Comvita - CVT

[winner69]

I sped through it this morning too in ODT: Took it that CVT bought into the distributor, 49%, powerful position, but not owning them: (I'll go back to it later to check my understanding correct but by all means correct me!) There is a ton of incentive there for this distributor to continue getting it right. There was a guy on RNZ today (financial commentator) who said that he checked out one of the CVT dedicated outlets in China, in a Mall, to see out the front of the shop a "Gift Pack" to the value of NZ$750 for 5 small CVT items! The significance of that value was also in the "numerology" of that value in Chinese currency: VERY CLEVER! It is premier value product targeting wealthy Chinese. In the mid '80's I recall a fact in some article I was reading that China had a million millionaires then! CVT are doing amazing and very cleverly IMHO. Good for the ride!

CVT taking 51% of the JV

Also of note is that Zhu Guangping's (majority owner of SCNT) wife owns 5.12% of Comvita ....and after the deal the Zhu family stake in Comvita will rise to 10%.

Seems to be plenty of motivation to make all this work

Hope this bit of (so called) ramping works --- got to keep the CVT share price outperforming the EBO
share price - or maybe it's just a case of both being very good company's but one does seem to do better than the other (share price wise)

[moimoi]

Its not earnings accretive in its 1st full year of trading UNLESS start up costs are "ignored"..!!

What are the start up costs?

Mind you, under the evidently acceptable Dick Smith accounting process, its probably earnings accretive before it even happened....

[Balance]

Its not earnings accretive in its 1st full year of trading UNLESS start up costs are "ignored"..!!

What are the start up costs?

Mind you, under the evidently acceptable Dick Smith accounting process, its probably earnings accretive before it even happened....

Plus - is it eps accretive?

[Beagle]

Good write-up on NBR behind the paywall on this new JV and over 6 minute interview with the CEO. He talked some pretty interesting margin expansion numbers. Would love to cut and paste but the police say I'm not allowed. Bottom line is they've been working together with these people already for over a decade. Don't know how others feel but by the time you've had a business relationship for over a decade you usually have a pretty good handle on who you're doing business with. There's almost always start up costs with new JV's, (you have to invest to get returns) but they're saying its earning accretive from year one and based on the interview that the CEO gave and margin expansion numbers he was talking I am very comfortable with this new JV.

[BlackPeter]

Good write-up on NBR behind the paywall on this new JV and over 6 minute interview with the CEO. He talked some pretty interesting margin expansion numbers. Would love to cut and paste but the police say I'm not allowed. Bottom line is they've been working together with these people already for over a decade. Don't know how others feel but by the time you've had a business relationship for over a decade you usually have a pretty good handle on who you're doing business with. There's almost always start up costs with new JV's, (you have to invest to get returns) but they're saying its earning accretive from year one and based on the interview that the CEO gave and margin expansion numbers he was talking I am very comfortable with this new JV.

Agreed. I think the announced JV is clearly a good thing and in my view a step towards risk reduction. What might concern me a bit more is the 60% reliance on just one market, which happens to be quite tightly politically controlled. Embargoes for political reasons are unfortunately not unheard of and neither are import restrictions based on political motives CVT has no control over. I think what CVT now definitely needs to do is to put effort into diversifying into other markets.

Discl: not holding (yet)

[Balance]

CVT announcements and commentary in recent times raise a few red flags to me :

1. CEO's comments that import restrictions in China did not impact on CVT - and then admitted the restrictions do indeed impact.

2. We know know 60% of CVT's sales end up in China directly and indirectly - so it is naive at best but downright misleading at worse for CVT to state 1 in the first place.

3. The JV is obviously in recognition of 1 & 2 - the issue is why CVT needs to take a shareholding in the distributor when they are already doing a good job?

4. The release states that the investment is earnings accretive - one better hope so as CVT is paying over $30m (in shares). But is it eps accretive or just earnings accretive? Big difference between the two.

5. Will the JV offset the impact of 1 and 2?

Worthwhile considering irrespective of how bullish or bearish you have been.

[Beagle]

Fair enough Balance. Like you I have reservations around the disclosure made earlier but as stated at the time, in my opinion the Herald doesn't always report what you say in an accurate or fulsome manner.

Further, they did say that they have been working on this for months. I take you point about your question about earnings accretive of EPS accretive and acknowledge the difference but if you'd heard the interview that was reported behind the paywall on NBR you wouldn't be quibbling over this minor share issue and I expect it will be inconsequential to the overall scheme of things.

Not a big position for me ~ 4% portfolio and I am very comfortable with that.

[jim9358]

CVT taking 51% of the JV

Also of note is that Zhu Guangping's (majority owner of SCNT) wife owns 5.12% of Comvita ....and after the deal the Zhu family stake in Comvita will rise to 10%.

Seems to be plenty of motivation to make all this work

Hope this bit of (so called) ramping works --- got to keep the CVT share price outperforming the EBO
share price - or maybe it's just a case of both being very good company's but one does seem to do better than the other (share price wise)

Ha haaa Winner is there a CVT v EBO race on I don't know about?

Oh! ok CVT are controlling. (i didn't get back to it ...other type of "work" occupied today) Oh well "controlling" should be fine and at 51/49 still works that "i do very well, you do very well!!!" ;-)

[winner69]

Chris Lee on manuka honey

http://www.chrislee.co.nz/taking-stock

This ONL looks interesting for punters

[jim9358]

Chris Lee on manuka honey

http://www.chrislee.co.nz/taking-stock

This ONL looks interesting for punters

Good newsletter confirming my own thought that China tightening up its borders / regulations on what is or is not Manuka is completely in CVT's favour. Ever improving "trusted importer/distributor/retailer" status will see CVT go ballistic ... imho! The whole nation should be planting Manuka on its rubbish land! I've planted 4 against my southern hedge-line and have been contemplating inviting one of the new trend, urban apiarists, to install a hive in my back-yard, a movement going on around the world!