NZ seafood to become more investable with King Salmon IPO

Friday 02 September 2016 11:47 AM

NZ seafood to become more investable with King Salmon IPO targeting Asia, US growth

By Sophie Boot

Sept. 2 (BusinessDesk) - New Zealand King Salmon's planned initial public offering will give investors another way to gain exposure to the nation's under-represented seafood sector as the Marlborough Sounds fish-farmer raises funds to build more farms and lift sales to Asia and the US.

New Zealand's exports of fish, crustaceans and molluscs were worth $1.58 billion in the year ended July 31, amounting to about 3.2 percent of total exports, but the combined market value of existing listed seafood and fish product companies Sanford and SeaDragon was just 0.5 percent of the total NZX market capitalisation of $125 billion in the same period. Comvita, which owns 13 percent of Seadragon, also produces fish oil products, while Pharmazen, which is listed on the Unlisted platform, produces marine oils and powder.

On Monday, chief executive Grant Rosewarne said King Salmon expects to raise $30 million in a float which would see long-term majority shareholder Oregon Group drop from its current 51 percent to a 40 percent shareholding, while Auckland-based investor Direct Capital had yet to decide how much of its 42 percent stake to sell down. The three-decade-old company would list on both the New Zealand and Australian stock exchanges.

New capital raised would be used to help fund three new salmon farms in the Marlborough Sounds, which King Salmon won resource consents for last year after a marathon process that saw the company's name attached to a landmark Supreme Court interpretation of the Resource Management Act in relation to outstanding coastal landscapes.

In a fact sheet, King Salmon says it harvested and processed 6,300 metric tonnes of salmon in 2016, and three new sea farms, which gained consents in 2014, will allow it to increase volumes to around 9,500 metric tonnes by 2021 and approximately double existing production over time.

The company turned over $114.1 million to produce pro forma earnings before interest, tax, depreciation and amortisation (ebitda) of $16 million in the year toJune 30, and is expected to declare fully imputed dividends of $5 million in the current financial year, rising to $5.6 million in 2017/18, with a target payout ratio of 50 percent of net profit after tax.

King Salmon is forecasting 14 percent revenue growth in 2017, and a further 10 percent in 2018 to $143.6 million, with ebitda predicted to hit $26.1 million that year.

It expects 75 percent of its volume growth to be sold offshore with the remaining quarter "to support moderate growth in the domestic market," meaning that by 2021 it will sell more than half of its products offshore.

"This export focus reflects strong demand from these markets that New Zealand King Salmon has not previously had adequate volumes to satisfy," the company said. "The plan is to expand Regal smoked salmon's presence in key offshore markets in the future (in particular, Asia ex-Japan and North America)."

(BusinessDesk)

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