CLV - Clover Corporation

[skc]

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?

I wonder if the Fonterra announcement of reduced farm gate milk price has anything to do with it...

 

[Ves]

It's a fairly illiquid small-cap so it doesn't take much to move the price. From what I can tell there hasn't been any news (and certainly not much volume), and my impression is that it is just the market doing its thing, waiting patiently for the 2014 results to be released.

Personally I am not really interested until there is more clarity on the sales recovery; is it structural or is it still related to poor consumer confidence re the contamination scare? I don't think there is any way of knowing at this point.

 

[So_Cynical]

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?

I think the 35 cent dip was just one of those things, like Ves said "just the market doing its thing" those little nano opportunity's come along in different stocks quite regularly, banged up a chart - i reckon the no news range will prevail although 2 dip/double bottoms are also quite a regular manifestation of the market just doing its thing.
~

 

[Junior]

2014 results are out, around $1mill net profit down from $6mill previous year.

Those who've been following the company for longer than me, what do you make of this report? A lot of talk of managing existing clients and investing in growth and R&D, but I guess we won't know the success of this until we see a legit recovery in sales and margin.

 

[skc]

2014 results are out, around $1mill net profit down from $6mill previous year.

Those who've been following the company for longer than me, what do you make of this report? A lot of talk of managing existing clients and investing in growth and R&D, but I guess we won't know the success of this until we see a legit recovery in sales and margin.

I sold my small position today on open, on the back of this report. It's not really out of expectation that their NPAT will be low... a 40% fall in revenue will cause >40% fall in profits.

However, it's missing 2 things in my view. A lack of evidence showing the supposedly "regaining market share" by their customers in May/Jun, and a lack of outlook statement. I understand that the NZ recall incdient was unfortunate and not really something within the control of management. But that happened over 12 months ago, yet CLV has somehow not yet recovered from it. I find it difficult to assess the company's prospect on the underlying basis. So with the market looking a bit weak I am happy to sit on the sideline and wait for a clear sign of recovery. I am willing to back my judgement that, my re-entry (when that time comes) will be superior than my exit price.

For those who have much longer investment timeframe, better patience and less problems holding onto a paper loss, it's a potential turnaround buy if indeed the impact of the contamination incident just naturally peters out. It's showed what profit it can earn when it's firing on all cylinders. I just didn't get the info I need to support such conviction.

 

[So_Cynical]

For those who have much longer investment timeframe, better patience and less problems holding onto a paper loss, it's a potential turnaround buy if indeed the impact of the contamination incident just naturally peters out. It's showed what profit it can earn when it's firing on all cylinders.

I think the 35 cent dip was just one of those things, like Ves said "just the market doing its thing" those little nano opportunity's come along in different stocks quite regularly, banged up a chart - i reckon the no news range will prevail although 2 dip/double bottoms are also quite a regular manifestation of the market just doing its thing.
~

And today we have news and my half predicted double bottom, currently trading at 35c ~ i have insufficient funds in my long term account so will not be adding to my somewhat significant position.

 

[skc]

And today we have news and my half predicted double bottom, currently trading at 35c ~ i have insufficient funds in my long term account so will not be adding to my somewhat significant position.

Closed on the low of 34c. It's dipping it's toe into the price band between 26-35c where it spent much of 2011.

It's a thinly traded stock so it doesn't take much to move it one way or the other. It could easily drift to the bottom, or just as easily bounce off the top of this band.

 

[robusta]

Looking for a reason why CLV is near 52week lows. I know sales have been slow to come back in China but...?

Could be worth a look.

 

[So_Cynical]

Looking for a reason why CLV is near 52week lows. I know sales have been slow to come back in China but...?

Could be worth a look.

Looks crazy cheap now, sellers/haters prevailing, i imagine that the low dollar would help Clover, i will take another small bite soon, just a little average down as i already have too much in this.

 

[skc]

However, it's missing 2 things in my view. A lack of evidence showing the supposedly "regaining market share" by their customers in May/Jun, and a lack of outlook statement. I understand that the NZ recall incdient was unfortunate and not really something within the control of management. But that happened over 12 months ago, yet CLV has somehow not yet recovered from it. I find it difficult to assess the company's prospect on the underlying basis. So with the market looking a bit weak I am happy to sit on the sideline and wait for a clear sign of recovery. I am willing to back my judgement that, my re-entry (when that time comes) will be superior than my exit price.

They seem to keep blaming the Aug 2013 incident for customers not returning... now that's 1.5 years ago. Their revenue has grown in the report, but the revenue is starting to recover ($16.1m compared to $14.9m in the period just after the incident). There's little seasonality in infant formula... if they could publish some monthly run rate figures, then a potential investor could know asap that the sales downtrend is finally reversed.

Of some concerned is the rise in COGS. Gross margin dropped from 34% last HY to 22.9% in the latest HY. Management citing raw material cost increases, falling $AUD, cmopetitor pricing pressure and product mix as key reasons. The question is, are those high margins of the past returning? The fall in margin does not appear to be cyclical.

So let's say they recover in sales but not in margin... sales of $40m in another year with 23% gross margin = $9.2m gross profit... take away SG&A of $6m and pay 30% tax, you are left with $2.24m NPAT. Compare that with the current market cap of $27.3m... hmmm.

Looks crazy cheap now, sellers/haters prevailing, i imagine that the low dollar would help Clover, i will take another small bite soon, just a little average down as i already have too much in this.

CLV is 44% owned by SOL and Farjoy (associated with the Soul Patt mob) and you know they are not the ones selling. There are probably some micro cap funds with position in this that they are trying to liquidate. As is typical with these kind of small stocks, it's all good to keep buying and build a position when it's rising (booking rising NTA along the way), it's quite a difficult thing to do when things don't work out and you want to sell!

Since 20 March market update, the volume has only been ~3.6m (or <$1m worth of stock). So the quesiton is whether this seller has finished his line or not.

 

[Ves]

Hmmm.... trading at around NTA now. Problem is it's starting to bleed cash and NTA is going backwards. There's also the fact that there isn't really any "hard assets" (which alternatively is great when sales are flying) to bother too much with an "asset play."

Agree with skc, and I think I said it previously, the gross margin contraction started off as a worry and a sign of increasing competitiveness in their markets, now it's almost at a point, where you can start seriously revising any long-term investment thesis compared to 18-24 months ago.

If it can earn above cost of capital going forward it's pretty cheap, but you'd have to be an expert in this niche to figure that out (and probably ride a bit of luck), and unfortunately I'm not.

It's hard to fund further R & D when you're not making much cash. Capital squeeze on the horizon? Wouldn't be surprised if they have to tap the markets at some point if it doesn't improve.

 

[So_Cynical]

(9th-April-2015) Looks crazy cheap now, sellers/haters prevailing, i imagine that the low dollar would help Clover, i will take another small bite soon, just a little average down as i already have too much in this.

I wish i did take that extra bite, would taste so sweet now as opposed to the bitterness of regret.

(10th-April-2015 ) Hmmm.... trading at around NTA now. Problem is it's starting to bleed cash and NTA is going backwards.

Agree with skc, and I think I said it previously, the gross margin contraction started off as a worry and a sign of increasing competitiveness in their markets, now it's almost at a point, where you can start seriously revising any long-term investment thesis compared to 18-24 months ago.

13 Months later and Clover is closing in on a new all time high, not there yet but an amazing trend reversal, i missed the last bottom but did get a small parcel two years ago this week, hold 3 parcels.

• (28/08/2009) 7000 CLV @ 0.19
• (31/08/2011) 2700 CLV @ 0.285
• (16/05/2014) 5000 CLV @ 0.415

Interesting to look back (7 year chart below) total net dividend return on the 2009 parcel is 10.25 CPS ~ 7.7% PA, beat having the money in the bank, open trade profit on the 3 parcels of close to 90% with an average price of 0.29.

Im thinking that the SP could really take off on good results reporting considering the SP rise of the last 12 months hasn't needed much good news, some actually really good news may take the price over the top.
~

 

[greggles]

Clover Corporation had a huge leg up in March after releasing their Half Year Financial Report and Investor Presentation. Since then it has been going from strength to strength.

CLV reported a Net Profit after Tax of $3.2 million for the half year ended 31 January 2018 (2017: $1.0 million) an increase of 209%. Sales revenue increased 60% to $31.0 million (2017: $19.4 million).

The company produces infant formula and other health foods and has made great inroads into the Chinese market. It is also expanding into other international markets, particularly the USA, Europe and Asia.

 

[So_Cynical]

Traded above $1 yesterday for the first time ever - i have been in this stock for almost 9 years and at last the big leg up, patience and belief, my average price is 23c so sitting pretty now..

 

[greggles]

Traded above $1 yesterday for the first time ever - i have been in this stock for almost 9 years and at last the big leg up, patience and belief, my average price is 23c so sitting pretty now..

Well picked. It's up another 8% today. Lots of buyers and not a lot of sellers. CLV appears to be the very definition of a quality growth stock.

 

[galumay]

Well done SC, I have a mate on twitter that has been posting about CLV, I am sorry I didnt pay any attention now!

 

[So_Cynical]

CLV appears to be the very definition of a quality growth stock.

There were many doubters over the years, it hasn't been a linear journey for the business or the share price, like so many success story's its a matter of discovering potential and having patience, and rewarding good responsible management by simply sticking with them..

 

[kid hustlr]

Real shame for me this one.

I was very nervy on the market prospects (as well as busy with life) so passed up the opportunity to buy @ $1.

This bias then stood in my way when looking at this chart each day. A good lesson here.

One thing I'd like the duckman to chime in on if he's around.

Typically I don't like volume - to me volume without range is a worrying sign so when looking at this on the weekend Friday's tight bar on volume worried me. It proved to buying based on today's action however I find it's often sellers doing their thing - any thoughts?

 

[galumay]

like so many success story's its a matter of discovering potential and having patience, and rewarding good responsible management by simply sticking with them..

So true mate, its what I call 'high conviction' investments. Its something I have definitely got better at with experience, shutting out the noise, ignoring the price action, take opportunities to accumulate and maintain patience.

 

[HelloU]

i often just guess.......if u like this then cast an eye to synlait (clv is a supplier of little black things to them)