Comvita Share Price Decouples

Comvita Ltd's share price appears to have decoupled from the company's earnings prospects and asset value. Decoupled, it reflects no measure or forecast.

The thinly traded shares closed at an historic low of NZD0.56 on 29 April, which represents a 73.0% collapse from the year-ago level and a discount of 73.9% to the company's net asset value of NZ2.15 per share (calculated from balance sheet data as at December 2024).

Comvita's financial year ends in June. As no net profits are forecast (the company talks of a "potential rebound" in the year to June 2026), the share price cannot reflect any ratio of earnings. Which leaves assets. Mānuka honey inventory comprises the largest asset. As the industry's mānuka honey stockpile volume is unknown and its value therefore incalculable, Comvita's inventory also defies valuation.

On the positive side, even vulture funds seem wary. Such funds, which target distressed companies with a view to breaking them up at a profit, would already have added stock market value to net debt to calculate the theoretical cost of acquiring Comvita debt-free. They then would have compared that cost with the resale value of the company's assets. But who would several thousand tonnes of mānuka honey entice? 

A key point in Comvita's financial results for the current year is whether operating cash flow is sufficient to fund interest expense. And if it is not, whether asset sales can close the gap. Attention may focus on the resale value of the medical honey business whose annual sales have stalled at around NZD10m for the past five years.

Reputational Risk

Accounting and audit function failures are the death knell of a publicly traded company. Evidence of both at Comvita spells reputational risk for investment bank research departments which can be expected to give the stock a wide berth. 

Only seven weeks remain until the end of Comvita's financial year. A large overhang of stale bulls (disappointed speculators who became long-term investors as liquidity evaporated) can be expected to inhabit the stock. Those jaded bulls likely will stampede to get out at any uptick caused by positive news.

On the earnings front, the only certainty appears to be uncertainty. But more important than the amounts represented in the operating and financial data that nervous shareholders and the industry at large await to see, the integrity of those data must be unimpeachable. Comvita must restore the credibility of its accounting functions.