Comvita - CVT

[Beagle]

Ogg.
CEO specifically mentioned in the behind the paywall NBR article yesterday it was an overseas company.
Management have an absolutely appalling track record of shocking downgrades. I would concede that some of the products are very good.
What I am saying is that management have a very serious credibility issue when it comes to forecasting. Further, I believe they have very limited ability to translate the selling of very good products in enough volume at prices high enough to make this company a good earner.

What should be abundantly clear to all observers is this is a business based on agricultural products that is extremely weather dependent. Agricultural companies who are highly weather dependent for a sustainable supply of their product have traditionally almost always traded on very low PE multiples due to the cyclicality of their earnings resulting from weather cycles.
I think its clear the weather is getting more and more extreme so after two shocking seasons in a row there are no guarantees that the next one will be a good one or even representative on long term historical averages. Climate change is affecting the weather, regardless of whether people accept this or stick their head in the sand.
I repeat that the current year PE is 35. Good luck to investors buying in on that multiple.

Not saying that a Chinese or other company can't run this far more profitably with better management, in fact I think that's highly likely. Whether they remain keen after yet another savage profit downgrade is the open question.

[winner69]

Ogg.
CEO specifically mentioned in the behind the paywall NBR article yesterday it was an overseas company.
Management have an absolutely appalling track record of shocking downgrades. I would concede that some of the products are very good.
What I am saying is that management have a very serious credibility issue when it comes to forecasting. Further, I believe they have very limited ability to translate the selling of very good products in enough volume at prices high enough to make this company a good earner.

What should be abundantly clear to all observers is this is a business based on agricultural products that is extremely weather dependent. Agricultural companies who are highly weather dependent for a sustainable supply of their product have traditionally almost always traded on very low PE multiples due to the cyclicality of their earnings resulting from weather cycles.
I think its clear the weather is getting more and more extreme so after two shocking seasons in a row there are no guarantees that the next one will be a good one or even representative on long term historical averages. Climate change is affecting the weather, regardless of whether people accept this or stick their head in the sand.
I repeat that the current year PE is 35. Good luck to investors buying in on that multiple.

Not saying that a Chinese or other company can't run this far more profitably with better management, in fact I think that's highly likely. Whether they remain keen after yet another savage profit downgrade is the open question.

Just need to look at Cash Flow Statements for the last few years

Cash burn OK for likes of XRO and Pushpay ....but for likes of Comvita ...hmmm

Negative FCF ..,and they even paid dividends

[Balance]

Just need to look at Cash Flow Statements for the last few years

Cash burn OK for likes of XRO and Pushpay ....but for likes of Comvita ...hmmm

Negative FCF ..,and they even paid dividends

As long as the banks are willing, why not - dividends paid using bank debts to 'optimize' capital structure.

Tegel does it and the Warehouse has been doing it for years! Oh - and they both deliver heaps of capital losses via declining share prices for their shareholders!

[Ogg]

Ogg.
CEO specifically mentioned in the behind the paywall NBR article yesterday it was an overseas company.
Management have an absolutely appalling track record of shocking downgrades. I would concede that some of the products are very good.
What I am saying is that management have a very serious credibility issue when it comes to forecasting. Further, I believe they have very limited ability to translate the selling of very good products in enough volume at prices high enough to make this company a good earner.

What should be abundantly clear to all observers is this is a business based on agricultural products that is extremely weather dependent. Agricultural companies who are highly weather dependent for a sustainable supply of their product have traditionally almost always traded on very low PE multiples due to the cyclicality of their earnings resulting from weather cycles.
I think its clear the weather is getting more and more extreme so after two shocking seasons in a row there are no guarantees that the next one will be a good one or even representative on long term historical averages. Climate change is affecting the weather, regardless of whether people accept this or stick their head in the sand.
I repeat that the current year PE is 35. Good luck to investors buying in on that multiple.

Not saying that a Chinese or other company can't run this far more profitably with better management, in fact I think that's highly likely. Whether they remain keen after yet another savage profit downgrade is the open question.

I wouldn't say it was extremely weather dependent, you get bad years and good years. You can stock up and hold inventory over bad years too. One advantage is that you always get a harvest unlike some industries that can get wiped out from a natural disaster. The sustainability is good too. Who knows, maybe the next 2 years will be a bumper season. The point is that it isn't as bad as you're making it out to be if you look at it over a 5-10 year period. Global warming will cause extremes at both ends so as long as it's managed it should be fine. Even so, the price per KG just shoots up if supply is low anyway, so they always make money.

Re take over, yeah it's more than likely going to be China Resources. They paid $10 per share in 2016. The price a couple of months ago when they were first were looking at the take over, the price was $9. The take over price isn't going to be sub $7, that's almost a given. It won't get shareholder approval, and if it falls through than next year the price could double if the harvest is good.

Looking at the PE of this company is the wrong way about it. Again, yes, if this was "Tegal" you should be doing this. Comvita basically operates a monopoly, that over the long term, continues to deliver returns for shareholders. The Chinese love food businesses in first world countries. Not only that, this company is special and has the best reputation in it's class. The PE just doesn't matter, that's like saying the Chinese are buying Auckland property for the rental yield.

[JoeGrogan]

[QUOTE=Ogg;711437] Looking at the PE of this company is the wrong way about it. Again, yes, if this was "Tegal" you should be doing this. Comvita basically operates a monopoly, that over the long term, continues to deliver returns for shareholders. The Chinese love food businesses in first world countries. Not only that, this company is special and has the best reputation in it's class. The PE just doesn't matter, that's like saying the Chinese are buying Auckland property for the rental yield.[/QUOTE}

LOL so valuing it on hype and speculation i guess is better than looking at earnings...

Can you explain a little more why you should do this with TGH but not CVT?

[Beagle]

Probably because some feel that nobody else makes good manuka honey and its totally unique and special lol...(better not tell all the other manuka honey producers lol)

[Ogg]

[QUOTE=JoeGrogan;711455]

Looking at the PE of this company is the wrong way about it. Again, yes, if this was "Tegal" you should be doing this. Comvita basically operates a monopoly, that over the long term, continues to deliver returns for shareholders. The Chinese love food businesses in first world countries. Not only that, this company is special and has the best reputation in it's class. The PE just doesn't matter, that's like saying the Chinese are buying Auckland property for the rental yield.[/QUOTE}

LOL so valuing it on hype and speculation i guess is better than looking at earnings...

Can you explain a little more why you should do this with TGH but not CVT?

Basically yeah. The product itself has massive hype and speculation over it's healing properties and health benefits. Hence why the share price should be valued the same.

Here's my call on Tegal back in 2016 when it was trading at twice today's price: https://www.sharetrader.co.nz/showth...l=1#post611620

Tegal has to compete, Comvita is a monopoly.

[Ogg]

Probably because some feel that nobody else makes good manuka honey and its totally unique and special lol...(better not tell all the other manuka honey producers lol)

That's like saying A2 Milk has to worry about the independent farmer down the road who has a heard of A2 cows.

[Ghost Monkey]

Not sure I would say CVT has a monopoly. But they are the biggest player in a market with a limited supply of a premium product. Counts for something I suppose.

[Ogg]

Not sure I would say CVT has a monopoly. But they are the biggest player in a market with a limited supply of a premium product. Counts for something I suppose.

They're basically the "Fonterra" of honey, nobody else comes close. Instead of milk that can be produced globally, Manuka in effect can only be produced here. It's vertically integrated, controls the entire supply, distribution and sales. It not only dominates the entire category but it also has the best brand in the market. It's practically a monopoly as it could get.