On the Money can’t count how many breathless statements on this and that deal we’ve seen over the years, nor can we estimate how many actually turbocharged whatever iconic business into the stratosphere, although a few spectacular implosions stick out.
So we weren’t overly surprised to see a quick about-face by Comvita over a very breathless deal with China’s Olé supermarket chain that touted itself as being a multimillion-dollar deal, without providing any of those sweet sweet details we financial reporter-types like.
A trading halt was whacked on the stock soon at NZ RegCo’s request for more information, and a new statement soon emerged with the more nebulous “significant” description in the headline, and an addendum pointing out that the details were still being ironed out, but wouldn’t affect the firm’s earnings guidance for the year ended June 30 – which seemed a bit obvious given the statement was made three days after the balance date.
On the Money wonders whether the mix-up stemmed from Comvita’s inability to tell whether it’s a singular or plural – obviously a case of one plus one not adding to two.
Last edited by winner69; 08-07-2023 at 08:36 AM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Comvita have a good chance to expand their business worldwide given the top ranking for NZ food safety, nutritional standards and food safety programme. In 2021, NZ ranked 3rd out of 113 countries for food safety, nutritional standards and food safety programme. New Zealand is a leader in food safety and product traceability. NZ Manuka Honey is a unique honey. Hope I can be part of its successful business journey. It seems management is taking steps to penetrate foreign markets. Curent trading price is not overly expensive. Similarly, not overly cheap. In other words sitting on the middle, but trading great discount to the market as well as to the sector. Short term and long term assets exceed both short term liabilities and long term liabilities respectively.
PE ratio is much below(16x) the personal products industry(27.5x), market and other global peers. Debt level is satisfactory.Over the 5 years debt has reduced.
As at 31/12/2022
In thousands of New Zealand dollars
Total Curent assets:207,906
Curent liabilites:38,085
Total Liabilities: 125921
Total Assets:358,855
Totoal non curent assets:150,949
This is not a highly leverage company as well. When compare with market, sector and peers, it’s very attractive to me. Peer comparison is a great way to find attractive stocks. On top of that it’s also a defensive company. Finally, I invested in a quality company.
Net debt, inventory, and operating cashflow Net debt increased to $63.3M primarily as a result of increased inventory and an increase in debtors due to timing of revenues in H1 vs PCP. Inventory has now peaked, and Comvita retain forecast to deliver inventories in line with PCP at the full year end. This elevated inventory was a considered decision to enable Comvita to respond immediately to changes in market demand. Stage four of the supply optimisation work is now completed – this programme significantly reduces Comvita’s exposure to contracted demand and enables the balance supply and demand. This new program is central to Comvita’s confidence that they will be able to deliver material decreases in inventory over the next two years in line with their strategy for inventory to be c$85M in 2025. The supply optimisation program is also designed to remove inventory related seasonality from their cashflows, enabling year-round positive operating cashflow. This higher net debt position during the period resulted in increased interest expense of $1.0M vs PCP, notwithstanding this, Comvita still delivered an NPAT ahead +19% vs PCP
Looking forward – exciting future ahead Comvita’s 2025 plan is designed to deliver a business model that achieves a GP of at least 60%, delivers long term investment in its brand by investing 15% in brand building activity and deliver a 20% EBITDA margin, Comvita again re-iterated that it was on track to deliver $50M earnings in 2025. This model, underpinned by its aim to be carbon neutral by 2025 and a global leader in ESG is designed to set Comvita up for long term profitable growth. It’s underpinned by its focus on continued delivery of its three-part plan to; 1: Stabilise performance 2: Transform the organisation 3: Build long-term resilience and growth Comvita’s talent backed skincare proposition is due to launch late in 2023 / early 2024 and is also showing some exciting potential. Talent and launch details will be shared as soon as finalised but expected to be before June 2023. Finally, Comvita highlighted that the total honey category (TAM) is forecast to grow from its current $9BN USD to $15BN USD by 2031 – an increase of around 67% and that category dynamics favour a high quality premium lifestyle brand like Comvita.
“The global honey market is expected to grow from $8.53 billion in 2022 to $12.69 billion by 2029, at a CAGR of 5.83% in the forecast period, 2022-2029”
l In 2022, the global honey market was valued at USD $8.5 billion. It is predicted to be worth USD $12.7 billion by 2029.
l The New Zealand European Union Free Trade agreement removes a 17.3% import tariff on mānuka honey. The tariff has been worth $40 million over the last 5 years.
l Mānuka has become popular in the cosmetics industry over the last 10 years. Its use has increased due to its potential benefits for the skin and its natural properties.
l New Zealand is the largest exporter of honey to China, accounting for 80% of imports.
l The percentage of online sales to US consumers has jumped from 3% in 2019 to 18% in 2023.
Always sounds good eh …..and I try very hard to like Comvita but something just doesn’t click for me
A producer of a premium high value product should be making decent profits but Comvita don’t. Their return on invested capital (equity + debt) is only about 6% …….not even covering their cost of capital ….ie economic value destroying valuegrowth.
As such CVT doesn’t deserve to be trading at around its current book value of $3.25 per share.
Dave says the future is bright and they going get to $50m EBITDA in a few years time …….even if they do ROIC will still be less than 10% which probably will cover their cost of capital ….and such maybe a share price a bit higher than book value whatever it is then ….maybe $3.50
So even if I have really started to like /love Comvita $4 share price in a few years time might be about right.
But then Dave might have found that elusive acquiror by then and we’ll never know if that $50m EBITDA was achieved.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Ideal ROE for me is above 15. In some case, I don’t mind having ROE below 10 depend on the balance sheet, new developments, future earnings, market and peer comparison, type of sector to be in the particular time to protect capital, the trend and last but not least, going concern and so on. Most of the time my stocks are defensive in nature. I have experienced few defensive multi baggers in my stock market history. Defensive sector is very familiar to me and I have gained capital gain more than investing in tech stocks. NZ honey is also ideal for me. We can get clear idea about the company over the next one to three years. More I see the potential more I will accumulate. In short, My top favourite types of stocks are food and commodity stocks.Besides I like to invest in simple business that I can understand.
Last edited by Valuegrowth; 08-07-2023 at 04:28 PM.
Always sounds good eh …..and I try very hard to like Comvita but something just doesn’t click for me .A producer of a premium high value product should be making decent profits but Comvita don’t. Their return on invested capital (equity + debt) is only about 6% …….not even covering their cost of capital ….ie economic value destroying valuegrowth.
Originally Posted by winner69
As such CVT doesn’t deserve to be trading at around its current book value of $3.25 per share.
Dave says the future is bright and they going get to $50m EBITDA in a few years time …….even if they do ROIC will still be less than 10% which probably will cover their cost of capital ….and such maybe a share price a bit higher than book value whatever it is then ….maybe $3.50
So even if I have really started to like /love Comvita $4 share price in a few years time might be about right.
But then Dave might have found that elusive acquiror by then and we’ll never know if that $50m EBITDA was achieved.
There will be immediate tariff relief for kiwifruit, wine, onions, apples, mānuka honey and manufactured goods. It will also apply to most seafood, and other horticultural products.
“The winning sectors on the day are the likes of horticulture, seafood, wine, and honey, who will be delighted with the outcomes. Our two largest goods export sectors, red meat and diary, however, would have been hoping for more commercially meaningful outcomes for their exports.
“We are thrilled that the agreement also includes the definition of mānuka and a separate tariff recognising the inherent distinctiveness of mānuka as a taonga species exclusively from Aotearoa New Zealand,” Apiculture NZ chief executive Karin Kos said.
“The EU’s recognition of mānuka as a taonga species is significant in helping progress the next step in securing geographical indications for mānuka honey, an initiative that is strongly supported by both industry and iwi.”
The FTA contains another important “EU first”– a Māori Trade and Economic Co-operation chapter that will create a platform for greater engagement with the EU on Māori economic and trade interests.
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Originally Posted by winner69
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