CZZ - Capilano Honey

[ThingyMajiggy]

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.

Doubled in less than 12 months, nice run up

 

[Value Collector]

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

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Well it's due to release its results, I guess it depends how strong these are. But I am thinking they will be good, they almost doubled the dividend, and just made a decent acquisition.

What the reason for the Pull back you predict? Is it just the fact it's gone up so much?

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

Profits have grown over the last three years for several reasons.

1, It has transitioned from being a bee keeper owned co-op, Operated with the intent of buying as much honey from bee keepers as possible for the highest price possible not really caring much about margin, to an investor owned business focusing on making a profit for share holders.

2, Increased profits from the change of stratergy above has allowed them to reduce debt saving interest, and also make some acquisitions, one of which was a WA Brand allows them to pack capilano brand honey in WA along side the purchased brand, rather than ship it from Queensland

3, Move into exporting high value honey eg manuka.

4, The honey shortage has stopped some of their competitors packing large volumes especially private label, Private label has been largely substituted by the Capilano owned Allowrie branded imports, its allowed them to raise market share from 50% - 70%.

Doubled in less than 12 months, nice run up

Check out the 3 year chart, Even more impressive. up over 700%.

 

[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.

Ok so the results are in, and they look pretty good.

revenue up 40%

Profit up 70%

Earnings were 91cents per share for the full year, which means my earlier estimate of value of $13.50 per share should easily hold, they closed today at a bit over $16.50 per share.

fundamentals remain strong, happy to hold at this stage.

 

[Faramir]

Hi ValueCollector

I looked at this stock last year and thought $7 was too much for honey. How dumb was I? Since last Jul (or Aug), I missed out on the rallies. Didn't really investigate this stock. (My stupidity!) I really want a food stock.

Honey is not just food. It can be put in soaps, shampoos, aroma products. The list goes on and on. Capilano has make some smart acquisitions like Manuku Honey. Its ability to source and pack honey, then export it to high demand markets like China.

I missed out again and I envy share holders who got in early. Congratulations.

 

[Value Collector]

Hi ValueCollector

I looked at this stock last year and thought $7 was too much for honey.

What were you basing that on?

There is only something like 8.6 million shares on issue, so $7 per share only values the company at a little over $60 million.

$60 Million Doesn't seem too expensive for a company with such a dominant position, that earned $4.6 Million net profit after tax that year, or were you just basing it on the dollar figure of the share price, for example you think a $50 share is automatically more expensive than a $10 share regardless of the number of shares on issue?

 

[Faramir]

Hi ValueCollector

I was very much a beginner last year (still very much a beginner now.) I only took the dollar value of the share and did not understand things like number of shares available. This only confirms how little I knew back then and I guess how little I know now.

I just want to say Congratulations. I admire your knowledge and I have so much to learn.

 

[Value Collector]

I have so much to learn.

As do I, that's the great thing about investing, the learning process never ends, there is always some thing more to learn, as long as your learning the right things, you will get better and better.

 

[Value Collector]

Earnings were 91cents per share for the full year, which means my earlier estimate of value of $13.50 per share should easily hold, they closed today at a bit over $16.50 per share.

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Czz have been on a real rip this week, ending the week at $19.85.

I must admit, this company has exceeded my wildest expectations.

 

[Ves]

I agree, absolutely extraordinary performance. Both the brand (& it's potential profitability) are miles ahead of where I initially assessed them.

Well done on this one mate.

 

[Value Collector]

Czz have been on a real rip this week, ending the week at $19.85.

I must admit, this company has exceeded my wildest expectations.

Capilano has continued to push higher, over $23 today.

it is currently sitting higher than my valuation, it has become some what of a mini market darling, with the shares being tightly held by investors even in the face of huge share price increases, and is experiencing a surge in investor interest as food stocks are becoming popular, with the so called "dining boom".

in my opinion this share price will need good underlying profit growth to be maintained, but with recent acquisitions and a move into high value exports of Manuka honey, combined with a lower Aussie dollar, we have a decent chance to see big profit growth in the coming years. So at this stage I am happy to hold.

 

[skc]

CZZ printed a low of $16.50 and finished on a high of $19.99 by the close. That's 21.2% rise from the bottom.

Very thin stock to trade at the best of times and the spread is often horrendous.

But that's a big range to get involved in today.

Hopefully it can develop a bit more buy/sell depth over time.

 

[luutzu]

Giving my two cents on CZZ...

First, a funny story as caveat... Was exchanging emails with a fellow investor earlier in the year and he asks my opinions on Capilano. Told him I don't know about it beside it's in the honey business. But then added that it's in the honey business man, why would you want to buy it? From my experience with Select Harvest these kind of business are cyclical and when I bought SHV it did pretty well for a while then sunk like a rock; I've held on to it for a few years and just sold out at $6.80 or so (to buy MND and as usual my brilliance meant SHV soon shoot to $12 or somehting and MND, well, ahem...).

Anyway, I went on saying that CZZ is small, in a honey business that's practically a commodity and it mainly sells to Woolies and Coles and those two guys don't play nice... but I don't know. So the guy thought about it and thought maybe I make some sense.

I haven't heard from him since, haha... Didn't think much about it because we rarely talk anyway... until VC - another smart fella, said he own it, a lot of it. So i look the share price up and it was around $13, then $18 etc.


With that out of the way, here are my two cents going for free
---

AIM
To try and figure out how or why a company that was $6 to $7 a bit over a year ago then traded at $22, reaching $24 at one point and now going for $17-$18.

To then give my reasons as to why I think its fair value is around $10 a share, with $16 a share being reasonable but really pushing it. BUT at the same time believe that within 12 months (soon after release of Annual Report) the market could possibly priced it at $30 (you have got to cover both ends when making prediction )

Then will try to be real brave and pin point the time back then that an investor could safely have bought it (hindsight might be more difficult when you need to give reasons for it, trust me).

And for a bonus round, after the fun is all over will apply the same rationale and principles used for CZZ onto a current company and predict its future returns to investors.

WHY?

Got something to sell... that and while I could live with having no friends, debt collectors... well can live better without them too but they're not the forgiving type and learning to see if it's possible to pick a 3 or a 10 bagger might solve a few problems in life, and make a couple new friends with that kind of cash too.

 

[Value Collector]

Giving my two cents on CZZ...

First, a funny story as caveat... Was exchanging emails with a fellow investor earlier in the year and he asks my opinions on Capilano. Told him I don't know about it beside it's in the honey business. But then added that it's in the honey business man, why would you want to buy it? From my experience with Select Harvest these kind of business are cyclical and when I bought SHV it did pretty well for a while then sunk like a rock; I've held on to it for a few years and just sold out at $6.80 or so (to buy MND and as usual my brilliance meant SHV soon shoot to $12 or somehting and MND, well, ahem...).

Anyway, I went on saying that CZZ is small, in a honey business that's practically a commodity and it mainly sells to Woolies and Coles and those two guys don't play nice... but I don't know. So the guy thought about it and thought maybe I make some sense.

I haven't heard from him since, haha... Didn't think much about it because we rarely talk anyway... until VC - another smart fella, said he own it, a lot of it. So i look the share price up and it was around $13, then $18 etc.


With that out of the way, here are my two cents going for free
---

AIM
To try and figure out how or why a company that was $6 to $7 a bit over a year ago then traded at $22, reaching $24 at one point and now going for $17-$18.

To then give my reasons as to why I think its fair value is around $10 a share, with $16 a share being reasonable but really pushing it. BUT at the same time believe that within 12 months (soon after release of Annual Report) the market could possibly priced it at $30 (you have got to cover both ends when making prediction )

Then will try to be real brave and pin point the time back then that an investor could safely have bought it (hindsight might be more difficult when you need to give reasons for it, trust me).

And for a bonus round, after the fun is all over will apply the same rationale and principles used for CZZ onto a current company and predict its future returns to investors.

WHY?

Got something to sell... that and while I could live with having no friends, debt collectors... well can live better without them too but they're not the forgiving type and learning to see if it's possible to pick a 3 or a 10 bagger might solve a few problems in life, and make a couple new friends with that kind of cash too.

Hey Bud,

was this meant to be a two part post, or am I missing something?

 

[luutzu]

Hey Bud,

was this meant to be a two part post, or am I missing something?

Oh yea, been busy putting lipstick on my little pig That and discussing world affairs, alright bludging, on the forum

I've completed the analysis at September so will have to go back to summarise and also update if there's any new development. But given that CZZ held high level of inventory last FY, the good sales vitamin and health food is experiencing with China, it stands a very good chance to continue doing very well this 2016 FY - the drought in Aus and California might actually help its margin this and possibly next 2017FY.

If these pans out, won't surprise anyone if its shares hit $30 and over if we use just moderate assumption of growth, say 7% p.a. over next few years.


But if we're to be conservative and assumes that the distant future won't be, on average, as bright as next year or two, CZZ's fair value shouldn't be more than $16 per share. And probably more sensible to buy if we can at this point at $10 or so.

Of course this does not take into consideration corporate plays and other lucky strikes - say world honey supply goes out the window.


btw., in case you're not already onto MRM (MMA Offshore), it's worth a close looking into. It might prove to be better possibilities than CZZ was back in 2013.

 

[Value Collector]

But if we're to be conservative and assumes that the distant future won't be, on average, as bright as next year or two, CZZ's fair value shouldn't be more than $16 per share. And probably more sensible to buy if we can at this point at $10 or so.




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Seems a pretty low valuation, considering they will more than likely be earning well over $1 per share this year, and be debt free buy June, I have at $18.50 as the approx fair value, with a decent chance for growth.

btw., in case you're not already onto MRM (MMA Offshore), it's worth a close looking into. It might prove to be better possibilities than CZZ was back in 2013

I took a look at MRM after I read your post late Saturday night, spent most of Sunday reading all their docs and learning about the industry in general, it's a business that I can understand, and I think they will be able to weather the down turn in good shape, so I bought 23,000 shares and may take a larger bite as more funds become available next month.

 

[Value Collector]

Seems a pretty low valuation, considering they will more than likely be earning well over $1 per share this year, and be debt free buy June, I have at $18.50 as the approx fair value, with a decent chance for growth.

capilano released it's results after the closing bell yesterday, and it's another amazing result profits for the half year were up 51% to 64cents per share (up from 42cents in the corresponding half.)

Export sales grew 32% with exports to Asia up over 50%, honey inventories are up showing that we have had a good honey harvest this season, so sales growth is supported, and management seem pleased with the intergration of recent acquisitions.

I think there may be a decent share price gain on money in response to this news, I am very happy to hold this little gem.

 

[luutzu]

Seems a pretty low valuation, considering they will more than likely be earning well over $1 per share this year, and be debt free buy June, I have at $18.50 as the approx fair value, with a decent chance for growth.

$16 was pretty close to your $18.50. Maybe due to me not knowing enough about it to project much more concrete growth.

But my $10 was priced for me buying so of course it's low. Me selling it would be $22, or $30, or anything higher

But yea, was a great call getting into CZZ when you did. Hope my MRM pick does half as well next few years.

I took a look at MRM after I read your post late Saturday night, spent most of Sunday reading all their docs and learning about the industry in general, it's a business that I can understand, and I think they will be able to weather the down turn in good shape, so I bought 23,000 shares and may take a larger bite as more funds become available next month.

Yea, bought a fair bit and so far average is breaking even or just slightly ahead. Though it look quite nice in one of my fund when bought for around 22cents.

Didn't load up anymore since that low as it's up while my other weed was way too cheap so pick on them instead.

 

[luutzu]

capilano released it's results after the closing bell yesterday, and it's another amazing result profits for the half year were up 51% to 64cents per share (up from 42cents in the corresponding half.)

Export sales grew 32% with exports to Asia up over 50%, honey inventories are up showing that we have had a good honey harvest this season, so sales growth is supported, and management seem pleased with the intergration of recent acquisitions.

I think there may be a decent share price gain on money in response to this news, I am very happy to hold this little gem.

Kinda predicted that, serious. Share price might hit $30 after final report issued. After this year I think, guess it is true in all business, need very careful attention. I don't know nearly enough to even guess beyond one year but yea. Well done dude.

You know much about Select Harvest? Almond business. I bought, held on for some 5 years to only gain maybe 20% before getting out at around $6.80; it then shot up to something like $12 soon after but now it's back down to mid $5s. Is that because of SHV itself or the industry, and would it affect your CZZ?

btw, how does the researc about the negative affect of too much honey does for the business?

 

[Value Collector]

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You know much about Select Harvest? Almond business. I bought, held on for some 5 years to only gain maybe 20% before getting out at around $6.80; it then shot up to something like $12 soon after but now it's back down to mid $5s. Is that because of SHV itself or the industry, and would it affect your CZZ?

btw, how does the researc about the negative affect of too much honey does for the business?

I researched select harvest and the almond industry a while back, at the time I really like select harvest, but thought it was too expensive, but yeah, I like food production companies especially ones taking stakes in farmland with water access, I might take another look.

What do you mean by the question about to much honey? Do you mean if there is to much honey supply because there was a really good production season? That would lead to discounting, and more bulk packs being sold and probably help competitors to put more stock on the shelves, however with the Aussie dollar low we can clear excess stocks through exports, it's not something I am concerned about at the moment, we are coming out of a severe honey shortage, it's good to have the warehouse full at the moment, especially with the Aussie dollar quite low.

 

[Value Collector]

But my $10 was priced for me buying so of course it's low. Me selling it would be $22, or $30, or anything higher

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If the current level of earnings are maintained and we end up earning $1.30 or more for the full year, I think a price of $28 could be justified.

I think we will probably gap up to $22 or more on Monday, but yeah I won't consider selling for less than $30 at this stage, there is just to much going for the company right now, domestic capilano brand and the cheaper allowrie imports are going well, exports are growing at a good rate, and we have stock available to grow sales, and our Manuka production and packing business is winding up, this is a real value generator for the company.

So yeah I am super happy to hold at the moment.