Beat­ing the re­ces­sion­ary tide

Finweek English Edition - - Portfolio Punts - MARC HASEN­FUSS

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.