I think we are seeing confirmation of the bottom being in the...

I think we are seeing confirmation of the bottom being in the rear view mirror - I think..

The stock price movements have been quite positive. We pushed through and set recent highs on 4/5th of March and closed above recent highs, which is a positive sign. I don't really read squiggles on the charts, but it does look to a layperson that we may have broken that downward trendline.

To the fundamentals though, the global salmon prices @TerritoryTrader and @aza have posted are really interesting. Important to note that Tassal is not leveraged as much as others (i.e. Huon) to the global price; and the prices this time of year are typically higher.

In the most recent earnings report, Mark took pains to note how depressed global prices have affected the recent results. He did not however present sensitivity analysis of TGR's EBITDA / Global Hog/KG prices. I think a shift of +50% from the lows of 40NOK to the current price of 60NOK could lead to a total EBITDA increase of around 13% / $8.5m in the most bullish scenario*, comparing with TGR's estimate of -$13.6m EBITDA impact due to export prices in 1H21.

I looked at the futures price of Salmon to see how resilient the moves are and whether they are reliable. Two weeks ago I was not as convinced as I am now. Each time there was an increase in futures prices, the actual prices in the current month collapsed. So for c.9 months we had this situation were futures prices looked high, but actual prices collapsed at the last minute to the low 40s. You can see what I mean from this graph based on 1 January 2021,



Now look at last weeks graph where we saw they were approximating each other..

And now this week we see it has completely crossed over, and actual prices are above forward contract prices. The supply is not being dumped into the market depressing prices towards the end of the contract periods essentially.



You can also see it here. For January prices, the futures contract was high until we approached the month, at which point it came down to the actual price.


Compared with March, where both have pushed up higher.



So not only are forward prices being pushed up, but the forward prices are approximating the actual prices. Big shift... I think. I'll be keenly watching Q4-21 forward prices to see if they are resilient and maintain above 60NOK.

*My assumptions: Export price TGR receives is +20% to c.$12.00/KG based on 5yr averages; export quantity impacted by the price increase is 4120t based on 4 months of price increase and total quantity being 6243t for the half based on 1H21 quantities maintained; increase in revenue would be around $8.3m; EBITDA/KG (pre AASB16) would increase from $0.83 to $1.57 or by +89% based on pro-rata historical averages, though could be as low as 33% depending on transport costs; increase in EBITDA of $3m-$8.5m; no exchange rate impacts (the current NOK/AUD is pretty consistent from 2020 levels, though we have had currency headwinds prior to that).