Comvita - CVT

[Beagle]

Okay on a deeper look it appears there may be some growing pains.
Debt blowing out the way it has is a concern in tandem with other matters, see below.
Stock has blown out from $44.5m, (6.6 months cost of sales in 2015 which is a stock turn of less than 2) to $95.2M or a little disturbing 10.1 months cost of sales as at 30 June 2016.

After a Herald report some time back where the CEO was reported as saying sales were not being affected by Chinese authorities regulatory changes, its now clear they are.
EBITDA margin's have contracted from a healthy 18% as at 31 March 2016 to 17.1% as at 30 June 2016, quite a drop for adding on only 3 months of quiet season sales.

Sales for the current quarter were only $28.6m and EBITDA margin on those modest sales was only 10.6%. I guess you expect that when sales overall are quieter for this quarter but nonetheless it is a little disconcerting looking at that quarter in isolation. This in tandem with stock blowing out dramatically suggests management were "behind the curve" with their earlier comments on the Chinese situation. Why ? Reports of some suppliers being disenfranchised by administrative shortcomings could possibly have some substance to them if management can't even ascertain at the time that the Chinese situation is affecting them ?

The stock turn is now very poor and quite a contrast to other retailers, (acknowledge CVT is more than a retailer), like Briscoes or HLG -possibly a little disingenuous for me to compare to other box retailers but nonetheless its makes quite a stark contrast. The sea dragon thing is thorn in their side, albeit something that has potential and only worth about 7.5 cps.

After a huge run I think the market will need to see evidence that growth isn't going to be impacted much by the Chinese situation and see them improve their stock turn before we see the SP reestablish an upward trajectory. They also need to fix the fiasco that is Sea Dragon. Plenty of work for management to do. Disc: I have reduced my stake and expect a period of consolidation around current level's.
Lack of a share split disappointed me. P.S. Very strong $Kiwi won't help FY17.

[Balance]

uh-oh W69, you may need to invest in a disguise to sneak past your bowling buddies when they're out mowing their lawns

Still unquestionably still one of the great NZ stories - question of what price you pay for that story.

The high inventory can be partly explained by : "at a period of peak supply, as most of our externally sourced raw honey is received between March and June".

[winner69]

uh-oh W69, you may need to invest in a disguise to sneak past your bowling buddies when they're out mowing their lawns

No worries mate

He happy with dividend and were even happier when I told him that OGG reckons CVT is a $20 share. I said this OGG was a professional investor and knew heaps about CVT

Patience

[winner69]

$10 is a nice round number so technically probably will provide solid support for the share price

Question - what 12 month profit you guys using to assess the EPS and PE (seeing the reported 45 cents is for 15 months)

[Ghost Monkey]

Roger 9:47am "Solid result, gearing up for GROWTH !! "

Roger 12:27pm "Okay on a deeper look it appears there may be some growing pains."


Just like weather watching in Auckland.

[Ghost Monkey]

No worries mate

He happy with dividend and were even happier when I told him that OGG reckons CVT is a $20 share. I said this OGG was a professional investor and knew heaps about CVT

Patience

Oh, well, that's ok then. I was under the impression he wasn't so patient and was worried for your safety.

$20 seems a bit further off today but agreed, patience is the best strategy.

[jim9358]

Hi All, a newbie here! Friend Zouga referred me to ya' all. Have been an NZX dabbler for a very long time including only recently in Comvita a co. have known for a very long time from when I was a young rower and would bike out to Paengaroa to buy bags of bee-pollen to add to fuel of a 6K calorie a day diet! As others here say it is a amazing story with Claude on bee-pollen too nearing 103! When I visited here several weeks ago with in mind to judge views before taking out a significant holding relative to myself I was quite concerned with views here. So I emailed and had both email and phone correspondence with Scott Coulter. Like others here a concern was their holding in Seadragon with more for me the ethics of being involved with the NZ fishing industry and destructive to marine ecology by bottom trawling and targeting of shark. He advised that they immediately advised Seadragon they were not comfortable at all with shark fishing for Omega-2 resulting in pressure now removed from that fishery, to now concentrate on Omega-3 alone. Scott said that they are steadfastly orientated to the ethics in business that the company first started with from the days of Claude and Allan from 1974.. They do (from memory) 97% recycling. My impression was that the plan is very good: Plans cost money (refreshing stores; securing suppliers)! The 15 month statement today supports that: Seadragon is just a small component, a small plan, of a wider intention of broader diversification to even out the sine wave of sales in the annual cycle. China requiring registration etc plays into hands of large incumbents which is what Comvita is, they will win greatly from this Chinese regulation! Disclosure: After talking to Scott I bought my 2nd biggest purchase in 15 years! Yep, I believe those saying "20" are correct! I just love this Kiwi company.

[Beagle]

Roger 9:47am "Solid result, gearing up for GROWTH !! "

Roger 12:27pm "Okay on a deeper look it appears there may be some growing pains."


Just like weather watching in Auckland.

I know its hard to believe that some of us are in business and have a lot of time pressure on us and don't have a lot of time at certain times of the day. When time allowed I had a deeper look at the issues. It is a solid result but there are growing pains, the two statements are not mutually exclusive DYOR

[Balance]

I know its hard to believe that some of us are in business and have a lot of time pressure on us and don't have a lot of time at certain times of the day. When time allowed I had a deeper look at the issues. It is a solid result but there are growing pains, the two statements are not mutually exclusive DYOR

Takes a big person with solid experience and objectivity to acknowledge first look is different from a proper look.

Bit like seeing a sheila with heavy make-up in an Oz pub at 3 am and then, looking at her again at 7 am when the sun is up?

CVT is a great company and has delivered solidly for the last 2 years after a flat 3 year period before that.

I suspect the market is going to be monitoring the company very closely to see if the company is experiencing another flat period of growing pains.

[winner69]

Looking at the chart again that $10 mark has been a telling mark in the past. acted as resistance for some time before bursting through ...... now should as act as a very strong support level

Its even below the 200MA but what the heck I'm in to see what happens - with a pretty tight stop loss. OK I know i should wait until the crisis is over but now is as good as ever I reckon