CSS - Clean Seas Seafood

[System]

On December 7th, 2016, Clean Seas Tuna Limited changed its name to Clean Seas Seafood Limited.

 

[pixel]

Presentations, FY18 Guidance out this morning
... and the early enthusiasts lap it up by the Millions.

I see a possibility for a drop to 4.4 before eod.

 

[tge oracle]

I can't believe that I am back posting on CSS. I was convinced they would fail and end up de-listing, however, their progress with YTK can not be denied any longer. I could never understand why they didn't pursue the course of a profitable YTK business before embarking on the SBT project. The new management and dilution of the Stehr's and their subsequent influence is, I guess, the reason for success in building this business.
As a long term investor through many market cycles I have to accept that my previous posts were wrong and that CSS now presents as a compelling investment, not without risk, but none the less, appears to be very much on the right track.
I have swallowed my pride and re-invested in CSS today.
l look forward to posting, positively, in the months/years ahead.....just like the early days.

Disc- Re-invested in CSS.

 

[skc]

I can't believe that I am back posting on CSS. I was convinced they would fail and end up de-listing, however, their progress with YTK can not be denied any longer. I could never understand why they didn't pursue the course of a profitable YTK business before embarking on the SBT project. The new management and dilution of the Stehr's and their subsequent influence is, I guess, the reason for success in building this business.
As a long term investor through many market cycles I have to accept that my previous posts were wrong and that CSS now presents as a compelling investment, not without risk, but none the less, appears to be very much on the right track.
I have swallowed my pride and re-invested in CSS today.
l look forward to posting, positively, in the months/years ahead.....just like the early days.

Disc- Re-invested in CSS.

Yes a string of good announcements has pipped my interest. It seems the company is now almost approaching competence. The projected profits are nice but would like to see some cashflow to match the accounting profits. This won't come for another period or two and no doubt the share price would run well in anticipation of that. It is worth noting though that they have really had 1 year of good fish growth so still lacking a bit of track record. I am tempted to put up a speculative-sized position...

 

[McLovin]

Anyone know the status of the lawsuit against their feed supplier? They're claiming ~$40m. Given their MC is only $65m even if they only get half what they are claiming that's a pretty big free kick.

 

[skc]

Anyone know the status of the lawsuit against their feed supplier? They're claiming ~$40m. Given their MC is only $65m even if they only get half what they are claiming that's a pretty big free kick.

The claim is that the feed supplied was lacking in certain nutrient. It "should" be something that can be proven scientifically? Did Skretting design of custom blend for CSS' fish? If not then there might be other customers impacted as well?

I guess what I am trying to say is that, if it's easily proven then Skretting would be seeking settlement out of court...

No idea about the status, but I don't really expect much. A free option I guess.

 

[McLovin]

The claim is that the feed supplied was lacking in certain nutrient. It "should" be something that can be proven scientifically? Did Skretting design of custom blend for CSS' fish? If not then there might be other customers impacted as well?

I guess what I am trying to say is that, if it's easily proven then Skretting would be seeking settlement out of court...

No idea about the status, but I don't really expect much. A free option I guess.

I don't expect a whole lot from it. You do have to wonder why it took them 3.5 years to work out the feed was deficient. If your fish are dying wouldn't the first thing you'd do be to analyse their diet?

 

[Garpal Gumnut]

The claim is that the feed supplied was lacking in certain nutrient. It "should" be something that can be proven scientifically? Did Skretting design of custom blend for CSS' fish? If not then there might be other customers impacted as well?

I guess what I am trying to say is that, if it's easily proven then Skretting would be seeking settlement out of court...

No idea about the status, but I don't really expect much. A free option I guess.

It's not as easy as that I'm afraid.

If Skretting are smaller than CSS and push came to shove they could liquidate and start off again tomorrow with new directors and a new name.

If they are bigger than CSS they will win the case through either a valid case or legal attrition.

Let it run, but don't get involved in the race.

gg

 

[tge oracle]

It, finally, looks like CSS have realised that building a profitable company takes time
and an appreciating share price takes more than spin and hollow promises. I am feeling significantly more positive that this company, with it's new management is on the right track. YTK was always a quality product that, if managed and marketed well, would become a popular product within the aquaculture markets. They appear to have learnt from the hard lessons of the past and are progressing toward a responsible , profitable company such as TGR and HUO.
The future is looking bright, as such, I am continuing to accumulate CSS.

Disc- Invested in CSS, and accumulating more. DYOR

 

[john5]

any opinions on the rally this past week?

 

[tge oracle]

any opinions on the rally this past week?

Yes, as per my previous thread I was a major buyer, post announcement. CSS is a major portion of my portfolio now and I am a long term investor, not a trader. I have sat through the ups and downs in CSS since it listed when I invested in the float. I actually, feel more confident now about CSS than anytime in the past. Deep value investors, particularly small cap fund managers , are starting to realise the potential for CSS with it's high quality YTK so could be buyers. I also wouldn't rule out a potential suitor, but have no specific information or indication that this could be happening, only that HUO have invested heavily in YTK in Port Stephens, they are smart operators and see value/potential in YTK.
I intend holding tight as I believe CSS will deliver substantial long term returns to investors.

Disc - Invested ( heavily ) in CSS again. Ceased accumulation due to overweight holding.

 

[pixel]

I see a flag pattern developing. Break below 6.5c would raise concern; but if it breaks above 7.2c, I take that as a continuation signal.

Curently, I don't hold - ctta

 

[tge oracle]

It will be interesting to see the details of the Cap Raising on friday but I am of an opinion that this is to further expand grow out capacity to meet increased demand. The new processing facility will drive demand through better handling, processing and stock inventory. I am far more optimistic about the future of CSS than at any other time and see this measure as necessary to propel CSS in to a significant player in the aquaculture space. My intention is to take up full rights and oversubscribe, if available. This will be dependant on the information provided in the documentation.

Disc - Invested in CSS. DYOR.

 

[tge oracle]

Preliminary details hereunder, being conducted by Pattersons.

Aquaculture company Clean Seas Seafood is seeking to raise up to $14.2 million in fresh funds via an institutional placement and rights issue with Patersons Securities.
Clean Seas Seafood shares went into a trading halt on Tuesday morning as its broker pitched the story to potential investors.
The company was seeking to rase up to $14.2 million including a $6 million placement and one-for-10 rights issue to raise up to another $8.2 million.
The offer was priced at 6¢ a share which was a 22.3 per cent discount to the five day volume weighted average price.
Funds raised were to continue the company's turnaround strategy including growth in its Kingfish biomass business and invest in farming and processing facilities according to terms sent to potential investors.

 

[fiftyeight]

I have been undergoing significant style drift recently as I try and find a style which suits my life style. This has led me to investing and having a look at CSS. More of a working example to find what I don’t know.

I chose CSS for some very simple reasons, I like fish, I keep reading about the growing middle class, I like that they are environmentally friendly and I am a contrarian by nature so I like they have had recent large drawdowns. Any and all of these assumptions my prove to be wrong but that is what I hope to find out

It is taking much longer than I would like to get across CSS but this is an ongoing drama with working long hours. Lots of work still to go but below are some of my thoughts when I listened to the CSS Investor update

http://www.cleanseas.com.au/investors/media/

Not sure if it is confirmation bias (I just kinda like the idea of this business) but I like the Michael J Head (CEO). With infinitely more knowledge of business, aquaculture, Kingfish and CSS his thoughts match very well with my gut feel.

I really don’t think growing fish is the main issue for CSS, it is creating markets for their premium brand. After many setbacks CSS seem to have the farming sorted and are now good at it. CSS have a licence of around 9000T and are currently producing 3000T so there is plenty of room for expansion.

CSS also have the new processing facility with new technology, CSS are currently utilising 25% of the footprint with enough room to expand to process the current 9000T licence. The new transport boxes look great and support the premium look and apparently reduce shipping costs.

CSS are also working on the scale of each individual farm and have lodged an application to increase the size of farms. This could be dangerous when looking at the issues in Tasmania. If environmentalist are against this and start protesting it could be a disaster for the Hiramasa brand. CSS are well aware of this and are engaging the local communities before they go ahead with any expansion. Protestors of this kind are not always local and benefiting from then economic activity though? I am sure CSS are all over this but they need to tread carefully to avoid a Tasmania salmon drama.

The problem, well not problem lets call it challenge I think is the size of their premium market and how large and how quickly can they grow it.

There are several new entrants to the KingFish market who are selling at a discount however the Hiramasa brand is branded as the premium product with blind taste tests to support this.

No doubt the market is large, but I feel the success hangs on the marketing campaign of the Hiramasa brand and the expansion in to China and to some degree Japan.

Japan for the prestige of selling into premium sushi restaurants and China for size of a new market. Much work is being done in China though David J Head (CEO) mentions there is a lot of work still to do as it is introducing a new fish to the China market.

At around the 10 min mark Head explains that the marketing role out is about 3 months behind due to a change of the head of sales. Also that it was "bigger job than we thought it would be" with a marketing team is 1 person (poor audio quality). With new Aussie entrants to the market surely there will be a first mover advantage here and the Sales and Marketing team need to smashing down doors to take advantage of this. Not sure why they have a team of 1?

Head also comments that he does not see significant growth opportunities in to Coles and Woolies as Hiramasa is the most expensive fish in Australia. I wonder if the marketing team chase down opportunities to feature on shows like Master Chef and My Kitchen rules? There are some premium frozen fish sold in Europe supermarkets so there is a market though very limited.

So to me it seems CSS have the supply side taken care of and are setup well for expansion IF they can create enough demand.

My understanding of financials is pretty limited so next on the list is to read is, Financial Statement Analysis A Practitioner’s Guide. This will take some time.

So assuming the market is mostly correct given current information, I have made the assumption that current prices are roughly correct and I do like the potential growth story. So using this possibly false assumption I have purchased 50,000 CSS with an average of 0.0634. Depending on how things play out and how my understanding of the company develops I could see this number increasing.

 

[galumay]

My only observation would be that you have bought the narrative before the numbers! A mistake that has cost me dearly in the past!! I own TGR so I have followed CSS as far as basic news goes.

Edit - had a quick look at the numbers, still loss making on pretty skinny margins, at least the losses are reducing at a similar rate to revenues rising, also no debt to speak of which is a plus. If CSS can scale up efficiently then profitibility should come in the next few years and then you can start to work up a valuation for the business.

 

[fiftyeight]

My only observation would be that you have bought the narrative before the numbers! A mistake that has cost me dearly in the past!! I own TGR so I have followed CSS as far as basic news goes.

Edit - had a quick look at the numbers, still loss making on pretty skinny margins, at least the losses are reducing at a similar rate to revenues rising, also no debt to speak of which is a plus. If CSS can scale up efficiently then profitibility should come in the next few years and then you can start to work up a valuation for the business.

Thanks for the response galumay, I missed it at first. I will put an alert on this thread.

So assuming the market is mostly correct given current information, I have made the assumption that current prices are roughly correct

I have definitely bought the narrative assuming that current financials are baked in to the share price. Very basic and fraught with danger, something I do intend on getting my head around.

I have read the previous few reports and the numbers didnt look to bad to me. Plenty of cash, little debt, H2 should be much stronger and a recent $2.5million grant.

https://wcsecure.weblink.com.au/pdf/CSS/01969769.pdf

They also have the ongoing court case, which may drag out for years but could also add significant $$$.

I used the trial version on this site to have real basic look as well

https://simplywall.st/stocks/au/food-beverage-tobacco/asx-css/clean-seas-seafood-shares

If CSS can scale up efficiently

I am not sure this is issue, I think they have shown they can grow good fish and process efficiently. I think it is can they scale up while maintaining margins? They can only cut so many costs, then it comes down to increasing the size of the market which will be difficult with a marketing team of 1

 

[galumay]

.... I think it is can they scale up while maintaining margins? They can only cut so many costs, then it comes down to increasing the size of the market which will be difficult with a marketing team of 1

Thats exactly what I meant by scaling up efficiently!

 

[fiftyeight]

Thats exactly what I meant by scaling up efficiently!

Ah, I thought you were referring just to the efficiency of their farming

 

[McLovin]

I have definitely bought the narrative assuming that current financials are baked in to the share price.

I was in and out of this when it went on its sp run. Looks pretty attractive again given where the price has fallen back to. The cap raise was done to grow the fish stock which takes feed, that's expensed not capitalised, so I'd expect it drag on cashflow. The main growing period is over summer so expect cashflow to tick up in q4.