Angel Seafood Holdings Ltd

AS1 Details

3QFY19 Sales Came in Lower as Expected: Angel Seafood Holdings Ltd (ASX: AS1) is an Australian producer, manufacturer, marketer, and seller of certified organic and sustainable oysters. The company recently, informed that IFM Independent Fund Management AG as Trustee for the Bonafide Investment Fund – Best Catches I, has become an initial substantial holder of the company with the voting power of 6.94%.

The company recently confirmed that it has issued 1,200,000 Options and 1,000,000 Performance Rights.Exercise price for the option was $0.28 per option. Performance Rights were convertible at a rate of 1 ordinary share per performance right, subject to vesting.

The company released the responses related to Appendix 4C Query raised by ASX. The company mentioned that it does not expect the negative operating cash flows to be continued. Although, the company experienced negative operating cash flows for the period ended 31 March 2019, which was a result of expected lower sales for the quarter due to the natural cycle of oysters. The company also mentioned that oyster sales will be resulted in cash generation after a restart of the sales season in early April 2019. In addition to cash generated from sales, AS1 has access to the funds under a Loan facility with National Australia Bank for $4 million. Under this facility, the available fund was amounted to $1 million as at 31 March 2019.

Further, the company clarified that its operations are expected to be continued and will meet its business objectives on the basis of cash on hand, cash generated from operations and access to funds under available debt facilities.

Q3 FY2019 Activities Update & Appendix 4C: Sales for the 3QFY19 came in at $200k, which was in-line with expectations for lower sales for the quarter, earlier mentioned.Cash receipts from customers stood at $923k, primarily on the back of sales momentum from the previous quarter.

The company’s operations were focused on grading and tendering of the stock to minimise mortality during the summer season.Hence, mortality was comparatively lower than expected.

H1 FY19 Results Highlights: 1HFY19 has been a progressive period for the company as it made significant steps such as investments to build substantial scale in the business, growing its water holdings and oyster stocks, etc. The company experienced sales of $2.48 million in 1HFY19, recording a pcp growth of 184%, which represented sales of ~3 million oysters.

Normalised EBITDA in 1HFY19 stood at $271,545 against an EBITDA loss of $967,621 in 1HFY18.Total direct cost in 1HFY19 at $1,294,128 was 15% higher on pcp. Total expenses included the amount $152,689 related to the Hank purchase announced 29 Oct 18, which have substantially increased stock of oysters for the year to come. The full normalised results are presented below:


1HFY19 Normalised Operational Profit and Loss (Source: Company Reports)

Outlook and Stock Recommendation: The company is focused on maximising sales, underpinned by near capacity stock levels and investments in infrastructure. AS1 has remained focused to progress the development of its export strategy throughout the remainder of FY19 and into FY20. For the purpose, the company is building on the initial export sample programs previously undertaken in various Asian and Middle Eastern markets.

The company expects cash flow from operation to be positive in FY19. 1HFY19 net margin has remained in the negative territory at 38.9%, steeply below the industry median of positive 8.3%. 1HFY19 ROE at -8.8% also remained below the industry median of 9.8%.

Looking at the historical price performance, the stock has gained 29.63% on a YTD basis and ~21% in the last 6-months. The stock is currently trading towards the higher end of its 52-week range. Hence, considering the aforesaid facts along with the unavailability of profit in the books, and price appreciation over the past few months, etc, we suggest investors to book the profit and recommend a “Sell” rating on the stock at the current market price of $0.190 per share (up 8.571% on 14 June 2019).


AS1 Daily Chart (Source: Thomson Reuters) 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.