It's the bee's knees
About the author:
- Author name:
- By Belinda Moore
- Job title:
- Senior Analyst
- Date posted:
- 13 March 2015, 9:21 AM
- Sectors Covered:
- Agriculture, Food & Beverage, Travel and Chemicals
Capilano Honey (CZZ) is the largest honey processor, packer and marketer in Australia and one of the largest groups globally. Established in 1953, Capilano Honey is a household name, with a domestic market share of approximately 50%. CZZ also owns and licenses a range of other honey brands, and its supply of honey is underpinned by 500 beekeepers in Australia.
CZZ exports to more than 32 countries, accounting for 20% of group sales. The demand for honey is increasing globally due to the health benefits that this natural product provides.
Expect strong profit growth
Over the last few years, CZZ has reported solid earnings growth. We forecast strong double digit EPS growth over FY15-17, reflecting the growing demand for honey, increased market share, supply growth, product innovation and mix benefits, new acquisitions and prudent cost control.
The balance sheet is well positioned to fund further acquisitions.
What we think
We have a positive investment view on CZZ due to its:
- strong brand name;
- market leadership;
- strong supplier relationships;
- product innovation;
- growing export business;
- leverage to favourable industry dynamics;
- solid earnings growth; and
- strong management team.
Trading on an FY16 PE of 10.4x and dividend yield of 4.8% fully franked, we believe that CZZ is attractively priced. Key risks include reduced honey supply, inability to pass on rising input costs, the market power of the major retailers and increased competition.
We initiate coverage with an Add recommendation and a share price target of A$12.30ps.
More information
Morgans clients can access our detailed report on Capilano Honey (CZZ). If you are interested in finding out more please contact your nearest Morgans office.
Disclaimer(s): Analyst owns shares.
The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.