From reading the reports and the presentation, a few things caught my attention:
1. Dividends have continued to grow on a grossed up basis and cash flows have increased even with higher costs from feeding fish that needed to be kept in the water longer.
2. Salmon prices will only continue to grow from here in domestic and international markets as demand outstrips supply over the medium term. Notice supply constraints from major players in Norway.
3. Tassal's profits for FY16 on EPS terms at 32.95 cents exceeded average analyst estimates of 28 cents for FY16 and 30cents for FY17. Note this achievement while the Coles contract was still in place for the majority of FY16. From FY17, Tassal will be able to balance sales in the wholesale/retail/export markets with much more flexibility and drive margins from there.
4. De Costi's Seafood boosted Tassal's earnings and management had previously forecasted this in the 1H16 results. The successful integration of this newly acquired business opens up greater distribution channels in the Eastern Seaboard which is highly beneficial as management tweaks the sales mix throughout the year depending on costs and salmon HOG prices.
At the current share price with FY17 forward PE <12, current ratio >3, operating margin >20%, ROE = 12%, grossed up dividend yield at 5.425% (100% franked ) from this coming dividend payment onwards Tassal's recent dip in share price from 4.40 a few weeks ago appears an attractive entry point for long term value investors out there.
Fire up the barbie and pop that champagne!
Ninja Tuna of the Bering Sea
TGR Price at posting:
$3.96 Sentiment: Buy Disclosure: Held
