A bit like bombastic US president Donald Trump, oysters are polarising.
People either love them or hate them. Something about the texture.
That's why the latest company to float on the ASX might not be to everyone's taste.
For 4 years, East 33 Limited (ASX: E33) has been bringing together independent farms and distributors in the supply chain of Sydney Rock Oysters under a single company for the first time in that industry.
Now with a large tranche of acquisitions currently in progress to complete the picture, its shares will become publicly available on 3 December.
East 33 executive chair James Garton told The Motley Fool that the Sydney Rock Oyster scene had traditionally been a cottage industry. Fewer than 5 farmers had been producing more than a million dozen oysters each year.
"This is an enterprise literally centuries in the making," he said.
"What we did was bring together a whole set of corporate nous – marketing, management, access to capital – to realise the vision of the farmers."
The initial public offering (IPO) will raise $32 million, which will help the company complete a second round of acquisitions to bring more of the supply chain under its roof.
East 33 will start its life on the ASX with an IPO share price of 20 cents and a market capitalisation of $83 million.
Bullish growth for Sydney Rock Oysters
Massive growth projections had pumped up demand for the initial public offer, according to Garton.
"We've got such strong institutional interest fundamentally because we're talking 300% growth a year. That's (like) a tech stock," he said.
"But you've got the backing of solid historic earnings. And that's underscored by National Australia Bank Ltd (ASX: NAB) giving us $10 million of senior debt as acquisition finance."
After 3 years as an ASX-listed company, Garton said East 33 expects to have a share price of $1, earnings before interest, tax, depreciation and amortisation (EBITDA) of $20 million and revenue of $50 million.
Garton said the industry has so much potential because of the scarcity of product.
"There has never been a Sydney Rock Oyster produced that hasn't been sold. It just doesn't exist. This is a supply constraint, not a demand problem."
He also said that the business would have low ongoing capital costs.
"You have an infinite water life. The assets we put into the water to carry the oysters have a 25-year productive life."
Similar to what Coca-Cola Co (NYSE: KO) has been doing for more than 130 years, East 33 will market Sydney Rock Oysters as a lifestyle consumable.
As well as supplying caterers, restaurants and seafood retailers, East 33's direct sales to the public have exploded in the year of COVID-19.
"From a zero start in April, we're up to a million oysters annually selling online."
Garton said the oyster industry was a maturing one in which many farmers were looking at succession planning. But the short-term strategy for East 33 would be simple.
"Increase volume, reduce the unit cost and sell more into higher value channels," he said.
"The existing waterway that we have has technical capacity to take us from 6 million oysters to 39 million oysters."
