Beating the recessionary tide
OCEANA IN THESE DESPERATE DAYS fishing specialist Oceana Group may be one of the few stocks on the JSE that can be contemplated from a growth perspective. Its results for the year to end-September 2008 were pleasing, with most of Oceana’s sprawling fishing activities (save export markets for squid and hake) performing well.
Though revenues were up 15% to R3bn, a leaner corporate ship meant muchimproved margins pushed operating profits up 34% to R317m. Earnings came in 44% higher at 243c/share and with net cash flow a reassuring R320m, the 47% hike in the dividend to 156c/share was more than justified.
It seems its previously turbulent fishing waters have calmed. Oceana is finding sufficient fish at a time when demand is buoyant in both emerging markets (where increased spending power is bringing seafood to more tables) and developed markets (where seafood is increasingly seen as a healthy alternative to red meat).
Historically, Oceana is trading on an earnings multiple of just on nine times – a rather modest rating for a well-managed business with valuable fishing rights and excellent brands (Lucky Star and Glenryck). Arguably, Oceana’s forward earnings multiple is probably closer to seven times if we assume the group should be able to improve profitability in its financial year ahead.
But we must remember that its past set of results – when the average US dollar/ rand exchange rate was US$1/R7,40 – were achieved without Oceana’s substantial export and offshore businesses benefiting from a weaker rand.
Aside from a fatter bottom line in the year to end-September 2009, investors should also probably take note of Oceana’s intention to make selective acquisitions. With more than R200m in the bank, the group looks likely to dangle a line to catch small to medium-sized fishing enterprises. We reckon Oceana is a buy at current levels.