Why would you short Tassals *now*?, page-854

If the performance is solid, personally I won't be selling after a small bump. Made that mistake before. Salmon is a mature business, but prawns are just starting to scale and FCF should be opening up as growth CAPEX dwindles.

I've mentioned before what I think the known knowns and known unknowns are - and specifically what I'll be looking for in the report. Of course, sustainable FCF is the ultimate indicator of success for any business and @McQuade is right to focus on that.

For the salmon business, all indicators are that the market performance in 2H21 is better than the 5y long term average across exports, and normal conditions for domestic wholesale and retail *despite* Covid-19 lockdowns. The logic there is that Tassal has a larger share of the domestic retail (supermarket) sector which has growth, while domestic wholesale (restaurants) is higher margin. The headwind we face however is that 1H is always better than 2H (even in FY20 we only managed 52%/48% split which is the best performance) - that small difference is like $8m EBITDA by the way - the one thing to offset that is selling from inventory largely into the export market which hopefully they smashed in 2H21.

For prawns, really just hoping our margins remain strong. The investment case originally was that prawns would have an operating EBITDA margin of around ~20%, or put another way at $30/kg we should be making around $6/KG EBITDA. I think that's bullish at this stage as they are still working things out (distribution, operational efficiencies, etc) - but if we can get to $5/KG that'd be amazing in my opinion, $4/KG is probably priced into the market. And with 4,000t and most of that in 2H, that's up to +$20m/EBITDA on 1H results.

All the above is operational cash flow. In terms of investing cash flow (CAPEX), Mark has kind of told us what to expect here so hopefully no surprises. Total CAPEX of around $45m, down about $20m, and that was before the 6000ha sold from Exmoor (what was that, $25m?). Hopefully they provide us with an outlook on future CAPEX requirements are, as well as returning to stronger growth in prawns (5,500t+ in FY22 would be nice).

Two more sleeps til Christmas.