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Comvita

By Dan Stratful

Monday 17th October 2011

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Comvita (CVT) has received a full takeover bid from Cerebos New Zealand, a wholly owned subsidiary of Singapore listed company Cerebos Pacific Ltd (‘Cerebos’), which intends to make a takeover bid at $2.50 per CVT share. This is good news for shareholders but CVT directors have reported a DON’T SELL notice saying the offer undervalues CVT by a considerable margin.

CVT’s profit for the financial year ending 31 March 2011 was $503,000 well down on the $5m reported in the previous year, however it did include several one off items and non cash adjustments. After adjusting for these items net profit was still lower at $3.6m.

At the gross profit level, CVT made further improvement in 2011. The gross margins increased to 56%, compared with 51% in the prior year. This improvement was achieved through a combination of cost reductions and gains in operating efficiencies, a higher proportion of sales of premium priced products and a continuation of vertical integration (and capture of value) in its core ingredient platforms of Manuka honey, fresh olive leaf extracts and propolis.

CVT is struggling from a strong NZD against most major currencies, and the outlook in 2011-12 is for the NZD to remain strong, and this is not good news with around 46% of sales denominated in GBP or USD. CVT also had to deal with the distraction of a court case in the UK where it defended a medical wound care patent.

CVT forecasts for the year ended 31 March 2012, sales in the range of $91m to $95m (FY 2011: $82m) and a normalized Net Profit After Tax of $7.3m to $8.2m (FY 2011: $3.6m).

Investment Research Group (IRG) recommends CVT investors HOLD and wait for the ‘Target Company Statement’ from CVT which will contain an Appraisal Report prepared by an Independent Adviser. However those not prepared to wait and risk that the deal falls through, may also like to consider SELLING their shares on market as CVT shares trade at a 3 ½ year high.

CVT’s shares today traded at $2.65, a 3 ½ year high.

For sharemarket and fixed income trading enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge


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