Morning Holders. Market hasn't done much in digesting the news -...

Morning Holders.

Market hasn't done much in digesting the news - probably because shorters have nothing to hang their hats on, longs have nothing to hang their hats on, and probably another six months before anything substantial happens.

Why didn't we export more in March-June?
I noted yesterday that I thought TGR management missed a trick with reducing their inventory. I ran some calculations on the basis of them selling into the export market 5,000t of their 7,000t frozen inventory during the March-June period when export prices were decent. @bug1 flagged this at the time. To be fair this would have been around 35 planes loads, which may have been difficult due to the air freight capacity - though they are doing it now in July and August? Regardless, we would have seen:

• Revenue up around +15% instead of 5%;
• Statutory EBITDA down 10% instead of 17%;
• Operating EBITDA up 8% instead of 0.6%;
• Air freight costs of around $24.9m instead of $16.4m
• Cash flow increased by $3.5m, and
• Reported operating cash flow up 29% instead of 22.4; and
• Statutory NPAT down 18.2% instead of 24.7%

Personally I think that would have made a difference to how the market reacted. Instead, this gets pushed to 1H22.

My outlook on the inflection point for positive free cash flow
The main long term thesis for investing in Tassal is that you believe the long term growth potential is quite strong, much of the investment in CAPEX is already made, and essentially we should see strong FCF. Or, you may just like fish. While personally I was hoping this would be achieved in 2H21 as the market conditions improved in around March, it seems it's FY22 and specifically 1H22 we should see this inflection point if market conditions continue as they are. In the long term, I still am betting that we see between FY20 and FY30 a doubling of revenue, a tripling of EBITDA and a quadrupling of cash flow that directly impacts dividends and stock prices.

I don't like the way TGR management presents some of their numbers, so I recreated the core of the financial statements to suit my models. Here are my workings for anyone interested.