90 on small volume, but very few sellers. Three people bidding at $1.90 and one seller listing at $2.00 today.

[Zito]

This share has been my investment of the year. It is in a solid uptrend, which has accelerated over the past 4 months. It lacks liquidity to an extent but its holders are holding tightly - and with good reason - plenty of good news has come out of the company over the past 12 months with more expected.

[snackpack]

I have to agree as I've held on to a loss for a year or so and am relieved to see it in the green again. I read that Comvita are hiring staff again and are looking into Europe. The extreme cold snap in the Northern Hemisphere was projected to bring benefits too.

[kiwi_on_OE]

6 months to 30 Sep 08
NZ$000''s
Sales 31,650
EBITDAF 2,036
NPAT 203

6 months to 31 Mar 09
NZ$000''s
Sales 40,000
EBITDAF 4,100
NPAT 800
Debt 30,300

6 months to 30 Sep 09
Sales 40,108
EBITDAF 4,258
NPAT 1,621

6 months to 31 Mar 10
Sales 45,000
EBITDAF 6,700
NPAT 3,300
Debt 11,600

They say: -
'The significant improvement in earnings is a result of a continuing strong
trend in sales growth and ongoing improvements in overall operating
efficiencies.'

So what could be the figures for the new year? What about doubling the numbers for the last 6 mths?

Sales 90,000
EBITDAF 13,000
NPAT 6,600

Mkt cap 64m => PE ~10.

[Paint it Black]

The most pleasing aspect is the big reduction in debt from $30m to $11m - this will let the company accelerate it's growth even faster. At least NZ now has one well run company on the NZX successfully exporting overseas. Congratulations to the Board!

[snackpack]

Agreed, well done to management. I can't wrap my head around todays jump in prices. Fantastic rise.

[Zito]

Well the rise to $2.80 wasn't immediately sustainable and now CVT has drifted back to $2.35 - and with the Euro situation as a backdrop a slight correction to the SP was expected. The share seems to be finding good support at around $2.30, which I'm happy about - a fall below that would mean a change of short-term trend and would cause me to revisit my strategy with the stock.

Accordingly I have been accumulating at $2.32 - $2.35 and was very happy today to see director Robert Tait has been buying at $2.40. A nice (albeit small) vote of confidence in the direction the company is heading.

[tango]

And now they've dropped to $1.90 after CVT revised their forecast downward

I wish I had sold when they were at their peak a few months ago. I thought about it but everything was looking promising so I held them. Now I'm not so sure...

[JayRiggs]

Comvita Limited (“CVT”) wishes to provide profit guidance for the year ending 31 March 2011, as follows.



The reported net profit after tax is expected to be in the range of $0.4m profit to a $0.2m loss on forecast sales of approximately $81m. This compares with a net profit after tax of $5.0m and sales of $84.9m in the previous financial year. On a normalised basis, net profit after tax forecast range is between $2.8m and $3.4m profit (2010 - $5.7m).

The difference between the normalised and reported results comprises a number of one off items; the main ones being a non cash tax expense of $1.5m after tax to account for the change in New Zealand tax law relating to depreciation on buildings, the already announced and provided for expense of $2.2m after tax in the defence of a medical patent in the UK, a write down of intangible assets of $740k after tax and the revaluation of warrants held in Nasdaq listed Derma Sciences of $950k after tax.

Even though we have enjoyed a much improved sales trend and profit for the last quarter, the sales and profit numbers for the full six month period are lower than the same period in 2010. It has proved to be too difficult to make up for the poor results in the first half. Problems were experienced with a soft Australian retail market further impacted by the mild southern hemisphere winter and the Queensland floods. Despite the slower sales situation for the year, Comvita has continued to invest in expanding its global internet direct sales model, expanding its retail presence in growth markets and expanding its product portfolio.
Our audited result and full commentary will be provided to the market on 20 May 2011.

Anyone else hold CVT? I bought some of these when I started out investing middle of last yr. Can't say I'm pleased with this result. This UK patent lawsuit crap is costing them too much. I hope they get their sh*t sorted ASAP and get back to selling honey.

[Blendy]

yeah. it's a bit annoying. i sell their products as well, and there have been problems that can't be helped such as weather that affects honey production and products have been unavailable. And there are price increases regularly which while are justified, are now making honey etc quite expensive (eg latest price list effective today has the basic UMF5+ honey 1kg RRP $49.90, and UMF18+ 250g RRP $68.70). The patent lawsuit is a big problem too, how annoying.

Hopefully a good season this year will make lots of honey and maybe even some of the higher UMF that has been deleted (or maybe is only available to the asian market).

[Catalyst]

There's been a couple of positive comments from CVT lately...

1. Earnings for the first three months of FY12 are better than the last two years despite the currency headwinds.
2. The company are forecasting that it is "going to have a significantly better financial result in 2011/12."
3. Medihoney milestone payment of US$1m from Derma due this month, plus ongoing royalty payments.
4. It looks like the company will negotiate an out-of-court settlement on its UK medical patent, which is likely to result in a recovery of some costs already expensed and a reinstatement of its patent.

Technically, CVT has today bounced off previous resistence at $1.57/58, which should now be a level of support.

Fundamentally, CVT is currently trading on a forward PE of 10.0x ($1.69/($5m/29.7m)) and an EV/EBITDA of 5.2x ($1.69x29.7m + $6.9m)/$11m. (Assuming CVT achieves FY12 EBITDA of $11m and NPAT of $5m -> the same as in FY10).

[sharer]

Recently watching MaoriTV (always worth checking their programmes), saw a substantial report about Comvita. Was pleasantly surprised to see they have a much larger range of products in the market than i appreciated. Mostly they seem to have been concentrating on getting business established overseas, & it looks like there is a strong push to develop & market "cosmetic" type products as well as the "medicals". As mentioned earlier the "medical" products (esp. aids to chronic ulcer & wound healing) are likely to be very profitable, & recent regulatory approvals very significant. As a "2nd string" the cosmetic & beauty unguents could also be very profitable, as a market accustomed to paying ridiculous prices for anything a touch exotic. Comvita also seem to be developing new products for the "healtherys" fad markets, & this also looks like a potentially lucrative diversification. Besides the famous manuka honey, they've spent a lot on getting into growing olives, & extracting magical substances to sell expensively, another clever diversification probably. Until i saw the programme on TV i didn't know they were making such good progress in developing their own plantations of manuka, based on tested & high "UMF" yield plants, to ensure they have their own independent source of supply. Obviously an intelligent and longterm plan for developing the business is in place, & just starting to yield benefits.
The only serious caution seemed to be doubts about how hard (& expensive) it might be to secure patents and exclusive rights. I wondered if the original intellectual property (relating to UMF assays, research at Waikato Univ, etc etc) might actually now be just interesting history (most disastrously so far in the legally expensive UK clash), and that for investors information about their newer products. and their science directed plant breeding programme, maybe most relevant.
Anyway, i decided to take CVT off my potential Sell list, and feel happier now just to wait & see what happens in the next year or two.
Sharer.

[Catalyst]

Wow, big profit upgrade from CVT...forecast NPAT to be around $7.8m for FY12 (midpoint of guidance range).

I value CVT around the $3 mark, based on...

PE of 13x = 13 x $7.8m/29.7m shares = $3.41
EV/EBITDA of 7x = (7 x $15m EBITDA - $18.9m net debt) / 29.7m shares = $2.90

[Blendy]

grrr, these were on my list to buy this morning, and then i had to pop out and missed out!!!

[Catalyst]

A $2 entry price is still not bad IMO Blendy....not as good as this mornings $1.77 but if the company can achieve its profit figures then it should continue to rerate up.

[Catalyst]

Some bullish technical signs to back up the fundamental view:

CVT smashed through previous resistance of $2.00. This should now, theoretically, be a level of support (a nice round number).

All of the high volume days in the last four months (>= 100k shares traded) have corresponded with up or flat share price movements ie. CVT is being accumulated. This is backed up by a rising OBV indicator.

[evander]

takeover offer $2.50.

[CAM]

Cerebos New Zealand has launched $71.6 million bid to acquire medical honey products manufacturer Comvita.
The offer values shares in the Bay of Plenty-based company at $2.50 apiece, according to a statement from the company, representing a 19 per cent premium on yesterday's closing price of $2.10.
The deal is conditional on gaining a 90 per cent acceptance rate form Comvita's shareholders.
''If the offer is successful, Cerebos intends to de-list Comvita and operate it as a Bay of Plenty-based subsidiary company on a largely standalone basis,'' said Trevor Kerr, chairman of associate company Cerebos Gregg's.
Cerebos operates a number of brand names in New Zealand including Gregg's, Robert Harris, Bruno Rossi, Atomic and Caffe L'Affare coffees among others.
It recently invested in a $13 million expansion at Dominion Salt in Mt Maunganui and is currently making a $6 million investment in an instant coffee producing plant in Dunedin.
''We are committed to the long term by providing the funds necessary to grow the business, like we do Atomic, Caffe L'Affare and Dominion Salt,'' said George Crocker, chief executive of Cerebos' food and coffee division.
''In particular, we can provide strategic assistance in sales and marketing in Asia where the Comvita brands are not yet well established.''
Cerebos New Zealand and Cerebos Gregg's are wholly owned subsidiaries of Cerebos Pacific, the Singapore-based food and health supplements company.

[Catalyst]

I can't see it succeeding at $2.50.

Based on the company's FY12 NPAT guidance of between $7.3 - $8.2m, the offer price of $2.50 corresponds to a PE ratio of between 9.0x - 10.2x and an approx EV/EBITDA ratio of between 5.9x - 6.6x.

[CAM]

Comvita spurns hostile Cerebos bid
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10758983

Manuka honey-based wound care maker Comvita is urging shareholders not to accept a $71.6 million offer to buy the company from Cerebos New Zealand, the local bid vehicle of Singapore-listed Cerebos Pacific.
Chairman Neil Craig told investors the offer is "unsolicited, unwelcome, opportunistic and your directors have reason to believe this offer undervalues Comvita by a considerable margin."
In a letter to shareholders, he advises holding onto their stock pending further advice from directors, and said the company is on the verge of reaping the rewards of long-term planning.
"The directors consider that Comvita's current share price on the NZX does not fully reflect the value of the company and the potential to increasingly reward shareholders from this year onwards," Craig said.
"This offer by Cerebos is an opportunistic attempt to capture the benefit of the company's innovation and hard work that our loyal and patient shareholders deserve."
The rebuff comes after the Cerebos vehicle made an offer of $2.50 a share for Comvita, a premium of 19 per cent to yesterday's closing price, in a bid to take control of the local manuka honey-based wound care manufacturer and delist it.
Cerebos plans to operate the company on a standalone basis, and says it will look to use its links into Asia to market the brand into one of the fastest growing regions in the world.
"Cerebos would be looking to explore areas of collaboration," sister company Cerebos Gregg's chairman Trevor Kerr said in a statement.
"In particular, we can provide strategic assistance in sales and marketing in Asia where the Comvita brands are not yet well established."
Comvita's shares were unchanged at $2.10, and have surged 42 per cent this year, valuing the company at $62 million by market capitalisation.
The stock is rated a 'buy' by the one analyst who follows the company, according to Reuters.
The offer comes a month after Comvita settled a patent dispute with Brightwake, where it granted a sub-licence to the British rival letting it manufacture, distribute and sell its Algivon brand in territories where the Comvita subsidiary Apimed Medial Honey has patent protections.
As part of the settlement, Comvita avoided a 226,000 pound payment.
The Te Puke-based company expects annual profit of between $7.3 million and $8.2 million, with sales likely to be between $91 million and $95 million.
Cerebos Gregg's, whose local brands include Caffe L'Affare coffee, Bisto gravies, and Raro drink powder, recently invested $13 million to expand facilities in a joint venture at Mount Maunganui, and is spending $6 million on the country's only instant coffee producing plant in Dunedin.
"We believe the business has potential which can only be fulfilled by an increased investment in research and development and brand building - even at the expense of short to mid-term profitability," Kerr said.
The offer is conditional on Cerebos reaching 90 per cent acceptances to force the compulsory acquisition of the remaining shares, and let it delist the company.
If it falls short and decides to declare the takeover unconditional, it will "seek appropriate representation on the Comvita board and will participate in decisions relating to Comvita and its future through the Comvita board," according to the offer document.

Shares in the parent Cerebos Pacific fell 0.6 per cent to S$4.78 on the Singapore Exchange yesterday, and have dropped 2.4 per cent this year.
The company has a market capitalisation of US$1.19 billion.

[Catalyst]

Just listened in on the conference call by the Comvita Chairman. Key points:

1. The company reitereated its recent net profit guidance of between $7.3 - $8.2m for FY12.
2. CVT have had recent correspondence with Cerabos but for information gathering only.
3. The company believes the $2.50 bid severely undervalues the company.

I would imagine the independent advisors report would use PE multiples of at least 15x - 17x and EV/EBITDA multiples of 8x - 9x on the FY12 forecasts (ie share prices of around the $4 mark).

This bid may spark further interest from other parties too.

Disc. Holding on.

[Felonius]

Phaedrus. I love your insights - so helpful. I need to take your advise extremely seriously henceforth as my capital has been savaged.

Bought into Comvita recently at $2 per share. The trick now is to identify the correct time to exit.

Thank you for making the effort to educate us.

[Catalyst]

A very good 1H result from CVT yesterday and confirmation that it is on track for FY net profit of between $7.2 - $8.3m.

The $2.50 offer from Cerebos will obviously not succeed. The question remains whether they will up their offer or a new bidder emerges.

I still think the Grant Samuels report (out this week or next week) would value the company using PE multiples of around 15x - 17x and EV/EBITDA multiples of around 8x - 9x on the FY12 forecasts (ie share price valuations of around the $4 mark).

Worst case scenario is the offer fails and no other bidder emerges. If that pans out I don't think the share price will fall too much. CVT will now be on people's radar.

Disc. still holding

[winner69]

NBR front page last week has a rave about director Taits purchase of 25,000 shares at $1.77 in August just before the takeover .... sort of saying Tait probably didn't know how they were 'tracking very well' (Chirmans words) .... yeah right

He's one lucky punter that guy Tait eh

[Catalyst]

"Reject offer. Indep val between $3.40 - $4.00".

Fairly predictable. I thought the indep valuation might have been a bit higher though.

At the current share price of $2.95 and using the company's 31 March 2012 net profit guidance midpoint of $7.7m (which they reiterated again today), CVT is currently trading on a PE multiple of 11.4x and a EV/EBITDA multiple of 7.0x. Hardly expensive stuff even if no other higher bids emerge.

[winner69]

Getting interesting ... Cerebos saying the company and Grant samuel talk a load a **** .... or something like that

Maybe 250 was a bit cheeky but $4 is outrageous

Would you buy a cash flow of $14m (if things continue to improve and keep on going to to plan) for $130m? Probably not considering the risk involved

Methinks Cerebos will say go 300 at tops and if you guys don't like that they'll walk away (and prob come back in a few years time and offer 200)

[Blendy]

yes, that sounds very reasonable. I think i will consider selling out soon and walk away with a tidy profit.

[sharer]

Threat by Cerebos to withdraw & instead set up a competing business could be a trifle depressing.
Comvita can really only counter that by turning in a stonking good performance for shareholders almost immediately.
That would mean a sudden switch from reinvestment in developing international business for CVT, towards maximising short term gain for shareholders instead.
There could be rational arguments to show such a switch just at the point where the previous strategy seems to be working well, would be to the detriment of the business, & therefore a reason to sell out. Possibly CVT is about to suffer a destructive clash of personalities.
While i was quite happy to be in CVT before the Cerebos intrusion, now i've been pondering the same questions as Winner69 & Blendy.
Seriously considering an exit fairly soon, with a view to re-entry later when smoke has cleared from the manuka groves.

[Blendy]

excellent points @sharer.

I'm hoping for a $3+ counter offer, so I ended up picking a few extras up today.... hope that pays off...

[Blendy]

Rats, no price increase from Cerebos. Comvita had better implement some fast strategies to prove their high valuation!

[Catalyst]

Looks like the company's hard-nosed response has scared off any likelihood of a higher bid, which is what we all were hoping for.

I do agree with the company, though, that $2.50 was a joke. PE of 10.0x FY12 forecast NPAT of around $7.5m and EV/EBITDA multiple of 6.3x (assuming EBITDA of $14.5m and $17 net debt).

I still think that CVT should be trading on higher multiples then those above. Either the market is saying the company's forecast earnings are optimistic/unsustainable or the market is waiting for further proof that CVT can achieve those numbers. I hope it's the latter, in which case CVT should rerate up (once the short-term traders have exited) over the coming year.

[Catalyst]

A couple of buy signals triggered recently, one being director Rob Tait buying a handful of CVT shares over the past week around the $2.50 mark. Last time Tait loaded up in August last year, it was followed by a profit upgrade and takeover announcement a month or so later!

Tait's recent buying suggests CVT is trading alright and on target to meet their $7.3m+ NPAT forecast for the y/e 31 March 2012. If the company achieves that, it is currently trading on a PE of around 10.5x and EV/EBITDA of around 6.5x (based on current $2.60 bid price).

[sharer]

Very encouraging that their patent in the UK for the very profitable wound dressing products has been reinstated, overturning earlier court.
I'm now inclined to advise our Trust to re-enter cautiously, longer term prospects looking good again. Main negative i see is the possibility Cerebos or others might
pursue previous threats to set up competing businesses.

[golden city]

hopefully will be over 3 bucks soon..

[golden city]

prices back up again.., but just lacking of volumes..., management is not going to miss this forecast...because they don't want to kill them selves