a stockbrokers view

.............from Ords........

Clean Seas Tuna Ltd.
Termination of Coverage

CSS today announced a 1H10 reported NPAT loss of $14.2 million in spite 1 March 2010 of a 48% improvement in revenues to $19.3 million. This was another disappointing result highlighted by negative operating cash flows and
obvious weakness in Yellowtail Kingfish pricing.

In a bid to reduce growing inventory levels, management initiated an aggressive stock reduction strategy resulting in a 75% increase in sales volumes. Importantly, farmgate revenue was up only 48% implying the existence of significant discounting. We expect that this discounting strategy will make it difficult for CSS to regain pricing margins in the short to medium term and hence we remain concerned about the ongoing profitability of the Kingfish business.

Broadly, we believe this result was indicative of a 'wipe the slate clean' approach which is always likely to cause short term distress to short term company profits. This was no exception. Encouragingly, the key aim of reducing inventory levels seems to have succeeded with total inventory levels reducing by 1,831 tonnes. Additionally, fingerling production was also cut back considerably which, in our view, is also a necessary initiative.

Southern Bluefin Tuna (SBT) update. For CSS, the key to generating longer term value lies in its ability to commercially breed SBT. To this end, CSS are making in-roads which are likely to generate longer term upside. Management specifies that fertilised eggs from this years spawning have successfully been transferred to the Arno Bay facility where they are undergoing larval rearing trials. We do not expect this years class of SBT to generate a commercial harvest volume.

Due to lack of investor interest and a realignment of coverage we are terminating coverage of Clean Seas Tuna Ltd. Effective upon the termination of coverage, the last recommendation should not be relied upon going forward.