CLV - Clover Corporation

[So_Cynical]

In yesterday for Clover trade #3 ~ first proper trade with the IB account to.

@ 0.505 with this significant dip of the last 2 days, has to be an opportunity..i haven't gone over the latest report with a fine tooth comb but the headline figures looked ok so cant see any cause for the recent SP weakness.

Can someone enlighten me?

 

[Klogg]

In yesterday for Clover trade #3 ~ first proper trade with the IB account to.

@ 0.505 with this significant dip of the last 2 days, has to be an opportunity..i haven't gone over the latest report with a fine tooth comb but the headline figures looked ok so cant see any cause for the recent SP weakness.

Can someone enlighten me?

Due to potential problems with their milk formula in NZ I believe. They're not sure of the potential impact to market share or profits.

Not to mention that a stronger AUD favors them, and that the CEO is retiring at the end of FY14.

 

[So_Cynical]

Due to potential problems with their milk formula in NZ I believe. They're not sure of the potential impact to market share or profits.

Not to mention that a stronger AUD favors them, and that the CEO is retiring at the end of FY14.

Thanks for the input Klogg

I must have a proper read of the latest report, very lazy of me to just accept that its not relevant to the big picture...ive been reading/listening to Malcolm Caldwell's book "blink" its about thin slice analysis and other issues of perception.

Cant help but think that i liked Clover the first time i saw it back in 2009, did my initial analysis and still liked it and have profited ever since....and still going with that.

First impressions have value...at its core Clover is a great business, a business with potential.

 

[Klogg]

First impressions have value...at its core Clover is a great business, a business with potential.

Very true. The problems with powder contamination (thought it was formula issues - apologies) isn't a major one and will be forgotten soon. Their current CEO has given them a year's notice to find a successor also, so this shouldn't cause any issues.

The only real problem they have are the margin pressures and the cost of importing goods to create their products as a result of a lowering AUD.

That being said, I don't know enough about the company overall to make a complete investment decision - have only started looking into them now... but they are definitely not overpriced, given they have $8.5m in cash and substantial inventory (which they have mentioned they'll be using, so I'm assuming minimal obsolescence)

EDIT:
So_Cynical - this is from the Preliminary final report around the issue of powder contamination

The recent milk powder contamination incident in New Zealand will have a negative impact for some
of our customers, leading to a reduction in infant formula sales. The Directors are uncertain as to the
extent of this impact on supply of ingredients by Clover at this stage. They are closely monitoring the
situation and will inform the market as more information emerges.

 

[So_Cynical]

The Motley fool has done a write up on Clover.

Is now the time to buy Clover Corporation?
By Claude Walker - September 30, 2013

Clover Corporation (ASX: CLV) owns technology that turns fish oil into a powder. Fish oil is a well-known source of omega-3, which plays a crucial role in brain function. It is normally contained in breast milk. Therefore, omega-3 is included in baby formula, and that’s where Clover comes in.

In FY 2013, Clover continued to expand sales of encapsulated fish oil into the Oceania region, which now makes up 67% of revenue. One driver of this growth is the Chinese middle class...continue reading below

http://www.fool.com.au/2013/09/30/is-now-the-time-to-buy-clover-corporation/

I don't often agree with fool.com but, yes since i bought into CLV again 2 weeks ago i would have to agree that now is the time to buy Clover Corporation...personal opinion only of course.

 

[jdenhaan]

So_Cynical, you seem like a fan of this stock. I have to admit I like it too. Its 5 year chart is great and it seems like a solid business from a value point of view.

At the moment though it seems to be in a bit of a downswing and all indicators (including the MA200) are firmly pointing south. For now, I'm holding on to my cash. What do you reckon would be a good buy in point? Plotting trendlines gives me possible lows anywhere from 0.36 to 0.47.

 

[jdenhaan]

Stock seems to be in a correction from being overbought. Buy in at 0.42?

 

[So_Cynical]

View attachment 55397

Stock seems to be in a correction from being overbought. Buy in at 0.42?

For what its worth (My Opinion) i don't think the stock was that over bought, i though the stock was being re rated at the last big SP run up based on the business, the focus on Omega 3 micro encapsulation and increased sales, and moving on from taking the loss on the Freedom foods adventure (2008 > 2012)

I would argue that the long term chart clearly shows a slow and somewhat choppy continual re rating of the SP in an upward direction...the current dip is an opportunity that i have decided to grab and thus have built an over weight position...time will tell all of course.

 

[jdenhaan]

For what its worth (My Opinion) i don't think the stock was that over bought, i though the stock was being re rated at the last big SP run up based on the business, the focus on Omega 3 micro encapsulation and increased sales, and moving on from taking the loss on the Freedom foods adventure (2008 > 2012)

I would argue that the long term chart clearly shows a slow and somewhat choppy continual re rating of the SP in an upward direction...the current dip is an opportunity that i have decided to grab and thus have built an over weight position...time will tell all of course.

Any idea why they're currently dipping?

I might put in an order at 0.45. This company has some solid fundamentals and from the looks of it it doesn't look like it will disappoint anytime soon.

 

[jdenhaan]

Announcement

Looks like the milk powder contamination thing has lowered sales by 20% in Q1 of FY2014. Longer term prospects are largely unaffected though.

This thing might tank a bit today and even if it doesn't and this has news already been priced in, CLV is a good buy I reckon. Watching this one closely today.

 

[So_Cynical]

Any idea why they're currently dipping?

I might put in an order at 0.45. This company has some solid fundamentals and from the looks of it it doesn't look like it will disappoint anytime soon.

0.45 your dreaming....those days are gone.

Its ok to have a low ball punt as long as your ok to let a good thing go, for me, CLV is too much of a good thing to be to low ball..recent price action has held well at the 0.49 level, either way i wont be surprised to see the SP dip to 0.45 or pop to 0.55.

The market is a 2 edged sword.

 

[Ves]

CLV is on my radar... actually it has been for quite a while, but I haven't really decided on it 100% yet. It's definitely not over-priced at the moment, but probably not any where near being a bargain of a life-time either.

Their R & D spend is impressive... completely funded out of OCF and growing over time. The Chinese market is probably going to be a future tailwind too, they have a pretty solid balance sheet and business model to take advantage of it.

I will keep digging.... I'll eventually make up my mind, I'm usually pretty slow with these sorts of companies.

 

[So_Cynical]

(21st-September-2013) In yesterday for Clover trade #3 ~ first proper trade with the IB account to..@ 0.505

In Again with the IB account @ 0.51, HY accounts out tomorrow resulting in some selling action so i decided to take a small punt on the results being ok.

 

[robusta]

Must admit to be taking a keen interest in the results as well. Noticed in the annual report consolidation iby their customers resulted in some pricing pressures. Will be looking at the margins to see what pricing power they have through these difficult trading conditions.

 

[piggybank]

Hi So_Cynical & robusta,

So what did you think of the result(s)?

​

The rest of the presentation can be read here:- http://stocknessmonster.com/news-item?S=CLV&E=ASX&N=790011

The market doesn't seen too excited by it so far. Presently it is down half a cent on higher volume tan normal. On Monday it broke through (downwards) the 250EMA and has continued to.

Regards
PM

 

[So_Cynical]

Hi So_Cynical & robusta,

So what did you think of the result(s)?

View attachment 57362​

The screen shot you posted looks great because its historical and doesn't include this first HY 2013/14, the HY that wasn't as good due to the contamination issue...for the results overall, its a little on the down side of what i was expecting and as per usual some holders decided to sell regardless.

When i saw the results this morning i had a feeling the SP could see 0.46 ~ i will double up tomorrow.

 

[Ves]

Following on from my last post: I still really like the low capital business model and the accounts look reasonably clean (no capitalisation of R & D etc). But, I have some further reservations about this.

The original forecast after the Fonterra contamination scare (and recall that found no defects) was that sales would decline by 20% in the first half as the market re-adjusts. They later qualified this by saying that there may still be further time lag as confidence returns to the market. The actual decline was 26%.

Latest forecast is that full year revenue could drop by as much as 20-40%. This indicates that they are now far less confident than they were before the Fonterra recall was shown to be just a scare. I read this as them saying that they now think that there will be no recovery in consumer confidence in their markets this half. What are the implications of this? 2015 FY now proves to be fairly pivotal, especially when the Chinese market for infant milk powder solutions is restructuring to accommodate and encourage domestic production.

Gross margin was in decline before the recall, but it has at least stabilised this report, it is still well shy of the 40% it was.

They are trying to diversify the geographic distribution of their revenue (early days yet) and develop new revenue sources (R & D spend will start to ramp up in the next two or three years).

Whilst the price is starting to look more attractive, the risks that are lying beneath the surface are becoming more obvious (the market obviously agrees) and as a long-term holder there are a lot of unanswered questions that you would need to be comfortable with.

Not sure of the impact of the imminent retirement of their founder Dr Ian Brown is either.

These situations make for good buying…. But only if you are reasonably accurate in the long-term success of the company.

 

[systematic]

Doing a forum search on CLV, So Cynical you have been the main follower. Interested in anyone's thoughts (for fun).

I've been looking at some different stuff (as I'm want to do for entertainment) compared to my usual areas of focus, and CLV came up for me as the pick of the bunch.

I'll put in a theoretical buy on Monday's open.

 

[So_Cynical]

I bought some in mid May @ 0.41 in to early as per usual, The current low of around 0.36 looks to be a hell of an opportunity to me, i probably should sell something else to free up some money and take advantage.

The business is as good as it ever was its just the continuing sales slow down from the contamination scare...nothing is broken.

 

[Junior]

SP has bounced pretty hard off 35 cents. Currently back up at 42 cents.

So_Cynical, Ves, what are your takes on the situation? Have there been any positive news articles or research in the past week or two which indicate any recovery in sales?