The Tassal Group Limited (ASX: TGR) share price has climbed around 10% over the course of the past year after the Tasmanian salmon farmer handed in a full year adjusted profit of $50.3 million on revenue of $509.5 million for the financial year ending June 30 2018.
The adjusted profit and revenue were up 19% and 13% over the prior fiscal year. Total dividends per share of 16 cents were also up a solid 6.7% on the prior year.
The group has grown organically and via acquisition over the past five years and this September announced the $31.9 million acquisition of the prawn aquaculture business of the Fortune Group. The deal was completed by Tassal subsidiary De Costi seafoods that Tassal itself acquired a couple of years ago.
Tassal reports that consumer demand for prawns mainly farmed in the warm waters of Queensland is soaring and that it has plan to lift production of prawns from 700 tonnes per annum in financial year 2019 to more than 3,000 tonnes per year in “the next three to five years”.
The group is targeting EBITDA (operating income) of $15 million to $25 million per year within five years as a result of the acquisition. In FY 2018 the whole Tassal Group posted operating EBITDA of just under $100 million.
The group has issued dilutive equity over the years to fund its acquisitions and used debt with a current gearing (debt to equity) ration of 18.7% as at June 30, 2018. Investors then should keep an eye on the balance sheet as Tassal is a relatively capital intensive business.
The group’s growth opportunities include expanding operational capacity in its home base of Tasmania, which is supported by the relatively strong consumer demand for salmon and prawns allowing for steady retail and wholesale price increases.
Tassal has one major rival in Tasmania in the form of Huon Aquaculture Group Ltd (ASX: HUO) with the two companies big rivals and recently clashing over the operating policies of each other in Tasmania.
Other than that though competition is quite limited in Australia thanks to the capital intensive nature of the business, its complexity, and high barriers to entry.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
- Why these 4 shares are being heavily shorted – December 11, 2018 3:23pm
- S&P/ASX 200 at 2-year low: Here are 6 popular shares getting crushed today – December 10, 2018 4:33pm
- The ANZ Bank share price nears 52-week low as analyst flags $3.3 billion buyback potential – December 10, 2018 3:10pm