NZ seafood shaping up as a better investment

New Zealand King Salmon's planned initial public offering will give investors another way to gain exposure to the nation's under-represented seafood sector as the Marlborough Sounds fish farmer raises funds to build more farms and lift sales to Asia and the US.

New Zealand's exports of fish, crustaceans and molluscs were worth $1.58 billion in the year ended July, amounting to about 3.2% of total exports, but the combined market value of existing listed seafood and fish product companies Sanford and SeaDragon was just 0.5% of the total NZX market capitalisation of $125 billion in the same period.

Comvita, which owns 13% of Seadragon, also produces fish oil products, while Pharmazen, which is on the Unlisted platform, produces marine oils and powder.

On Monday, chief executive Grant Rosewarne said King Salmon expects to raise $30 million in a float which will see long-term majority shareholder Oregon Group drop from its current 51% to a 40% shareholding, while Auckland-based investor Direct Capital had yet to decide how much of its 42% stake to sell down. The three-decade-old company will list on both the New Zealand and Australian stock exchanges.

New capital raised will be used to help fund three new salmon farms in the Marlborough Sounds, which King Salmon won resource consents for last year after a marathon process that saw the company's name attached to a landmark Supreme Court interpretation of the Resource Management Act in relation to outstanding coastal landscapes.

In a fact sheet, King Salmon says it harvested and processed 6300 metric tonnes of salmon in 2016, and the three new sea farms will allow it to increase volumes to about 9500 metric tonnes by 2021 and double existing production over time.

The company turned over $114.1 million to produce proforma earnings before interest, tax, depreciation and amortisation (ebitda) of $16 million in the year to June and is expected to declare fully imputed dividends of $5 million in the current financial year, rising to $5.6 million in 2017/18, with a target payout ratio of 50% of net profit after tax.

King Salmon is forecasting 14% revenue growth in 2017, and a further 10% in 2018 to $143.6 million, with ebitda predicted to hit $26.1 million that year.

It expects 75% of its volume growth to be sold offshore with the remaining quarter "to support moderate growth in the domestic market," meaning that by 2021 it will sell more than half of its products offshore.

"This export focus reflects strong demand from these markets that New Zealand King Salmon has not previously had adequate volumes to satisfy," the company says.

"The plan is to expand Regal smoked salmon's presence in key offshore markets in the future (in particular, Asia ex-Japan and North America)."

(BusinessDesk)

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