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Double blow sees Comvita shares drop 9.4pc

NZN 5/05/2017 Paul McBeth

Comvita shares sank 9.4 per cent as investment analysts cut their valuation for the manuka honey products maker, coinciding with yet another problem out of the Te Puke-based company's control with the discovery of myrtle rust in the Far North.

The shares fell as low as $6.07 in early trading on Friday, the lowest since January 23.

They were recently down 65 cents to $6.25 after Deutsche Bank cut its price target for the stock to $7.05 from a previous target of $9.

Deutsche Bank owns a stake in broking and research firm Craigs Investment Partners, whose executive chairman Neil Craig also heads up Comvita's board.

Grant Williamson, a director at Hamilton Hindin Greene, said Craigs Investment Partners' clients "have some pretty sizeable holdings" in Comvita and the 22 per cent cut in the price target came the same day that there was "more bad news" with the discovery in Kerikeri of myrtle rust, a fungal disease that can damage plants including manuka.

"The honey industry is going through a rough patch," Mr Williamson said. "It's one of the things in that sort of sector - you're going to have a bad year or two."

Comvita cut its profit guidance in April as a poor honey harvest came while efforts to clamp down on sales through China's informal online trading channels saw more aggressive competition, weighing on earnings.

Mr Craig has described the poor harvest as being a one-in-a-20-year event, and, given the company's inventory levels, shouldn't hit future profitability.

The shares have almost halved from a peak of $13 in May last year when the company posted a record annual profit with strong sales in New Zealand by visiting Asian tourists.

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