Tassal Group Limited boasts of big growth plans

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.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.