Ann: Half Year Report to Shareholders, page-103

Thanks most kindly, @Fire Bull
Great distillation of the important aspects of the business.
Most helpful to me. Answered many of the questions that I had.



On the JV's and why they weren't profitable in their first half of existence, I had to Google what was meant by "splitting hives", but it was easily explained to an non-apiary type like myself.

But can you elaborate a bit on why specifically JVs were necessary for CZZ to get "direct control of honey supply". Could they not have done so on their own bat, without any partners? Or do they partners they have on board have any particular assets/smarts that CZZ doesn't have when it comes to the actual production of honey feedstock?

Again, great constructive post.


PS. On the very important subject of valuation, you say, "I think a 15x multiple is quite reasonable." And yes, you are probably correct; it is a fair and reasonable multiple.

But what I seek to do is to buy stocks when they are undervalued, not fairly valued. Because, unless there is scope for an upwards re-rating of the valuation multiple, the only return I make is the same as the bottom-line growth in the business, plus 2.5%pa in dividends.

And given, that the past impressive growth has been predicated, as you said, on an impressive market share grab, from 50% to 70%, presumably the market share gain tailwinds are largely behind us.

As a case in point, if I strip out all the one-offs (insurance claims, asset sale profits, investment in Beeotic brand), in the past few half-year result, then at the Pre-Tax Profit line (to eliminate the effects of variability in tax rates), my analysis shows that the company by just 6% in DH2016 vs pcp. And in JH2016 the growth rate was -7%.

So, my question is, what do you think is the organic growth rate in NPAT and EPS over the coming 3 or so years, which is about the minimum period over which I would be owning the stock, if I do buy it?