CZZ - Capilano Honey

[qldfrog]

I already discussed that, but just a small warning:
I am a bee keeper hobbyist and beekeeping in Australia has a huge thread pending:
when will the varroa mite arrives in australia?
This disease has decimated apiaries O/S and is one of the reason CZZ is so successfull: we in Australia currently have a massive world advantage and can export and be competitive against deceased affected countries (the rest of the worl) just expect a massive crash in honey production and increase in honey price when varroa arrives here:
and it is not a matter of if but a matter of when.
just be aware and do not bank your house on how winds will flow in the torres strait or what could hide in a tourist suitcase.
I still wish CZZ well and really hope we stay free of varrioa for as long as possible!!
for this stocvk, the black swan will not be a surprise.

 

[Value Collector]

I already discussed that, but just a small warning:
I am a bee keeper hobbyist and beekeeping in Australia has a huge thread pending:
when will the varroa mite arrives in australia?
This disease has decimated apiaries O/S and is one of the reason CZZ is so successfull: we in Australia currently have a massive world advantage and can export and be competitive against deceased affected countries (the rest of the worl) just expect a massive crash in honey production and increase in honey price when varroa arrives here:
and it is not a matter of if but a matter of when.
just be aware and do not bank your house on how winds will flow in the torres strait or what could hide in a tourist suitcase.
I still wish CZZ well and really hope we stay free of varrioa for as long as possible!!
for this stocvk, the black swan will not be a surprise.

I actually don't think Varroa Mite is as big a threat as what people make out, the biggest risk to our production levels is whether, we have just come through a big production shortage, and we made it through by importing honey from countries that have varroa mite.

it will increase the work the beekeepers have to do, and would lower productivity, but it wouldn't cause a collapse in honey production, you can see this as some of the worlds biggest honey exporters have it already.

But yes there would be an instant market over reaction to the news, and would probably be a good time to add stock cheap.

people, that think that varroa mite would cause an instant 50% drop in production and cause capilano to struggle are just wrong.

 

[qldfrog]

people, that think that varroa mite would cause an instant 50% drop in production and cause capilano to struggle are just wrong.

Vc, do you have hives?
Are you actually aware of what this would implies for the actual producers?Anyway.. time will tell whether it is in a year or 5 and even as i wish 10y

 

[Value Collector]

Vc, do you have hives?
Are you actually aware of what this would implies for the actual producers?Anyway.. time will tell whether it is in a year or 5 and even as i wish 10y

i don't have hives, but prior to buying into capilano I did a lot of research into bee keeping including Skype conversations with an American bee keeper I met online.

He talked me through the various additional bee husbandry methods he has to employ etc, but varroa mite is not colony collapse syndrome, varroa mite would add some work and cost to a bee keeper, but it won't wipe them out.

What % of our output do you think varroa mite would reduce our output by?

As I said we currently import honey during our shortages from countries that have varroa mite, these countries still have highly productive bee keeping industries, the main thing that will cause Australian out put to fluctuate is whether.

If you think varroa mite would instantly cut production by 50%, I think you are wrong, firstly it would still take along time to spread across Australia, and secondly once bee keepers start managing there hives for it, production would normalise, if anything it would suffer a small reduction in output.

Again though, it would cause an instant over reaction in the share price, but I don't judge my holdings by what their share price does, and I have extremely patient capital.

 

[qldfrog]

i don't have hives, but prior to buying into capilano I did a lot of research into bee keeping including Skype conversations with an American bee keeper I met online.

He talked me through the various additional bee husbandry methods he has to employ etc, but varroa mite is not colony collapse syndrome, varroa mite would add some work and cost to a bee keeper, but it won't wipe them out.

What % of our output do you think varroa mite would reduce our output by?

As I said we currently import honey during our shortages from countries that have varroa mite, these countries still have highly productive bee keeping industries, the main thing that will cause Australian out put to fluctuate is whether.

If you think varroa mite would instantly cut production by 50%, I think you are wrong, firstly it would still take along time to spread across Australia, and secondly once bee keepers start managing there hives for it, production would normalise, if anything it would suffer a small reduction in output.

Again though, it would cause an instant over reaction in the share price, but I don't judge my holdings by what their share price does, and I have extremely patient capital.

for a full study:http://www.aph.gov.au/DocumentStore.ashx?id=05ce7b23-2204-4dbd-aafe-8fea6dac9c0b&subId=206000. read what you want from that but I expect significant extra cost and so higher plrice and less competitivity for Australian honey;
The worst cost overall will be the hidden one: the free pollinaisation service offered by feral bees which will be decimated and reduced yield in orchards, gardens fruit and vege bowls. But that is different from CZZ issues
Hope it helps

 

[luutzu]

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.

Too much intake/consumption of honey. Refering to some study published in the SMH a month or so back, where CZZ came out with a news release responding to the paper's claim that consuming too much honey of a certain type could cause some disease etc.

I think CZZ was implying that you would need to consume a bucketload of it a day to reach that amount etc. Guess it doesn't affect its operations much.

With inventory... yea it was loading up its inventory at last year's report. For a business with the wind behind its back like CZZ certainly does, it will only do well for it in the coming year. That was the extend of my insight. Beyond that, no clue and its price at the moment doesn't give any incentive to look further to see what the medium term future holds.. .but hope it works out much better than it is now.

If it does, man... I mean the company is relatively small even after your ten bagger. So maybe could retire on this ey?

 

[Value Collector]

Too much intake/consumption of honey. Refering to some study published in the SMH a month or so back, where CZZ came out with a news release responding to the paper's claim that consuming too much honey of a certain type could cause some disease etc.

I think CZZ was implying that you would need to consume a bucketload of it a day to reach that amount etc. Guess it doesn't affect its operations much.

With inventory... yea it was loading up its inventory at last year's report. For a business with the wind behind its back like CZZ certainly does, it will only do well for it in the coming year. That was the extend of my insight. Beyond that, no clue and its price at the moment doesn't give any incentive to look further to see what the medium term future holds.. .but hope it works out much better than it is now.

If it does, man... I mean the company is relatively small even after your ten bagger. So maybe could retire on this ey?

inventories will always be largest at the December half year report, because that right at the end of the honey season, at that time they will be buying all they can buy, and using some debt to do it if there is large supplies a available, by the time the end of year report rolls round we will probably have eaten through atleast a half of the inventories, freeing up $15 million of cash and generating $6million of earnings. So there is a decent chance that the current $20million of debt will be pretty much cleared by the end of the year, unless they make another acquisition or investment.

Then, next December if there is a good supply of honey to purchase again, the debt level should tick up again

 

[pixel]

Sunday's Landline report debunked the scaring reports. It also cast some (scientific) light on the health benefits of Manuka honey and its medicinal, antibacterial efficacy.
After that, I was unsurprised when I saw the sp break out on Monday. Have been waiting for the gap to close and now I am accumulating in the low $19's.



A Close Below $19 would be a deal breaker.

 

[skc]

Sunday's Landline report debunked the scaring reports. It also cast some (scientific) light on the health benefits of Manuka honey and its medicinal, antibacterial efficacy.
After that, I was unsurprised when I saw the sp break out on Monday. Have been waiting for the gap to close and now I am accumulating in the low $19's.

A Close Below $19 would be a deal breaker.

It's a pretty bad trading stock with large spread and limited liquidity.

It's also in a somewhat unloved sector at the moment.

On second thought... every sector is unloved except for gold at the moment.

 

[Value Collector]

Have been waiting for the gap to close and now I am accumulating in the low $19's

A Close Below $19 would be a deal breaker.

What do you mean a close below $19 would be a deal breaker?

 

[sinner]

What do you mean a close below $19 would be a deal breaker?

That's where his stops are

 

[Value Collector]

That's where his stops are

Oh ok,

I am so confident about the longterm outlook for this company that almost boing could separate me from my holdings at the moment, especially not a tick below an arbitrary price point.

 

[Triathlete]

For those interested part of the strategic comment from Stock Doctor


CZZ is in a position of Marginal Financial Health following the recent half year result and therefore does not meet our Financial Health assessment (GR1). This was driven by a negative operating cash flow mainly generated on the back of increased inventory levels during 1H16. In addition, the group's Financial Health was also impacted by increased debt levels over the period. As such the company cannot be considered as a Star Growth or Star Income Stock. Investors should note the company is also a small cap with low liquidity and as such may be unsuitable for some investors given low daily trading volumes.The company only pays an annual dividend and at a grossed up yield that is below the broader market.


Current valuation $19.00
Consensus valuation $22.17

 

[Value Collector]

For those interested part of the strategic comment from Stock Doctor


CZZ is in a position of Marginal Financial Health following the recent half year result and therefore does not meet our Financial Health assessment (GR1). This was driven by a negative operating cash flow mainly generated on the back of increased inventory levels during 1H16. In addition, the group's Financial Health was also impacted by increased debt levels over the period. As such the company cannot be considered as a Star Growth or Star Income Stock. Investors should note the company is also a small cap with low liquidity and as such may be unsuitable for some investors given low daily trading volumes.The company only pays an annual dividend and at a grossed up yield that is below the broader market.


Current valuation $19.00
Consensus valuation $22.17

Hahaha sounds like it was written by some one with no understanding of the industry, honey is harvested in summer, so offcourse if there is a good crop inventories will rise soaking up cash flow in the December report, this is also the reason they have only ever paid an annual dividend, inventories rose in summer, and are drawn down and converted back to cash in winter, their debt is small and only equal to about 2/3 of inventory, by the annual report that debt will mostly be cleared perhaps 5 of the 20 million remaining.

Since when is an annual dividend a problem it's the total dividend that counts, dividing it in half and paying it 6 monthly would only benefit those that can't manage their money.

 

[pixel]

Let's compare apples and apples.

The analysis of the latest financial report looks to me pretty accurate. Some of the concerns did occur to me as well. It's not so much the tonnage of unsold produce, but its valuation. I'd apply a hefty discount to such numbers - especially if a "good harvest" may mean oversupply or at least imply increased sales effort: read "more Advertising Dollars and offtake discounts".

Therefore, I apply the tight stop at $19 (which I did apply, selling at average 19.06) to avoid becoming a long-term holder of a falling knife.

On the other hand, I also understand VC's reluctance to let go. If I had bought two years ago and held at a cost base of $6 or $7, I might care a lot less whether the daily trades hover around $20 or $18.

Having said that, however, I am predominantly a Trader; therefore I find it hard to justify hanging on to a share that I can sell today for $19 when the chart suggests I should be able to buy it for $17 in a matter of days. In Capilano's case, the uptrend was broken about a month ago, and I would've sold before it dropped through $20.

 

[Value Collector]

Let's compare apples and apples.

The analysis of the latest financial report looks to me pretty accurate. Some of the concerns did occur to me as well. It's not so much the tonnage of unsold produce, but its valuation. I'd apply a hefty discount to such numbers - especially if a "good harvest" may mean oversupply or at least imply increased sales effort: read "more Advertising Dollars and offtake discounts".

Therefore, I apply the tight stop at $19 (which I did apply, selling at average 19.06) to avoid becoming a long-term holder of a falling knife.

On the other hand, I also understand VC's reluctance to let go. If I had bought two years ago and held at a cost base of $6 or $7, I might care a lot less whether the daily trades hover around $20 or $18.

Having said that, however, I am predominantly a Trader; therefore I find it hard to justify hanging on to a share that I can sell today for $19 when the chart suggests I should be able to buy it for $17 in a matter of days. In Capilano's case, the uptrend was broken about a month ago, and I would've sold before it dropped through $20.

View attachment 65857

There isn't an over supply of honey, what you are seeing is a recovery from a shortage, if capilano stopped purchasing honey today, it would eat its inventory to zero in about 4 months, and honey doesn't spoil, it can litererally be stored forever, so there is no problem with loading up while it's available in good supply at the end of the Spring harvest season, there will be a smaller harvest at the end of summer, and some northern bee keepers might get some winter honey, but the end of spring is the biggest by far.

I actually got in at $2.25 per share, so yes not concerned, the business is operating wonderfully.

Sales have been increasing rapidly, moving honey is not a problem at the moment, they aren't even packing 1L in capilano brand at the moment, so there is no oversupply, they are actually importing to fill the gap in the lower price segment, eg their allowrie brand.

 

[Triathlete]

Having said that, however, I am predominantly a Trader; therefore I find it hard to justify hanging on to a share that I can sell today for $19 when the chart suggests I should be able to buy it for $17 in a matter of days. In Capilano's case, the uptrend was broken about a month ago, and I would've sold before it dropped through $20.

I actually would not be surprised to see this stock come back all the way to the $14.90 level . It is at the 50% retracement level at the moment of the last range so at an important point right now, let us see if it will hold.

If we look at the last two ranges starting 18/09/2015 high and retracing to 3/7/2015 and the second retrace to 14/11/14 we can see price clustering at the 75% and 50% levels.

That is what I am thinking at the moment since it has bee in a downtrend since September 2015...time will tell though.

 

[pixel]

I actually would not be surprised to see this stock come back all the way to the $14.90 level . It is at the 50% retracement level at the moment of the last range so at an important point right now, let us see if it will hold.

If we look at the last two ranges starting 18/09/2015 high and retracing to 3/7/2015 and the second retrace to 14/11/14 we can see price clustering at the 75% and 50% levels.

That is what I am thinking at the moment since it has bee in a downtrend since September 2015...time will tell though.

After a Higher Low on Monday, the $20 level established a High High. At least short-term, I take that as a change of trend. Have started to re-enter and will accumulate as long as the rising trend is maintained.

 

[Triathlete]

After a Higher Low on Monday, the $20 level established a High High. At least short-term, I take that as a change of trend. Have started to re-enter and will accumulate as long as the rising trend is maintained.

Seems to me that there is still a bit of indecision going on with this stock.

 

[pixel]

Seems to me that there is still a bit of indecision going on with this stock.

It sure is, and I have noticed