CZZ - Capilano Honey

[Porper]

I have done some searching but the general consensus seems to be that CZZ is ethical "neutral". Anyway I can't find anything that causes me concern.

If there was something amiss I wouldn't want to be involved. I am mostly a technical trader but do have standards/ethics. Incidentally, we are just going through the process of having somebody place their own bee hives on our land...free honey for us is the deal. Should bee interesting

 

[Value Collector]

I have done some searching but the general consensus seems to be that CZZ is ethical "neutral". Anyway I can't find anything that causes me concern.

If there was something amiss I wouldn't want to be involved. I am mostly a technical trader but do have standards/ethics. Incidentally, we are just going through the process of having somebody place their own bee hives on our land...free honey for us is the deal. Should bee interesting

If you guys missed this land line episode, here is a 14 min video about the Australian medical honey growth industry, there is some commentary from Capilano's Managing Director.

http://www.abc.net.au/landline/content/2015/s4401734.htm

 

[pixel]

If you guys missed this land line episode, here is a 14 min video about the Australian medical honey growth industry, there is some commentary from Capilano's Managing Director.

http://www.abc.net.au/landline/content/2015/s4401734.htm

LOL VC,
That was the Landline episode that made me aware that CZZ was a listed company.
After watching it, I looked up the chart and began looking for an entry. See my initial post a page back.

 

[qldfrog]

To explain, in a nutshell:
CZZ sells most of the australian honey overseas where it gets a premium and import the cheapest O/S here to resell; yes it may not be under the Capilano brand (Allowie indeed and others; i would suspect homebrands, etc but I do not know for sure);
that imported honey is often tainted by chemicals far more than the australian one, both due to local O/S environment and pest treatments used O/S including antibiotics, pesticides (mites), etc;
There is also now some "honey" being sold O/S which is not honey at all and has never seen a bee in its life, and there is a risk (note that i am careful there ) that this could find its way in Oz;
As for ethical, i invite you to read the label of Allowie honey for example where it says in a summary(I do not have a bottle here) australian honey and imported when australian honey is not available;
as you understand it is a slight understatement and in my opinion fully misleading;
Have a quick look next time you are in a supermarket;
But this could indeed be fixed by the new labelling laws if used as they should

Anyway, I would not be surprised at all if this company gets bitten at its own game.It just need someone, a competitor maybe to start testing shelf products and finding an unsavoury item for this company to take a serious hit.May the brand be Allowir or other
I will leave this thread alone.
I have actually nothing against CZZ: I do not buy their products, I do not sell my honey to them and I am afraid have been quite negative so far:
once on the effect varoa would have here which i still see as major risk for CZZ (but CZZ is not to be blamed at all here),
and then on the actual risks CZZ is putting itself with its import/resell scheme;
The fact is, the more i learn, the less i like and I wanted to share this on this thread;
CZZ could be a world class leader if managed properly and could ride the wave of healthy natural honey.
I hope it will,.

 

[Value Collector]

To explain, in a nutshell:
CZZ sells most of the australian honey overseas where it gets a premium and import the cheapest O/S here to resell; yes it may not be under the Capilano brand (Allowie indeed and others; i would suspect homebrands, etc but I do not know for sure);
that imported honey is often tainted by chemicals far more than the australian one, both due to local O/S environment and pest treatments used O/S including antibiotics, pesticides (mites), etc;
There is also now some "honey" being sold O/S which is not honey at all and has never seen a bee in its life, and there is a risk (note that i am careful there ) that this could find its way in Oz;
As for ethical, i invite you to read the label of Allowie honey for example where it says in a summary(I do not have a bottle here) australian honey and imported when australian honey is not available;
as you understand it is a slight understatement and in my opinion fully misleading;
Have a quick look next time you are in a supermarket;
But this could indeed be fixed by the new labelling laws if used as they should

Anyway, I would not be surprised at all if this company gets bitten at its own game.It just need someone, a competitor maybe to start testing shelf products and finding an unsavoury item for this company to take a serious hit.May the brand be Allowir or other
I will leave this thread alone.
I have actually nothing against CZZ: I do not buy their products, I do not sell my honey to them and I am afraid have been quite negative so far:
once on the effect varoa would have here which i still see as major risk for CZZ (but CZZ is not to be blamed at all here),
and then on the actual risks CZZ is putting itself with its import/resell scheme;
The fact is, the more i learn, the less i like and I wanted to share this on this thread;
CZZ could be a world class leader if managed properly and could ride the wave of healthy natural honey.
I hope it will,.

Ok there are several things wrong with your post.

Firstly capilano does not sell "most" of its Australian honey overseas, it sells most of it in Australia, either as 100% Australian honey eg capilano brand or blended with imports in the allowrie brand.

yes, capilano exports Australian honey, it can get a higher price for it overseas than it could using the excess packing home brand to clear it, especially because of the exchange rate, but there is still plenty available for sale locally via the capilano brand, the shelves are always full, as much as the Australian market can absorb gets supplied.

The Allowrie brand exists as a lower cost option for consumers, not everyone wants to pay 50% more for Aussie honey, if they do the capilano brand is available, if they don't they can choose a lower cost import, so capilano is offering the best of both worlds, a premium Aussie product to the local and export markets that want to pay for it, and a cheaper alternative for those that can't or don't want to pay for it.

If capilano doesn't supply a low cost option, Coles and woollies will import one directly as they have in the past, the allowrie brand actually replaced a product that was sold at Coles and woollies that was Chinese and contained 50% sugar syrup.

-----------------------------

capilano goes to great lengths to ensure both the Aussie and imports are high quality honeys, claims that the imports contain poison or are fake are unfounded nonsense. To be honest, I would rather a product that has come through Capilano's supply chain than one organised directly by Coles or woollies.

-----------------------------

The labelling on allowrie says "made from local and imported ingredients" which is exactly what it is, and is inline with labelling on most other foods.

To say only Australia can produce quality honey is nonsense.

 

[galumay]

To say only Australia can produce quality honey is nonsense.

This. Amazing honey is produced all over the world.

Also, his point about CZZ exporting some of their honey doesnt make it an unethical company. They could export 100% if they like and it wouldnt be unethical.

The only point worth consdering for mine is the labelling issue, and that is addressed by the new laws that will remove any confusion about content source - which I imagine is only an issue for a small minority of consumers in the case of honey.

 

[Value Collector]

Also, his point about CZZ exporting some of their honey doesnt make it an unethical company. They could export 100% if they like and it wouldnt be unethical.

.

I agree.

 

[qldfrog]

Ok there are several things wrong with your post.

Firstly capilano does not sell "most" of its Australian honey overseas, it sells most of it in Australia, either as 100% Australian honey eg capilano brand or blended with imports in the allowrie brand.

yes, capilano exports Australian honey, it can get a higher price for it overseas than it could using the excess packing home brand to clear it, especially because of the exchange rate, but there is still plenty available for sale locally via the capilano brand, the shelves are always full, as much as the Australian market can absorb gets supplied.

The Allowrie brand exists as a lower cost option for consumers, not everyone wants to pay 50% more for Aussie honey, if they do the capilano brand is available, if they don't they can choose a lower cost import, so capilano is offering the best of both worlds, a premium Aussie product to the local and export markets that want to pay for it, and a cheaper alternative for those that can't or don't want to pay for it.

If capilano doesn't supply a low cost option, Coles and woollies will import one directly as they have in the past, the allowrie brand actually replaced a product that was sold at Coles and woollies that was Chinese and contained 50% sugar syrup.

-----------------------------

capilano goes to great lengths to ensure both the Aussie and imports are high quality honeys, claims that the imports contain poison or are fake are unfounded nonsense. To be honest, I would rather a product that has come through Capilano's supply chain than one organised directly by Coles or woollies.

-----------------------------

The labelling on allowrie says "made from local and imported ingredients" which is exactly what it is, and is inline with labelling on most other foods.

To say only Australia can produce quality honey is nonsense.

Hi Vc, I never claimed only Australia can produce quality honey and I neither claim that all imports contain poison or are fake.What i claim is that there is a major risk there and the odds are not that good .Anyway, I am out.
DYOR.

 

[Value Collector]

Hi Vc, I never claimed only Australia can produce quality honey and I neither claim that all imports contain poison or are fake.What i claim is that there is a major risk there and the odds are not that good .Anyway, I am out.
DYOR.

So you are happy to admit that other countries can in fact produce quality honey.

So what percentage of the worlds honey supply do you think is fake and poison, I mean you must think it's pretty high if you class it as a "major risk"

Also, don't you think capilano would be taking steps to avoid suspect honey? You seem to think that a competitor could simply buy a bottle off the shelf and test it, yet capilano would be oblivious to what they are buying.

Any way I think you are under estimating capilanos expertise, and have been listening to conspiracy theorists with other motives.

 

[Value Collector]

 

[pixel]

I have done some searching but the general consensus seems to be that CZZ is ethical "neutral". Anyway I can't find anything that causes me concern.

If there was something amiss I wouldn't want to be involved. I am mostly a technical trader but do have standards/ethics. Incidentally, we are just going through the process of having somebody place their own bee hives on our land...free honey for us is the deal. Should bee interesting

Sounds very interesting, Porper.
At the very least, you'll know exactly where your honey is coming from. Mind keeping us updated after your first taste test? :

I also like to support local business where possible. As evidenced by my comments about the Windara Apiary and their Redgum and Jarrah honeys.
Doesn't diminish my interest in Capilano though; there I am genuinely interested if anybody can offer a reason for the recent sell-down. I reduced my position considerably when the sp dropped through $22, but am today wondering whether it's time to reload. T/A suggests today may have found support. However, vwap still languishing at $20.90, a seller "in the know" could easily orchestrate such a deceptive temptation.

 

[Porper]

Sounds very interesting, Porper.
At the very least, you'll know exactly where your honey is coming from. Mind keeping us updated after your first taste test? :

I also like to support local business where possible. As evidenced by my comments about the Windara Apiary and their Redgum and Jarrah honeys.
Doesn't diminish my interest in Capilano though; there I am genuinely interested if anybody can offer a reason for the recent sell-down. I reduced my position considerably when the sp dropped through $22, but am today wondering whether it's time to reload. T/A suggests today may have found support. However, vwap still languishing at $20.90, a seller "in the know" could easily orchestrate such a deceptive temptation.

View attachment 66706

Yes, looking forward to the honey...if it happens. We are currently in the U.K for 3 months but live in New Zealand.

Today was better although not a great break out of the triangle to say the least. My stop is set at $19.99 as a push beneath would be of concern technically to me. Let's see if buyer's today can follow through.

 

[pixel]

Yes, looking forward to the honey...if it happens. We are currently in the U.K for 3 months but live in New Zealand.

Today was better although not a great break out of the triangle to say the least. My stop is set at $19.99 as a push beneath would be of concern technically to me. Let's see if buyer's today can follow through.

CAPITAL RAISING!

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01742029

So that's been behind the recent sell-off. Sadly, there is always a reason for the unexpected, but it only becomes obvious AFTERwards. Some people always know a few days early ... and "take measures" ...

 

[Value Collector]

CAPITAL RAISING!

...

Well that's annoying.

I hope it's because they have some hugely value adding acquisition or expansion, because as they stand they don't need the capital, so if it's just because some investment banker got in managements ear and talked them into it I will be pissed off.

I hope this isn't setting the tone for the future either, they have a great cash generating business, I would much prefer they finance any expansion through cashflow and debt, even if it meant they had to skip a few dividends, rather than give away shares at less than they are worth.

 

[Value Collector]

Apparently a $24Million stake in Comvita was sold a few days ago, I am wondering whether Capilano has taken this stake, if so that would explain the capital raising, it would mean they are funding the purchase with $8Million of internal funds and $16Million from the capital raising.

I have no idea what comvita is worth, but if the capital raising is to fund an entry in it, and its a good entry price, it may turn out to be a good use of the funds.

 

[pixel]

40cFF dividend announced: http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01742746
better than RBA cash rate

That cannot be the reason for the trading halt, and the next notice makes that clear: Trading Halt continues.
It is reassuring inasmuch as the expected capital raising will more likely be intended to finance an expansion/ acquisition, not to mitigate some financial trouble.

And there comes the main announcement:

Capilano Honey Limited ACN 009 686 435 (Company) – 1 for 10 Fully Underwritten Non-Renounceable Pro Rata Rights Issue
The Company announced on 23 May 2016 a 1 for 10 fully underwritten non-renounceable pro rata rights issue at an issue price of $19.50 per new share (New Share) to raise approximately $16.8 million (before transaction costs) (Rights Issue).
The Rights Issue is fully underwritten by Canaccord Genuity (Australia) Limited and Morgans Corporate Limited. Details of the potential effect of the underwriting arrangement on the Company, as well as the underwriting agreement itself, are set out in the offer document.

and

Funds raised from the Entitlement Offer will be used to strengthen both the financial and competitive position of
Capilano, by providing capital to:
- Fund the acquisition of beekeeping enterprises
- Strengthen the balance sheet by reducing debt and provide flexibility for further acquisitions
- Increase working capital to support business growth and new export market sales
- Capital investment in select production efficiency upgrades and new product capabilities
- Dedicated marketing budget supporting new product developments and export market growth
● Offer price of $19.50 per new share, a 7.7% discount to the closing price on 18 May 2016

 

[Value Collector]

40cFF dividend announced: http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01742746
better than RBA cash rate

That cannot be the reason for the trading halt, and the next notice makes that clear: Trading Halt continues.
It is reassuring inasmuch as the expected capital raising will more likely be intended to finance an expansion/ acquisition, not to mitigate some financial trouble.

And there comes the main announcement:
and

Yep I am still reading through the docs, but it looks like the company's trading results have been very good, and the main reason for the Capital Raising is to fund the expansion of their manuka production Joint venture through organic growth and making further acquisitions of licences and bee keeping operations.

While I would still have preferred management use retained earnings and long term debt to fund expansion, as long as the expansion is done wisely, I think we should be able to earn a decent return on the extra capital, so it should be ok.

 

[luutzu]

Yep I am still reading through the docs, but it looks like the company's trading results have been very good, and the main reason for the Capital Raising is to fund the expansion of their manuka production Joint venture through organic growth and making further acquisitions of licences and bee keeping operations.

While I would still have preferred management use retained earnings and long term debt to fund expansion, as long as the expansion is done wisely, I think we should be able to earn a decent return on the extra capital, so it should be ok.

It is a worrying sign that a company need to issue shares for $16M.

Worrying because $16M is a puny number that most banks wouldn't have much problem lending it; Worry too in that with low, very low, interest rate, CZZ thought to not borrow but to print shares and dilute holders interests - raising more cash from existing one is the same anyway.

Also worrying is that they issue dividend, but then raise capital at the same time. This point to a "making the fund managers and the market happy" strategy rather than a more thoughtful use of capital.

But if we could forgive all the above, why not - all management have to please somebody - then it's a sign of the current price being pretty high that management thought to take advantage of it - and taking advantage of new shareholders.

You welcome

 

[Value Collector]

It is a worrying sign that a company need to issue shares for $16M.

Worrying because $16M is a puny number that most banks wouldn't have much problem lending it;

$16M is a bit over 40% of their current equity position, so I guess its not a puny number to a small company like Capilano.

(have you ever tried to borrow $16M from a bank, whether you borrow $100K or $100M, they will decide based on collateral)

Worry too in that with low, very low, interest rate, CZZ thought to not borrow but to print shares and dilute holders interests - raising more cash from existing one is the same anyway.

Yep, I would have preferred them take on more debt, however with $10M long term debt and $10M short term I can see why taking on more equity was attractive.

Also worrying is that they issue dividend, but then raise capital at the same time. This point to a "making the fund managers and the market happy" strategy rather than a more thoughtful use of capital.

Is much stock owned by fund managers? the top twenty list is full of long term share holders, I think the dividend is to assure shareholders that they still are committed to a dividend policy.

But if we could forgive all the above, why not - all management have to please somebody - then it's a sign of the current price being pretty high that management thought to take advantage of it - and taking advantage of new shareholders.

I actually don't think the issue is that expensive, its only $19.10 when you subtract divvy, hence the reason I would have preferred a debt issue, its just not really practical unfortunately as it sounds like there is going through a big growth drive into manuka production.

I will be taking up as much of my allotment as I can, its poor timing for me because I am fully invested at the moment as I mentioned when we were discussing MRM, so I might not be able to take the full allotment unless I can juggle some stuff,

 

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as an aside, it's worth noting that at present time schedule, the newly issued shares will be participating in the dividend because they'll be allotted BEFORE the ex-div date, June 29th. Accounting for Franking Credits, that would reduce the $19.50 exercise price to below $19.
The only way to deny that opportunity would be Management extending the deadline for any reason, which they could do up until June 15th. As the offer document makes specifically mention of new shares qualifying for the dividend, such an extension seems extremely unlikely.

For investors intending to build/ hold a long-term position, it looks like a decent proposal.
I intend to go for it and increase my holding by 10%.