Canaccord: watch out for higher bid

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)."

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