Watch for bigger bid at Capilano Honey: Canaccord By Sarah Thompson, Anthony Macdonald AFR STREET TALK Aug 14 2018 at 12:09 PM Updated 1 hr ago
Canaccord Genuity analysts have outlined three reasons why there may be another bid for ASX-listed Capilano Honey. "We think there is a reasonable likelihood of a competing bid for the following reasons," the broker told clients on Tuesday morning, in reaction to Wattle Hill and ROC Capital's $20.06 a share offer.
"(i) the valuation implied by the offer isn't compelling based on the financial results released and leaves the door open in our view; "(ii) CZZ commands approximately 65-70% market share, is an iconic food brand and is likely to attract further interest; "(iii) We believe there is hidden value in the inventory, which the company has been building in recent years and is currently sitting at $51m. We believe CZZ is carrying excess inventory worth $2.60-$3.00 per share." Capilano shares were trading at $19.59 at lunchtime on Tuesday. Morgans analysts told clients the offer price was "fair". "We believe considerable time and marketing investment is required to build brand awareness overseas," Morgans said in a note on Tuesday morning. "In the near-term, we believe CZZ's FY19 outlook is also challenging – domestic competition remains high (and is increasing), while the dry conditions along the East Coast increases the likelihood of a poor upcoming honey season (spring rain is required)."
