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Four aussie aquaculture stocks

Here are four stock ideas from the Aussie aquaculture industry that have been caught James Dunn’s research net.

The Australian aquaculture industry is on a roll, benefiting from global demand for protein and the twin drivers of a shift to healthy eating and consumers’ need-to-know that food comes from clean and sustainable sources. On all counts, the Australian industry – based mainly in Tasmania, which accounts for almost 60% of national production, and South Australia, which contributes 21% – ticks the right boxes, and its prospects for export success are excellent. Here are other stocks that have been caught in my research net.

 

Seafarms Group (SFG:ASX)

Market capitalisation: $158 million
Three-year total return: 0.1% a year
Historical FY19 dividend yield: no dividend
Historical FY19 price/earnings (P/E) ratio: no profit

 

At present – that is, until Tassal ramps up production – Seafarms Group is the largest producer of farmed prawns in Australia, producing 1,800 tonnes a year from three farms, a hatchery and a processing facility in North Queensland. It farms two separate prawn species, under the brand Crystal Bay: black tiger prawns and the banana prawn, supplying almost year-round.

In FY19, Seafarms produced 1,770 tonnes, up 22% on FY18. In October, Seafarms completed its first delivery of black tiger prawns to Japanese seafood giant Nippon Suisan Kaisha (Nissui), which is a strategic investor in the company. Under an offtake agreement announced in May, Seafarms will supply 15% of its Queensland production to Nissui.

The real story for Seafarms, however, is not in Queensland. The company is developing the $1.5 billion Project Sea Dragon prawn aquaculture project, which is a large‐scale, vertically integrated, land‐based, prawn aquaculture project being developed in northern Australia, across sites in Western Australia and the Northern Territory, with the flagship operation being a 10,000-hectare land-based prawn farm to be built on a former cattle operation known as Legune Station. The company says Project Sea Dragon will be capable of producing more than 150,000 tonnes of prawns a year, year-round, targeting export markets over an estimated 90-year project life.

The company says Project Sea Dragon is “implementation-ready” – in SFG’s annual report, released in September, CEO Chris Mitchell said it was “taking longer than initially planned” – but that Seafarms was “on track to deliver this significant project for northern Australia.”

Other industry players:

 

Ocean Grown Abalone (OGA:ASX)

Ocean Grown Abalone has developed the world’s first commercial greenlip abalone ocean ranching business in the pristine waters of Flinders Bay, Western Australia, to supply premium abalone under its Two Oceans Brand, to Asian markets. The company has created a system it calls “sea ranching,” in which hatchery-grown juvenile abalone are attached to artificial reefs, or “abitats,” in the wild and left to grow to maturity.

 

Murray Cod Australia (MCA:ASX)

Murray Cod Australia produces 1,000 tonnes a year of Australia’s iconic freshwater fish species, from 20 production dams at Griffith in western New South Wales. It plans to increase its pond footprint by an additional 35 ponds to meet a rise in customer demand. The company has weekly shipments of its premium restaurant brand Aquna going to Japan and the USA and regular shipments going to Hong Kong and Singapore. World-renowned chef Heston Blumenthal was so impressed after a visit to MCA’s Griffith base, he bought 1.5 million shares in the company.

 

Angel Seafood (AS1:ASX)

Angel Seafood grows oysters on the Eyre Peninsula in South Australia – Coffin Bay, Haslam and Cowell. Its multi-bay strategy provides significant competitive advantages in optimising growth and conditioning, fast tracking production to maximise asset utilisation and revenue. In FY19 Angel commissioned an AQIS accredited export facility at Port Lincoln which sent its first live oysters exports to Hong Kong in the fourth quarter. In FY19, Angel sold 5.3 million oysters, a 179% increase; revenue rose 193%, to $4.3 million, and the company struck a maiden net profit, up $1.4 million to $305,000. For FY20, Angel has given guidance of oyster sales of 8 million–10 million.


About the Author
James Dunn , Switzer Group

James Dunn is an author at Switzer Report, freelance finance journalist and media consultant. James was founding editor of Shares magazine, and formerly, the personal investment editor at The Australian. His first book, Share Investing for Dummies, was published by John Wiley & Co. in September 2002: a second edition was published in March 2007, and a third edition was published in April 2011. There have also been two editions of the mini-version, Getting Started in Shares for Dummies. James is also a regular finance commentator on Australian radio and television.