Many may have heard of NZS over the past month as it was an attractive short term trade on this forum - although upon further research this is not the normal short term trade where Id personally want to profit-take my 100% gains and run just yet. This thread is an introduction to NZS and brief collation of research for new and old holders who see the strong potential of incredible growth for NZS over the next 2-4 quarters.
NZS have made $1M in revenue over the past 4 months, representing incredible growth following the completion of their nutraceutical manufacturing acquisition of KDI. NZS is currently trading at 2.8c with a market cap of $20M.
Introduction: New Zealand Coastal Seafoods is not as first seems, it is
not a fishing company.
It is in fact a Marine Biotech that manufactures Nutraceutical products from fish maw, mussels, oysters and other high quality NZ marine life. NZS do not participate in fishing side of the industry at all. The word "Nutraceuticals" is derived from the words "Nutrition" and "Pharmaceuticals", meaning food, or parts of a food, that provide medical or health benefits, including the prevention and treatment of disease.
*Nutraceuticals do not require FDA clinical trial clearance to reach the market, as they fall under food classification, therefore avoiding the most time consuming and costly of biotech expenses, which attract an incredibly high failure rate.*
Imagine a product that attracts the revenue and margins as enjoyed by a pharmaceutical drug company, but doesn't require the upfront costs of the FDA trial process, or expensive sales channels of the pharmaceutical industry.
Welcome to the "Cocaine of the Sea", dried and powdered Ling Maw. $1000/kg when dried.
- Ling Fish, home to the pristine NZ deep sea waters.
Fish maw is the commercial term for the dried air bladders of large fish and for the Chinese it’s considered to be
one of the four traditional delicacies of the sea alongside abalone, sea cucumber and shark’s fin due to its high nutritional content. NZS sell two of the four delicacies, Fish maw and Abalone.
The Chinese have been serving fish maw for hundreds of years with stories about chefs preparing fish maw dishes for emperors in grand banquets at celebrations for the Han Dynasty family and important visiting dignitaries. Many Chinese people believe fish maw represents fortune and health, so today, fish maw dishes are popular for special occasions like Chinese New Year, birthdays and weddings.
Nutraceutical Properties: Highly valued for the health benefits, fish maw is reported to contain rich proteins and nutrients, be high in good collagen, ionic acid and unsaturated fatty acid. It’s also believed to be effective in healing weak lungs, replenishing kidneys’ and boosting stamina. Many Chinese people believe that by drinking fish maw soup and eating fish maw dishes they can improve their skin, prevent ageing and brighten their skin tone. Fish maw has no fishy taste, instead, it absorbs the flavours of other ingredients it is cooked with.
The anti aging properties is the largest draw card for middle to upper class Chinese customers.
NZS Revenue: Ling Maw % of Revenue to Date:
Ling Maw made up the core of the revenue that NZS have enjoyed over the past year, although following management commentary this is shortly to be eclipsed by the booming market of Marine Nutraceutical powders and oils. NZS have spent the past 4 months completing their own Nutraceutical manufacturing facility which has been in operation for the past 2 months, alongside the acquisition of KDI, a nutraceutical manufacturing business. We have yet to see the major contracts and revenue from this market. Although following managements commentary, this quarter is the likely trigger for this to occur. I believe the $4.4M Ling Maw contract was as far as initial investors looked in regards to NZS revenue, missing the bigger picture of vast and diverse marine nutraceutical market potential. Ignoring MD&A commentary and revenue guidelines, as disclosed below regarding this booming market, warranting an expected "tripling of employees, from 25 to 75".The following is from an interview director Aldo Miccio conducted with NZ website stuff.co.nz:
"Marine biotech company, New Zealand Coastal Seafoods, has built a business out of exporting the dried swim bladders of the eel-like deep water fish, ling – highly prized in Asia for its collagen content.
But Coastal Seafoods has now set its sites on exporting the powders and oils derived from green shell mussels, oysters and seaweeds to Europe and the United States, to be processed into pharmaceutical-grade health supplements, often in the form of capsules.
While ling maw was still its biggest seller, Miccio predicted this would change in the next few months as it developed the nutraceutical business."The bulk of products going to Europe and the States will be oils. The more value you can add the more profits you can generate," he said. Its Christchurch factory was recently certified to export high grade pharmaceutical products to the US and Europe.
"We view ourselves now as a biotech company. Having gone from a health fast moving consumer goods' product, we are now starting to process and dry the ling and extract the collagen from it ourselves.
Coastal Seafoods employed about 25 people and expected its factory staff to triple over the next year as production ramped up."
NZS Market Reach & Penetration: NZS have only been selling nutraceuticals in Asia over the past quarter following completion of their vertical integration of powder and oil manufacturing facility in Christchurch, while also acquiring KDI,
a nutraceutical manufacturing company to allow greater margins. Following their growth strategy, they have also obtained US and EU certification allowing for global sales channels.
Current Contracts:
$4.4M Ling Maw Contract - China
$400K Oyster Powder Contract - New Zealand
$150K Ling Maw Trial Contract - Hong Kong
(US and European Certifications only just signed in May, allowing for major new markets to penetrate)
$120K Astaxanthin Oil - United States
$60K Mussel Powder Contract - Europe
Ling Maw forms 85% of their current revenue with net $4.55M expected for the next year, with MD&A commentary that this will "change over the next few months as it developed the nutraceutical business" and that staff will "triple over the next year as production ramped up", marking the perfect entry in a longer term hold. As good as this was a short term trade, the deeper you dig and the more pieces you put together, the more promising the NZS long term hold looks.
I expect to hear announcements regarding further contracts, in the figure ball park of $3-5M over the next quarter, representing exponential revenue growth with far better margins now that manufacturing processes have been brought internal, rather than sub contracted. NZS are now almost purely focused on sales after finishing their nutraceutical manufacturing facilities over the past quarter. With international import certifications acquired, I think this assumption of exponential revenue is strong. Annual revenue of $20M by Q32021 is likely if this revenue guidance comes to fruition.
This tripling of employees was discussed with CEO Andrew Peti during a factory tour with HC posters, it was said that the facility is expected to be running 24/7 as contracts roll in, with new employees working night shifts with full intent to keep it producing every hour of every day of the week before scaling facilities further in coming years when required. Logic suggests this tripling of employees is met with expected correlated nutraceutical revenue growth via undisclosed possible major contract signings over "the next few months". Knowing this revenue guidance prior to contract announcements, it marks a great opportunity to enter a position in NZS as a speculative play, or for my holdings, to maintain the position for another 3-6 months and see what nutraceutical contracts warrant a tripling of NZS labour force. This nutraceutical market penetration means bigger contracts with bigger margins, truly a company maker from the mere $20M market cap it resides at today.
Management:Aldo Miccio: Co Founder and Director: Previous Mayor of Nelson, a NewZealand City home to the largest fishing port in Australasia. The contacts he possesses in the fisheries community are immense, as NZS only manufacture the fish/marine products and not catch them, this is of utmost importance to have a director deeply rooted in the fisheries community. I have emailed Aldo on multiple occassions regarding queries, all of which have been answered within 12 hours, weekday and weekend. A breathe of fresh air for companies with sub $20M market caps. He has also facilitated phone calls with posters on HC regarding queries, he is a pleasure to deal with. He owns 50M NZS shares, worth $1.2M - representing strong skin in the game and remains the largest shareholder.
Andrew Peti: CEO: Andrew has more than 14 years’ commercial experience in the seafood industry including 8 years as Operations Manager at Ngai Tahu Seafoods. Previously COO and recently promoted to NZS CEO, in terms of operations boots on the ground management, this is as good as you could hope for in a company of this size. He has also facilitated a tour of the newly built facilities for HC posters in previous weeks. The shareholder centric management is a characteristic of a company worth much, much more. Its a blessing to find a company this small with management that prioritize shareholders this highly.
Anna Lee Fraser: CSO: 11 years experience working as the National BDM of Pure Waters NZ, a position where she focused on export sales and operations between New Zealand and Asia.Managing both branded and private label contracts across China, Hong Kong, Singapore, Vietnam, Cambodia, South Korea and Australia, Anna-Lee brings extensive knowledge of supply chain, risk and compliance requirements for exporting products into Asia that will benefit New Zealand Coastal Seafood clients, and their customers alike. This paired with the ReachChina sales team, NZS is in hands for quick market penetration into the Nutraceutical market now with the facilities and export certification obtained in the past 3 months.
NewZealand: Safe Haven from Covid-19:Operating in NewZealand, NZS possesses a unique quality in the world of Covid-19. It has no regulatory risk on operations. Not only that, the characteristic of the pristine, clear waters that makes NZ marine life attractive to the Asian markets is now magnified by the Covid Free feather in its cap - especially after imported meat products were met under strong scrutiny and testing last quarter after outbreaks were found via imported meat wet markets. The NZ origins of NZS will attract a stock premium in coming months if Covid pesists, as operations are unaffected and Asian demand for NZ products increase.
Conclusion:
This is just a brief collation of research, outlining the very short term catalysts for NZS and summary of business operations that are not obvious when searching through announcements. Upon this MD&A expected revenue coming to fruition, I expect NZS to rerate heavily to $40M market cap over the next 6 months, with a target of 5.5c, representing a further 100% gain as investors see the significant revenue growth that NZS in the nutraceutical market has to offer. I hope this is of use to those just starting to look into NZS, and why it is so much more than a short term play.
GLTAH, as always DYOR, not financial advice. I will do a similar quarterly break down of revenue for Q3 as more comes to light over the coming weeks.
(20min delay)