Oyster supplier East 33 (ASX:E33) sets out to make a splash on ASX debut

East 33 Limited (ASX: E33) is an aquaculture company aiming to get listed on the ASX on 3 December. Here's a closer look at the company.

Plate of oysters and 2 glasses of champagne

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

East 33 Limited (ASX: E33) is an aquaculture company specialising in oyster production and supply. The company is aiming to get listed on the ASX (indicative date 3 December 2020) and opened its IPO on 23 October. It is setting out to raise $32 million through the issue of 160 million new shares at 20 cents per share.

A closer look at East 33

East 33 was formed to acquire and operate a portfolio of long-existing oyster farms and distributors, with the goal of creating Australia's largest vertically integrated group of Sydney rock oyster producers, suppliers and exporters. According to East 33's prospectus, it will control approximately 9% of Sydney rock oyster production and 25% of industry distribution.

There are two stages to East 33's acquisition strategy. The first stage was completed in December 2019, with 4 assets acquired. The second stage is the acquisition of another 6 assets, which will be carried out as a condition to the company listing on the ASX.

A key feature of its acquisition model is the continued participation of the oysterfarm operators in the new company. Many of these operators are families that have been involved in the industry for generations.

It also aims to create an 'iconic' Australian export by taking the Sydney rock oyster to the world. In a press release announcing the IPO, East 33's co-founder and executive chair James Garton said:

We are proud to be part of the transformation of the Sydney Rock Oyster industry. This unique oyster has been enjoyed in Australia for more than 150 years and we look forward to deploying the skills of our farmers to showcase it to the world. The Sydney Rock Oyster should be our native version of French Champagne or Beluga Caviar.

East 33's financial performance

Let's look at East 33's profit as of June 2020: 

 

FY18 Audited ($m)

Change in %

FY19 Audited ($m)

Change in %

FY20 Audited ($m)

Gross revenue

18.96

34.39%

25.48

5.18%

26.80

Cost of Sales

-10.40

34.52%

-13.99

-8.90%

-12.84

Gross Profit

8.56

34.23%

11.49

21.49%

13.96

Table: author's own. Data Source: East 33 Prospectus

East 33's cost of sales dropped 8.9% in 2020. Management attributes this cost reduction to the aggregation of oyster farms, which has reduced production and transportation costs.

At the same time, East 33 is looking to increase its sales. Amongst all sales channels, distributing to local restaurants and international exports (to Japan, China and Singapore) took up 15% of the company's profit in 2020. The two segments also had the highest mark up price of 376% and 3.25%, respectively, compared to other parts of the value chain, according to the company's prospectus.

East 33's financing strategy

In conjunction with the equity raised, East 33 will receive debt financing to a value of $10 million. The company has advised the proceeds will be used for the following:

  • $27.1 million to fund the cash component of the consideration for acquisitions
  • $4.4 million to fund its growth capital expenditure
  • $1.6 million to fund its marketing and branding activities
  • $5.7 million to fund its administrative costs and working capital
  • $3.2 million to pay costs and expenses arising in connection with the offer and the other related transaction costs

East 33 will use more than 60% of the funds raised to fund acquisitions of oyster farms and distributors.

In addition to the funding strategy, East 33 will appoint two directors who have international brand experience gained through luxury goods group LVMH and China's largest privately-owned integrated aquatic port. The company expects these new hires to help increase East 33's capability to penetrate the high-end consumer market in Asia. 

East 33's IPO is due to close on 16 November, in view of a 3 December listing under the ticker E33.

Motley Fool contributor MWUaus 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.

More on Share Market News

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 dips on RBA interest rate decision

The ASX 200 gave up some of its intraday gains following the latest RBA interest rate announcement. But why?

Read more »

A man sees some good news on his phone and gives a little cheer.
Share Gainers

Why Capitol Health, Infratil, Newmont, and Race Oncology shares are charging higher

These shares are having a good session. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Beach Energy, Fortescue, Kina Securities, and Melbana Energy shares are dropping today

These shares are missing out on the good times today. But why?

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
52-Week Highs

CBA, DroneShield, and these ASX stocks just hit 52-week highs

These shares are flying high on Tuesday. What's going on?

Read more »

Man smiling at a laptop because of a rising share price.
Broker Notes

Macquarie shares have 10% upside: Morgan Stanley

Another bullish broker on Macquarie.

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Broker Notes

Is the ANZ share price 'the best value of the major banks'?

ANZ shares are in the green ahead of the Reserve Bank's next interest rate decision today.

Read more »

Two kids in superhero capes.
Small Cap Shares

2 ASX small-cap shares I'd buy for massive growth potential

I’m bullish about these two stocks.

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Broker Notes

Buy 'em now! Brokers name 3 ASX All Ords shares to add to your portfolio

Copper, technology, and healthcare are the themes among these newly buy-rated stocks.

Read more »