Been wondering where you've been aramalap. Amazing what was said in 2013 and continues to be the case today. Amazing the difference in share orice since way back then..lol.....Go, go Capilano!
Toot toot and woooooshhhhhhh!
The soaring cost of honey is just one factor that has seen the once-struggling Capilano, a producer of table and export honey, hit fresh highs.
A recent restructure designed to retire debt and reduce costs has also paid dividends with the stock rallying 25 per cent over the last month.
Capilano managing director Ben McKee told Smart Investor that the former co-operative is refocusing operations away from low-margin bulk export business.
“International demand for Australia’s specialist honeys have picked up. They are seen as cleaner and greener than many other honeys,” he says.
Specialist honey varieties such as Manuka honey, renowned for its healing powers, have risen fastest as international buyers clamour to secure premium quality Australian product amid a global shortage.
Demand for the Australian product has risen in tandem with fears over cheap Chinese exports contaminated with antibiotics.
The US, India and Europe have all placed bans on Chinese honey imports at times over the last decade.
“Australian honey is seen as cleaner and greener” McKee says. “We are seeing a 15 per cent to 20 per cent rise in prices over the last 12 months. Prices for specialist honeys have risen 25 per cent.”
Higher prices have been driven in equal parts by bad weather and a phenomenon in the northern hemisphere that has seen an unexpected reaction to pesticides, killing one out of every three US bees over winter.
Valued at just $25 million, Capilano trades on an undemanding price to earnings ratio of 7 times. By way of comparison many similar food companies have been bid up to around 20 times, as investors eye the potential Chinese market.
For example, Warnambool Cheese and Butter is trading at 44 times following a bid from rival cheese maker Bega, which trades on a multiple of 20 times. Unlike Warnambool, Capilano is unlikely to be fielding a takeover offer any time soon. Sitting on the register with a 20 per cent holding is instore display company Icon Brands.
Icon Brands bought the stake from Marriner Investments, which in turn bought the stake from Guinness Peat Group as it divested its portfolio in 2012.
Trading for $2.97, the company listed on the ASX in July 2012 at $2.15, netting float participants a handy 38 per cent return over 15 months.
For the year to June 2013 Capilano reported a 35 per cent rise in after tax profit to $3.4 million and a healthy 20 per cent rise in EBITDA to $7.7 million. The company paid a fully franked dividend of 15¢, implying a yield of 5 per cent.
Looking forward there are likely to be further wins in store as it beds down its acquisition of WA honey company Wescobee and pursues a 50:50 joint venture with New Zealand Manuka.
The stock however is looking a touch expensive following a month long rally that saw the company gain 25 per cent.
For those prepared to take a punt on a plucky small cap as part of a diversified portfolio, buying the dip might be a better option.
Capilano’s NTA of $3.06 and the market’s seemingly insatiable appetite for agribusiness China plays mean there’s likely to be plenty of headroom for future growth.
CZZ Price at posting:
$14.40 Sentiment: Buy Disclosure: Held
