Tasmanian based salmon farmer Tassal has been one of Under the Radar’s most enduring performers, having more than quadrupled since we first rated it a buy back in 2012. We take a look at Australia’s next biggest operator, Huon Aquaculture, whose shares are trading at close to its IPO price from just over four years ago.
WHY IT'S WORTH WATCHING
Huon offers exposure to growing domestic and global demand for salmon because of its health benefits, while supply restrictions provide support to prices. Investment is increasing production capacity. High barriers due to regulatory requirements, capital demands and aquaculture constraints limit competition. But recent production issues at Huon have impacted fish size and numbers, which will weigh on FY19 performance. If the company can once again grow production in FY20, it could deliver double-digit operating profit growth.
WHAT'S NEW?
Huon reported a mixed FY18 result emphasising aquaculture related risks. Operating NPAT increased 23% to $35.4m reflecting a 25% lift in production volumes to 22,968, tonnes for the 12 months to 30 June 2018. The second half performance was soft, impacted by difficult growing conditions and disease due to warmer water. This saw the average HOG weight fall from 5.29kg in 1H18 to 4.27kg in 2H18. Partially offsetting this was strong pricing conditions. FY19 production guidance of 20,000 tonnes was reaffirmed at the AGM at the end of October 2018. We are forecasting dividends for FY19 to be in line with last year at 10 cents.
**FY19 Forecast