Daily ShareChat: Comvita

Honey products company Comvita has experienced robust product demand but has yet to achieve consistent earnings growth, creating further uncertainty, says Craigs Investment Partners.

The company's latest guidance is that earnings in the year ending March 2011 will be down about 28% because of the impact of the strong New Zealand dollar, even though local currency revenues will increase.

"International demand for natural healthcare products remains robust, particularly in the Asian markets," Craigs says, noting first-half local currency revenue in Hong Kong was up 14% and more than 100% in mainland China, "albeit off a low base. An aging population and greater health awareness in Comvita's main markets will continue to underpin demand for Comvita products."

Craigs is forecasting Comvita's net profit will fall to $4 million in each of the years ending June 1011 and 2012 compared with $5 million in 2010. The broker says, based on the $50 million invested in acquisitions in the year ended June 2008, Comvita ought to be earning about $8 million a year.

It values the stock at $2.14. "The key upside and downside risks are the New Zealand dollar/US dollar exchange rate, Comvita's ability to control costs and future levels of demand for natural healthcare products," the broker says.

Recommendation: Hold.

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