Tim Boreham | July 31, 2007 LONG-TIME Criterion readers would be familiar with our sceptical stance on seafood stocks, with a string of earlier listed fish failures such as Sam's Seafood shaping our attitude.
Now, fish is the new black. Revived Tassie salmon outfit Tassal (TGR, $3.40) is making good money, while the Port Lincoln-based Clean Seas Tuna (CSS, $1.27) is well above water.
The US-based barramundi producer Australis Aquaculture (AAQ, 57c) should follow suit when its inventory of 1 million tiddlers are big enough for the dinner plate.
Yesterday, Western Kingfish listed in torrid market conditions after its $8 million raising, doing well to end above the 25c-a-share issue price. Then again, the raising was oversubscribed as it was backed by a marquee investor in Lachlan Murdoch, who holds 13 per cent.
Western Kingfish's game is about farming yellowtail kingfish for export markets, with a sideline in rock lobsters and Moreton Bay bugs. The facility is located within the Jurien Bay Marine Park, which is being promoted as a piscatorial centre of excellence to temper the West's unhealthy obsession with iron ore and Brian Burke.
Given the dearth of hard numbers in the prospectus, we can't be sure of the company's prospects. Suffice to say the fast-growing fleshy creatures -- which grow to 100kg but are knocked on the head at around 4kg -- are popular in Japan's sushi bars.
There's an ocean of experience behind the listing, in that it's backed by Stewart Graham, who founded Australis after defecting from less successful barra rival Cell Aquaculture (CAQ, 19c). Western Kingfish remains intertwined with Australis in that the latter holds 4 per cent of Western Kingfish, part of a deal to access Australis's growing US distribution presence and fish-rearing savoir faire.
Graham and family retain a 6 per cent stake in the outfit. The vendor, local rock lobster identity and director Merv Collinson, holds 11.75 per cent. Given the global pressure on most native fish stocks, fish farming is one of those green-tinged sectors which will enjoy the benefit of the doubt. Crack a big offshore market -- as Australis looks to be doing in the US -- and you'll leave competitors floundering.
The motives for listing seem innocuous enough, in that most of the funds will be used for working capital and inventory expansion. That's after the $710,000 pocketed by brokers and other float hangers-on.
A lot can go wrong, notably disease. As the prospectus warns by way of routine disclosure: "There can be no certainty that the company will achieve or sustain profitability or achieve or sustain positive cash flow from its operating activities."
Still, we rate Western Kingfish a speculative buy for those keen on an undersized early entrant. We prefer Australis, which is cracking the fussy US market with barra reared at its growing facility just out of Boston.
AAQ Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
