CSS - Clean Seas Seafood

[FI$H]

Re: CSS - Clean Seas Tuna

The CSS managment has so far been very cautious and conservative with predictions and mostly surpassed them. In their recent investor presentation they suggest 5000t production with margins of 10$ per kg for SBT (FY 2011/2012). 7500t (very likely to be higher) of Kingfish with 3$ per kg margin (provided the farmgate price recedes to 8.5 $) for FY 2011. This translates to more than 70 million dollar operating profit. compare this to 250 million market capitalization and price-in the company's further future growth potential.

Right now the stock trades at a price-level that is lower than what it was before announcing the breeding success with SBT which is paradox. The stock is simply following the markets on very low volumes. SBT rearing will cost the company a fortune initially requiring them to raise more capital and probably issue more discounted shares. Shareholders that like to expand their position could strike a good deal if the stock trades very low on average till the end of the year...

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Someone sold a large parcel of shares yesterday, off market. I wonder who it was? and why?
I guess there will be an ASX change in substantial holding notice submitted soon.
Hopefully, this signals the bottom of the sell off since SBT fertilization news!

 

[FI$H]

Re: CSS - Clean Seas Tuna

Someone sold a large parcel of shares yesterday, off market. I wonder who it was? and why?
I guess there will be an ASX change in substantial holding notice submitted soon.
Hopefully, this signals the bottom of the sell off since SBT fertilization news!

Hopefully... I don't expect much upside until SBT fingerling commercialization has been finalized. This can take a while. We'll have to wait for the next earnings reports and see what the kingfish story is. I wonder how exchange rates/production costs/ production volumes/ food prices/ environmental situations/ etc develop and affect earnings.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Hopefully... I don't expect much upside until SBT fingerling commercialization has been finalized. This can take a while. We'll have to wait for the next earnings reports and see what the kingfish story is. I wonder how exchange rates/production costs/ production volumes/ food prices/ environmental situations/ etc develop and affect earnings.

Yes, there are a few unanswered questions. The sell off in the stock has me wondering why. I mean, the news was very postive, I hope we are not being given just the edited highlights....I would ilke to know the full picture.
One thing that has been bothering since the news was released is what happened to the larvae? why didn't they progress them to fingerlings?
It would add a lot more confidence to the stock if they at least grew a few fish to the juvenile stage and beyond. Perhaps the seller knows more than we do!

 

[FI$H]

Re: CSS - Clean Seas Tuna

Somebody must have seen this coming:

http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00863646

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Somebody must have seen this coming:

http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00863646

Yes, FISH , I must confess that I had lost faith in this comapny over the past few months and having invested since the beginning I am now out of them.
I had concerns about the lack of information on the SBT breeding e.g.

1. How many fertilsed eggs did they achieve?
2. How many reached larvae stage?
3. What happened to the larvae?
4. Why didn't hey grow a few out to fingerling stage?

Since the investor update, I have even more questions:

1. The European NBT company achieved 10 Million larvae , how will this affect market demand if another company is able to breed so many fish?
2. They achieved the same result, possibly much better, by breeding in sea pens. No need for expensive shore tanks / facilities. Have CSS pursued the wrong plan?
3. Is the CSS breeding facility in the best location. I mean Port Lincoln is very cold most of the year. The fish only breed in warm water. Should it have been located in a warmer climate e.g. Darwin?

I think the only value in this company will be in the YTK production for quite some considerable time and that appears to be losing money!

 

[truevalue]

Re: CSS - Clean Seas Tuna

This Stock is worth looking at again below 80c.

This year the company is on track to sell 4,000 tonnes of King Fish, which at current farmgate prices of $10/kilo, equates to $40m in revenue. 4,000 tonnes gives CSS scale to be profitable this year and EBIT should be around $12m ($3/kilo). Year end debt will be around $20m which gives an interest cost of $2m so NPAT should be 12-2-3(tax)=$7m or 4.5 cents/share.

Added to which, this summer CSS expects a "significant number" of fertilsed Southern Bluefin Tuna eggs which will give them enough to ensure a commercial production of fingerlings. The great thing about SBT is they grow faster than Kingfish and they sell for more than double/kilo at the farmgate. If CSS produce "just" 5,000 tonnes of SBT that will equal $100 million in revenue and at least $50m in EBIT. CSS expects to conservatively double that number.

This company will be significantly higher in 6 months time and you should consider doing some serious research into this industry because acquaculture is where most of our fish will come from in 10 years and CSS has a major first-mover advantage especially in SBT

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Here is an interesting article form the Australian which appears to validate my concerns about this company. They have lost all credibility as far as I am concerned. It is obvious some shareholders knew about this , which explains the relentless selling since the SBT news.
I can't understand why they had to wait for the annual results to tell us that there were only a modest number of larvae which did not progress beyond this stage.

Disclosure - I no longer hold CSS shares

http://www.theaustralian.news.com.au/story/0,25197,24128600-5012436,00.html

 

[truevalue]

Re: CSS - Clean Seas Tuna

Yes Oracle I can see why you would be disappointed with management, especially on the eggs to fingerlings announcements (or lack thereof). My understanding at the time of the announcement was that it was never going to be a commercial run of eggs (because there were not enough of them) and that the larvae were to be subjected to a number of experiments to determine the best process for getting fingerlings.

I think the Stuart Wilson article prbably misses a couple of points though. Firstly the profit warning came in July as a result of lower growth rates than expected in May and June. This is hardly a delayed announcement given they could not possibly know growth rates for May and June until July.

Second the lower farm-gate prices were the result of a new frozen product they are selling into international markets and are more susceptible to exchange rate fluctuations. Who would have predicted the rapid rise in the $A from January through to June.

I have been buying a few as the stock falls but I am cautious about getting too agressive. I think November to January will be a good time to build a position - just before the next spawning.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Yes Oracle I can see why you would be disappointed with management, especially on the eggs to fingerlings announcements (or lack thereof). My understanding at the time of the announcement was that it was never going to be a commercial run of eggs (because there were not enough of them) and that the larvae were to be subjected to a number of experiments to determine the best process for getting fingerlings.

I think the Stuart Wilson article prbably misses a couple of points though. Firstly the profit warning came in July as a result of lower growth rates than expected in May and June. This is hardly a delayed announcement given they could not possibly know growth rates for May and June until July.

Second the lower farm-gate prices were the result of a new frozen product they are selling into international markets and are more susceptible to exchange rate fluctuations. Who would have predicted the rapid rise in the $A from January through to June.

I have been buying a few as the stock falls but I am cautious about getting too agressive. I think November to January will be a good time to build a position - just before the next spawning.

Good luck Truevalue. I would be very cautious about on this stock and wouldn't be so sure about breeding success over summer. I believe there is still a lot they haven't told us and their new relationship with Kinki University suggests to me that they don't have the ability to succeed on their own. I may be wrong....but I no longer trust them. I will continue to keep an eye on developments.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

As reported in my last post that I would keep an eye on developments at CSS.

Since my last thread there have been a number of changes:

1. The share price has continued it's dramatic fall ( now around 34c )
2. The Oz dollar has lost 35-40 %.
3. Rabobank have extended their overdraft to CSS.

Having had time to reflect on my dissapointment regarding the SBT breeding disclosures earlier this year, I have decided to re-invest in CSS.

I have re-invested for the following reasons:

1. The share price attributes little or no vlaue to the SBT program, it essentially reflects the YTK business. I base this vlautaion on the continuing expansion of the YTK business and demand for the product.
2. The fall in the Oz Dollar will make it easier to market and sell overseas and , hopefully, result in many new clients and increased orders.
3. The Rabobank extension takes away the need to tap the market ( investors ) for more funds. Although it is not ideal to go further in to debt the increase in biomass and earlier production projection explains the need for more funds.

Other ( optimistic ) reasons for re-investing are:

1. The possibility of SBT breeding success on a commercial scale.
2. The liason with Kinki University, which I was originally sceptical about, does make sense. They have achieved breeding and growout success and their knowledge should benefit CSS.
3. Finally, If the Stehr Goup are serious about their loyal shareholders we all need to be in the same boat together. I believe the catch and grow business should be a part of CSS. It is somewhat a conflict of interest to have them involved in this, highly profitable , aspect of the business at the exclusion of their loyal share holders. I hope that they will recognise shareholder loyalty as they will need our suppoirt ( read funds ) to move forward and inlude them in the catch and grow aspect of the business.

Finally, I will have no hesitation to dump this stock, for good, if I am disappointed again and I am not talking about the fact that things may not go as planned, thats a risk we all take. I am talking about open and transparent reporting to all shareholdrers on all aspects of the business.

I hope I will be posting postive threads in the future.

Disclosure: I have re-invested in CSS shares, hopefully, for many years to come !

 

[truevalue]

Re: CSS - Clean Seas Tuna

Oracle you are a stock mover and shaker. 34c to 45c in 3 days. Hopefully there are plenty of legs left in this one.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Oracle you are a stock mover and shaker. 34c to 45c in 3 days. Hopefully there are plenty of legs left in this one.

I doubt the share price movements have anything to do with my threads, I suspect it is more likley attributed to investors thinking like me on issues discussed in my earlier post. In particular the recent annonuncement concerning additional funding from Rabobank. It is not easy, in the present financial climate, to get funds from any bank....they aren't even lending to each other! It is encouraging that they have provided additinal funds to CSS.
They are obviously comfortable with the longer term growth prospects of this company and it's ability to re-pay debt. I suspect ( read - hopeful ) that CSS may become cash flow positive again in the not too distant future and will not end up drawing down all of these funds.

In connection with my last post re - catch and grow business, it is esential that any proposal to sell the catch anf grow business to share holders also includes a share in the " wild catch tuna licence". It would be totally unacceptable, to me, to purchase only the catch and grow infrastructure and assets from the Stehr group, but not a share in the licence.
This would be like selling investors a radio station or TV station , i.e. all of the transmitter towers, studios, production/recording equipment, etc but not the licence to transmit or broadcast. These assets are worthless without the licecne to broacast, the same applies to the Stehr group catch and grow business. Investors should be very aware of this fact and voice their concerns to CSS. The Stehr group have not actually said they won't sell part of the licenece, but they have said there is no proposal to incoude the licenece at this stage.

There will always be a niche market in the SBT business for wild catch tuna, even after breeding success and loyal CSS shareholders should be included in this business. I trust the Stehr group will realize that they will need the support of loyal shareholders to guarantee the future of CSS and include us in all aspects of the business.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Although not directly related to CSS, the recent failure by Western Kingfish ( WKL ) to succeed in the growout of its inaugural cohort of YTK demonstrates the difficulties competitors will have in trying to compete in this industry. I don't want to dwell on the dissapointment their share holders are suffering but I do see this as a significant positive for CSS as they have succesfully bred YTK for a number of years and have very stringent quality and scientifc potocols in place to ensure successful breeding of YTK.
There is obviously significant demand for YTK and the less competition the greater the benefit for CSS.

 

[Basilica]

Re: CSS - Clean Seas Tuna

The relationship between CSS and the Stehr Group is even more complex than you describe. I recall reading in last years CSS annual report that CSS pays the Stern Group to grow out their fish on a per KG price. CSS does have potential to become a valuable company if they succeed in producing large quantites of SBT fingerlings. But there are big hurdles in the egg to fingerling stage to overcome. Early nutrition and disease can be a challenge and that may be where Japan comes into the picture. And last week WKL was placed in Voluntary Administration so it is not an easy road.

PS. I do not own shares in WKL AAQ CAQ or CSS

 

[Basilica]

Re: CSS - Clean Seas Tuna

I found the related party transaction i wrote of.
From the 2007 annual report. It may be avery fair price, i have no idea.

28 Related Party Transactions (Continued)
The growout fees are paid by Clean Seas Tuna Ltd (CST) to Clean Seas Aquaculture Growout Pty
Ltd (CSAG) under the terms and conditions of the Fish Husbandry Agreement disclosed as a major
contract in clause 12.11 .4 of the IPO prospectus issued in October 2005.
Under the contract CSAG is responsible for growing out Kingfish, Mulloway and Tuna on behalf
of CST. All costs of growout are born by CSAG for payment by CST per kg of growth achieved.
The initial price for growout was $5.50 per kilogram growth for Mulloway and $6.25 per kilogram
growth for Kingfish. The charge will be increased by the greater of the percentage change in the
CPI and 5%.
The company has entered into a feed supply agreement with a major feed supplier for the
provision of pellets for feeding Kingfish and Mulloway. Under the Fish Husbandry Agreement
feed costs are born by CSAG. The feed purchased by CST is on sold to CSAG at cost.

 

[Basilica]

Re: CSS - Clean Seas Tuna

A closer read of the 2008 annual report shows the Purchase of CSAG by CSS that was loosing money. Would CSS have made a profit if purchase had not occured?

35 Business Combinations
(a) Summary of acquisition
On the 27th of November 2007 the company completed the purchase of 100% of the issued shares of
Clean Seas Aquaculture Growout Pty. Ltd. (CSAG) This acquisition provided key infrastructure and specialist
personnel to carry on the business of finfish growout.
The acquired business contributed revenues of $14,205,000 and net loss of $965,000 to the Group for the
period from 1 October 2007 to 30 June 2008. If the acquisition had occurred on 1 July 2007, consolidated
revenue and consolidated loss for the year ended 30 June 2008 would have been $19,205,000 and
$3,747,000 respectively.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Yes, the purchase of CSAG has contributed to their losses but in the long term the purchase of CSAG will benefit CSS as it increases fish production particulrly if they succeed with SBT.
I would be very wary of purchasing the wild catch business if they try to flog it at an inflated price and do not include as share of the wild catch licence. Without the licence they could walk away and leave investors with nothing if the business was to fail. They could then re-establih a new business on their own with the licenece. Investors could be left very vulnerable without a share of the licence. As I have said before investors need to be included in all aspects of the business. I will be keeping a close eye on what their proposal is concerning the wild cath business.

 

[Basilica]

Re: CSS - Clean Seas Tuna

Yes, the purchase of CSAG has contributed to their losses but in the long term the purchase of CSAG will benefit CSS as it increases fish production particulrly if they succeed with SBT.
I would be very wary of purchasing the wild catch business if they try to flog it at an inflated price and do not include as share of the wild catch licence. Without the licence they could walk away and leave investors with nothing if the business was to fail. They could then re-establih a new business on their own with the licenece. Investors could be left very vulnerable without a share of the licence. As I have said before investors need to be included in all aspects of the business. I will be keeping a close eye on what their proposal is concerning the wild cath business.

Hi tge oracle, I agree investers need to be informed and it is even more important when the listed company does transactions with Pty Ltd companies that are also owed be the same players. It must be very difficult to calculate a fair price when you are buyer and seller. I checked the owner of the Sea cage leases and both CSS and CSAG own leases for sea cages, but as CSAG is a Pty Ltd company we have no way of checking what assets are included and their value. The 3.7 million loss by CSAG in one year is a concern. How did that happen? Stock loss, feed prices, slow growth? CSS should declare the full financials for the last few years of CSAG to satisfy the investors. Seems to be more than colder water temperature would cause. Have they proposed a buy out of the wild tuna catch or are you just guessing? The license for the tuna quota is worth heaps, and is the key asset for starting again.

 

[tge oracle]

Re: CSS - Clean Seas Tuna

Perfect timing -

I posted my last reply 24 hours too early. I see our Chairman is extolling the success of the recent wild catch on the CSS website, can't understand why as this is of no benefit to CSS shareholders who hold no interest in the wild catch business! What it does do though is pump up the interest in the wild catch business and price the Stehr group will hope to sell it for.
It is commendable that they have achieved good succes in harvesting high biomass wild tuna in a short period of time but I am cautious on this report and it's underlying motive.
I have re-invested in CSS but will not cop any of their BS as with the last SBT breeding announcments or lack there of.

To cut to the chase - they have to deliver after nearly 3 years of no returns and a share price that is languishing below float price and report on business achievemnts that relate directly to CSS , not further aspects they wish to flog to CSS shareholders.

Anybody else have an opnion on this? FISH? Truevalue?