My prediction will only be as good as your dad's. However I absolutely agree with his view seeing value in this company amidst a constrained global salmon supply trying to catch up to an ever growing demand for quality protein from a growing world population.
I hold a more medium to long term view and when Tassal corrects itself to trend like Marine Harvests (MHG:NO on Bloomberg, which is up 39% YoY), $6.00 and beyond appears a likely target.
Tassal is rapidly expanding it's farms and will use offshore 'fortress' pens in the future to benefit from even colder waters and stronger currents against which the fish likes to swim against as it passes more dissolved oxygen through their gills. Salmon feeds and grows fastest in the range of 13-16 degrees Celcius. So Tassal is well placed to meeting this demand with more supply thus boosting its earnings
We can see that Tassal sells around 96% of Salmon domestically either via retail or wholesale channels. The other 4% of revenues come from exports. Domestic market prices and margins are substantially higher than the export market. Addionally Tassal is able to make the recently acquired De Costi Seafoods even more profitable by replacing old supply contracts with its own salmon (head-on-gutted). Its all about distribution flexibility in the domestic market, and getting rid of the old contracts with Coles will not only lift margins but allow Tassal greater flexibility to tweak sales channels when they see fit (this is to better align timing of harvests, the size of the fish and the price of the HOG)
Thanks for your question.
Enjoy your salmon and shrimp on the barbie this weekend!
Ninja Tuna of the Bering Sea
TGR Price at posting:
$3.97 Sentiment: Buy Disclosure: Held
