Tuna and Kingfish farmer Clean Seas Tuna (ASX: CSS) has announced another capital raising, this time to raise $3.6 million to expand its Kingfish business.
This capital raising follows the earlier announcement of a revised business strategy by the new management team led by CEO Craig Foster which involves reducing operating costs, putting the Bluefin Tuna breeding program on hold and focusing on "increasing profitability through increased Kingfish production."
The plan involves expanding the Yellowtail Kingfish production from its current level of 500 tonnes per annum (tpa) to over 3000 tpa. This should be a realistic goal, as in past years Clean Seas has managed to produce up to 4000tpa. Major health issues amongst the Kingfish caused a near 30% mortality rate in 2011/ 2012, resulting in the current low production levels. Management has given guidance that they expect the Kingfish farming to be profitable above 1100 tpa.
It has been a painful five years for Clean Seas Tuna shareholders with the share price sinking right to the bottom of the ocean floor. At its peak during 2007, the market capitalisation approached $300 million and its share price touched a high of $2.35. Today the stock is languishing at 2 cents per share with a micro-capitalisation of just $10 million.
Fellow fish farmer Tassal (ASX: TGR) has managed to struggle through issues of its own and appears to be making good headway. Its recent interim results included a rise in profits and dividend. The market appears happy with the outlook, with its shares trading at a 52 week high. Meanwhile stock feed supplier Ridley Corp (ASX: RIC) which produces a broad range of feed solutions, including for the aquaculture industry, has updated the market advising that a number of external factors are currently affecting its business. This has sent its share price plummeting 18% to a 52 week low.
Foolish takeaway
Clean Seas Tuna provides an important reminder to investors that investing in early stage start-up businesses with unproven technology is not for the faint hearted. If investors choose to make higher risk/higher reward style investments then they need to be disciplined in how much of their portfolio they allocate to this strategy.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur owns shares in Tassal.
