investment case

Main trends :
. + 50 % for pearls production since FY17. Steady increase except in 2020 (flat),
. - 27 % for operating expenses since FY 17.
. since FY 21 : price increase.
This last element (together with quality production improvement) had a large impact on gross margin which increased from 38 % in FY 20 to 54.1 % in FY 21.

These trends are explained by several elements :
- internal hard work to decrease the costs and improve the quality of production,
- probably some luck as they were forced to rethink their distribution, following covid (online auctions allow them to sell at higher prices),
- improvement of market conditions.

Difficult to know if the impact of these trends had already a full impact.
It seems to me that they still have some room to do more sales online, as they just represented 18 % of their FY 21 sales. So, they can probably improve further their margins thanks to a pricing effect.

All these improvements had already a large effect on their earnings, with a free cash flow of 3.3 m during H1 22, which represents 20 % of their Enterprise Value (just for one half of the year).
The company has also turned net cash (of 1.8 m) in Dec 21.

Regarding the risks, I see 2 main ones :
- microcap, so can be severely affected in case of market correction (but the market can also appreciate their free cash flow yield of around 40 %),
- exposure to natural disasters as all their oyster farms are located in Indonesia.
If I am not wrong, the last major natural disaster affecting them was a volcano eruption in Dec 20 near one of their 2 hatchery locations. At the end, it seemed to have had a limited impact on the company. So their geographic diversification (7 farms) seems to help them with this risk.