Comvita’s price target has been raised by brokerage Craigs Investment Partners after the manuka honey company reported a 68 per cent increase in full-year profit on surging demand in Australia and China.
Adrian Allbon, an analyst at Craigs Investment Partners, lifted his 12-month target price for the stock by 43 per cent to $14.30, saying the company’s market of Asian health and wellness, and tourism, along with its strong growth outlook and a business model which is now demonstrating operating leverage, had led to the upgrade.
“Key highlights for us: profit growing faster than sales, lift in its dividend and a material increase in raw honey inventory to support 2017 growth,” he said in a note.
“Our key valuation change, however, is assuming lower capital intensity (both capital expenditure and working capital) to realise Comvita’s stated sales target of $400 million by 2020. As a result, we have also raised our dividend payout to 45 per cent, and assume a 4-cent final [dividend] for 2016,” said Allbon.
Comvita reported an annual profit 68 per cent as Australian sales soared, overtaking New Zealand as the manuka honey company’s largest market.
Profit jumped to NZ$17.2 million, or 43.36 cents per share, in the 12 months ended March 31, from NZ$10.2 million, or NZ29.88 cents, the year earlier. That’s ahead of its November forecast for profit of NZ$15 million to NZ$17 million. Its shares rose 1.7 per cent to NZ$12.20.
Comvita shares have tripled in the past year, hitting a record high NZ$12.40 in April, on demand for products such as manuka honey and olive leaf extract.
The Te Puke-based company is currently trading at $12, having gained 43 per cent this year. It joined the NZX5 0 in April after Diligent’s exit, having been the second-biggest gainer on the NZX All Index in 2015, up 129 per cent to $8.40.
The company is changing its balance date to June 30, although it expects the 15-month operating result will likely be similar to the latest 12-month period given the June quarter is typically the quietest period due to seasonality of sales.
Comvita will pay a second interim dividend of 10 cents per share on June 24, taking the total for the 12-month period to 16 cents, ahead of its 13 cent payment a year earlier. A final dividend is expected to be paid in September.