CZZ - Capilano Honey

[Value Collector]

Capilano honey have continued their impressive share price performance, they are currently trading at $6.12 / share.

Capilano Honey, Annual report was released today, Earnings per share are up 34%, to 54cents per share. The share price has continued it's impressive run, Trading as high as $6.70, before finishing the day at $6.65.

Domestic sales increased 19.4%
Export Sales Increased 22% (sales to Asia doubled)
Health and wellness brands increased 69%

 

[Value Collector]

Capilano is a honey packer, It buys bulk barrels of honey from bee keepers and then decants it into handy packs to be sold mainly through coles and woolworths, So It does not face the risks from virus and other things mentioned above as a single bee keeper would.

It has its main packing shed in Brisbane and a smaller packing shed WA, and it takes delivery of honey from beekeepers from right around Australia and can import honey if it needs to.

I actually like this business, I built up a position about 12 months ago and it has done really well for me, I still think it is a little undervalued, I think the full fair value would be around $5.25 per share, based on earnings.

I am happy to hold this little gem in my portfolio.

This company has proved to be a little gem in my portfolio, It has broken through $8 today, I originally valued it at around $5.25 when it was trading at around $2.25, It's since increased it's profit substantially, So I believe that as long as it can maintain profits at this current level it may be worth up to $8.10, however any price above this may have a speculative component due to uncertainty on whether this profit level will be maintained over the next 12 months.

I am happy to hold for now.

Also, due to it's size, it is a take over target, so there is also a chance any take over offer may see a decent take over premium above my $8.10 valuation, this as well as possible future earnings growth add to my confidence in holding this gem.

Here is an interview with the CEO.

http://media.brisbanetimes.com.au/business/businessday/capilano-honey-seeks-new-growth-5666396.html

[video]http://media.brisbanetimes.com.au/business/businessday/capilano-honey-seeks-new-growth-5666396.html[/video]

 

[Value Collector]



• Revenue grew $13.8m (19.2%) in FY2014.
• Results YTD October FY2015 shows the continuation of double digit revenue growth.
• This year’s YTD October profit for FY2015 has surpassed last year’s half year result as at the end of December 2013.
• A well managed supply chain has underpinned Capilano’s ability to meet sales demands, in an environment of escalating honey prices.
• Our Retailer partners have been supportive and responsive to rising honey commodity costs

The out performance continues, Capilano Honey's Market share has grown from 55% of the Australian Market to 67%, as it has pushed it's premium branded honeys and many of it's smaller competitors are struggling to source honey because of the current shortage.

Capilano honey has proven it's resilience by growing profitably even in the face of the honey shortage, and I think it will continue to perform well as the honey supply normalises early next year.

I continue to hold.

 

[McCoy Pauley]

I suspect that CZZ is a company that many people who spruik the Warren Buffett way of investing would recommend taking an interest in, due to the fact that it's a fairly well-known brand and has a significant portion of the market.

I briefly looked at this company some time ago but with deep pockets and short arms, I unfortunately didn't jump in when it was much cheaper.

 

[Value Collector]

Capilano today announced that they are purchasing CHANDLERS HONEY.

They will use the packing equipment to get their mothballed packing facility in Victoria back up and running, this should bring about another 1000 tonnes of packing capacity online, if this goes ahead Capilano will have 3 packing plants, being the Main one in Richlands (Brisbane), another smaller one in WA, one in Vic.

They say reopening the packing plant in Vic will also help build relationships with beekeepers in Victoria, and should increase the honey supply Capilano have available to them.

It sounds like a pretty good plan, I only wish they were not using stock to complete the deal, they could have easily cash flowed this deal.

 

[clowboy]

Capilano today announced that they are purchasing CHANDLERS HONEY.

They will use the packing equipment to get their mothballed packing facility in Victoria back up and running, this should bring about another 1000 tonnes of packing capacity online, if this goes ahead Capilano will have 3 packing plants, being the Main one in Richlands (Brisbane), another smaller one in WA, one in Vic.

They say reopening the packing plant in Vic will also help build relationships with beekeepers in Victoria, and should increase the honey supply Capilano have available to them.

It sounds like a pretty good plan, I only wish they were not using stock to complete the deal, they could have easily cash flowed this deal.

Hopefully there is a performance incentive attached to the shares? Management staying on?

Given that there is a shortage of honey though where are they planing to get the extra 1000 Tonnes from?

 

[burglar]

Hopefully there is a performance incentive attached to the shares? Management staying on?

Given that there is a shortage of honey though where are they planing to get the extra 1000 Tonnes from?

Busy bees, mate!!

 

[Value Collector]

Hopefully there is a performance incentive attached to the shares? Management staying on?

Given that there is a shortage of honey though where are they planing to get the extra 1000 Tonnes from?

They are basically just buying the packing equipment, they will be moving it to their mothballed facility that they are going to be reopening, in Maryborough Victoria.

The worst of the shortage was last season, this season is shaping up to be a better season, the shortage is not a forever thing, also they are saying by having a presence in regional Victoria, it will give them access to a larger supply base. They also import honey when supplies are low and pack it as "smiths" or "Allowrie" brand.

 

[Value Collector]

Another fantastic report released today. Revenue up 34%, Normalized profit up 100%.

half-year result being a net profit before tax (NPBT) of $5.12 million, which compares to $2.45 million for the same period last year, before the impact of the Richlands fire and insurance reimbursements. Revenue has increased 34% to $57.9 million due to growth in domestic and export markets.
Net interest bearing debt has been reduced to $4.29 million, down from $7.59 million at the end of June 2014 and $9.75 million for the same period to December 2013.

As I post this the stock has hit an all time high of $8.30 / share.

This little gem of a company has really shown it's resilience and brand power as it has increased profits in the face of a honey shortage.

 

[clowboy]

Another fantastic report released today. Revenue up 34%, Normalized profit up 100%.



As I post this the stock has hit an all time high of $8.30 / share.

This little gem of a company has really shown it's resilience and brand power as it has increased profits in the face of a honey shortage.

How seasonal are their profits, due to various factors (for example I would assume Australians eat more honey in winter), how much does the weather impact on their supply / profit etc?

I read an article that said they where fully priced (at $9) but given the figures they are only on a PE of just over 10 assuming no variance in HY profits.

 

[mahen142]

How seasonal are their profits, due to various factors (for example I would assume Australians eat more honey in winter), how much does the weather impact on their supply / profit etc?

I read an article that said they where fully priced (at $9) but given the figures they are only on a PE of just over 10 assuming no variance in HY profits.

I read about this stock in the Marcus Today newsletter yesterday, it was $8.70. Profit rose 73% and stock is up almost 6% today at $9.30. Anyone else buying this stock? Looks like it has doubled in the last year and might be a good investment.

 

[Value Collector]

Anyone else buying this stock? Looks like it has doubled in the last year and might be a good investment.

I have been in since it was around $2 a share, as you can see from my posts I think it's a great little company. If they can maintain profit levels like this, I can see it being worth well over $10/share, So I am continuing to hold.

 

[Value Collector]

How seasonal are their profits, due to various factors (for example I would assume Australians eat more honey in winter), how much does the weather impact on their supply / profit etc?

I read an article that said they where fully priced (at $9) but given the figures they are only on a PE of just over 10 assuming no variance in HY profits.

Profits are not overly seasonal, honey sells well all year round, however winter is a slightly bigger season. However the honey harvest is mostly at the end of spring and then another smaller harvest at the end of summer.

Weather is a big impact on supply, obviously trees produces less nector if they don't have moisture in the soil, supply over the last year or so has been the worst on record, however this season is shaping up a lot better. Profits have grown in the last 2 years though even in the face of the supply shortage, and capilano has taken some very good steps to secure more supply in the future, they bought a WA honey packer and recently another packer in VIC this will fortify supply in the future.

I originally valued they at around $5.00 when they were $2, however profits have really surged and the company has expanded since I bought in early 2013, So I think they could be worth closer to $13 now, but this is dependant on them maintaining profit levels around where they are now.

They have expanded market share to over 70% up from 50%, will this be maintained as the honey shortage fades, I don't know, but they have improved their offerings in the higher value honeys, so it's looking good.

Go into either woollies or Coles and look at the honey range, you will see the capilano brand in its various offerings dominates the shelf, also the other brands such as Wesco, smiths and Allowrie are owned by capilano.

 

[clowboy]

Profits are not overly seasonal, honey sells well all year round, however winter is a slightly bigger season. However the honey harvest is mostly at the end of spring and then another smaller harvest at the end of summer.

Weather is a big impact on supply, obviously trees produces less nector if they don't have moisture in the soil, supply over the last year or so has been the worst on record, however this season is shaping up a lot better. Profits have grown in the last 2 years though even in the face of the supply shortage, and capilano has taken some very good steps to secure more supply in the future, they bought a WA honey packer and recently another packer in VIC this will fortify supply in the future.

I originally valued they at around $5.00 when they were $2, however profits have really surged and the company has expanded since I bought in early 2013, So I think they could be worth closer to $13 now, but this is dependant on them maintaining profit levels around where they are now.

They have expanded market share to over 70% up from 50%, will this be maintained as the honey shortage fades, I don't know, but they have improved their offerings in the higher value honeys, so it's looking good.

Go into either woollies or Coles and look at the honey range, you will see the capilano brand in its various offerings dominates the shelf, also the other brands such as Wesco, smiths and Allowrie are owned by capilano.

There is no doubt that they are the dominate brand in Australia, the concern is that they have grown market share to an unsustainable percentage on the back of serious supply constraints.

The concept of improving earnings by increasing the higher end product range (spruiking health benefits) is a good one but again I think there is only so far you can take this.

My interest lies more in their ability to sell to overseas markets on the basis of world class honey. The potential price premiums to markets like China or Malaysia could be quite lucrative?

The recent profit upgrade certainly revalues the stock, if the second half only matches the first the stock is only on a PE 12, substaintially low for a stock increasing profit by 50+%

 

[Value Collector]

There is no doubt that they are the dominate brand in Australia, the concern is that they have grown market share to an unsustainable percentage on the back of serious supply constraints.

I reckon that they will be able to hold onto a decent chunk of that growth.

The concept of improving earnings by increasing the higher end product range (spruiking health benefits) is a good one but again I think there is only so far you can take this.

It's not just the health benefits, although manuka honey etc has done really well, but higher value honeys packed to capture that premium.

eg, Honey from certain flowers and regions is better in colour and flavour, look at the honey range next time your in coles, when they receive honey from a premium source, they now pack that showing what it is and where its was from, that appeals to certain people and they are willing to pay an extra $1 for it.

My interest lies more in their ability to sell to overseas markets on the basis of world class honey. The potential price premiums to markets like China or Malaysia could be quite lucrative?

Yes, in todays broker report export sales were said to be around 35% now, this is the highest I have seen it, and that's got to be good with the Aussie dollar where it is.

The recent profit upgrade certainly revalues the stock, if the second half only matches the first the stock is only on a PE 12, substaintially low for a stock increasing profit by 50+%

yep, we will have to wait and see if profits can be maintained, but with the third packing plant opening on the 1st of July, I still think there is room for profit growth.

As you pointed out, based on current profit they are still undervalued, So there is a safety margin should we see profits fall a bit, However if profits increase again next year, which is possible, due to expansions that are already in the pipe, we should see double benefits of share price growth that factors in current earnings by moving it to a higher PE, combined with higher earnings.

I hate making short term predictions, but if profit holds I think it will be worth $13 or more.

 

[Value Collector]

Capilano Honey announced a 37.5 cent dividend today, up from 20 cents the prior year and 15 cents the year before.

The dividend is fully franked.

The increase in dividend comes on the back of fantastic revenue and profit growth over the past 2 years.

I hate making short term predictions, but if profit holds I think it will be worth $13 or more.

Well Since I made that comment they have traded as high as 12.85, as I type they are sitting 12.35.

I still feel confident that if the second half results are as strong as the first half, they will be worth at least $13.50, so I am looking forward to the end of year results, I think this strong increase in dividend is a sign that the end of year results should be good.

 

[Value Collector]

I still feel confident that if the second half results are as strong as the first half, they will be worth at least $13.50, so I am looking forward to the end of year results, I think this strong increase in dividend is a sign that the end of year results should be good.

Well that escalated quickly, $13.65 as I type.

 

[Value Collector]

Capilano Honey has announce the acquisition of 100% of the share capital in KirksBees Honey Pty Ltd (ACN 120 374 683). This beekeeping enterprise is one of Australia’s largest active Manuka honey producers, which is located in Evans Head, New South Wales.

The acquisition includes the assets required to operate the business including bee hives, apiary sites, vehicles, related property, sheds and honey extraction equipment. The beekeeping enterprise produced over $2 million worth of bee products last financial year. The business was purchased for $5,250,000 and property and land was also purchased for $750,000.

I believe this is Capilano's first move into bee keeping and the ownership of hives, this part of their business will be subject risks that their packing business is less exposed to, but I trust CEO Ben McKee has his head around this as he comes from a bee keeping family, it actually has the potential to become a decent profit centre for the company.

I still feel confident that if the second half results are as strong as the first half, they will be worth at least $13.50, so I am looking forward to the end of year results, I think this strong increase in dividend is a sign that the end of year results should be good.

The results haven't been announced yet but the market seems to like the acquisition, Capilano stocks are trading over $15 now, $15.12 as I type.

 

[Value Collector]

Is any one else following this company, I am surprised it doesn't have more of a following here. The share price has been going from strength to strength, Closed at $16.39 Today.

 

[joeno]

Is any one else following this company, I am surprised it doesn't have more of a following here. The share price has been going from strength to strength, Closed at $16.39 Today.

Missed the bull run heh. Looks like it's in for a correct IMO.

Any ideas how this stock managed to grow so much the last few years? I'm guessing it's to do with the price of honey and good management.