Disclaimer:
Recent posts in the traders’ forum website “Ten Bags Full” have stimulated my interest in “Clean Sea Tuna” (Code CSS), and prompted me to undertake this chart review. This post seeks to share with other retail investors. some of what I have learned, but it should not be viewed as providing a recommendation for or against the stock. Readers should always discuss their own specific needs with an appropriate financial adviser.
The Australian Tuna Industry
The SBT industry is an Australian success story pioneered by the Port Lincoln fishing industry, and is the single most valuable sector of South Australia’s aquaculture industry (PIRSA, 2012); however it has not been without its challenges. Since 1991 the industry has participated in two Cooperative Research Centres involving major Australian research institutions, investing a significant amount of money to ultimately understand, enhance and improve farming/ranching methods.
Clean Sea Tuna (Profile)
Clean Seas Tuna Limited (Clean Seas) is an Australia-based commercial producer of kingfish. The Company is engaged in the propagation of Hiramasa Yellowtail Kingfish, producing fingerlings for sale and grow out; grow out of Hiramasa Yellowtail Kingfish for harvest and sale, and research and development activities to produce juveniles of Southern Bluefish Tuna (SBT). The Company operates through two segments: finfish sales and tuna operations. The finfish sales segment is engaged in the propagation, grow out and sale of Hiramasa Yellowtail Kingfish. The tuna operations segment is engaged in research and development activities to produce juveniles of SBT. The Company is engaged in the aquaculture business. The Company produces aquaculture-bred SBT. Hiramasa Yellowtail Kingfish is a firm-fleshed table fish
Clean Seas was listed on the Australian Stock Exchange on the 12th December 2005.
Its Major Shareholder is Australian Tuna Fisheries.
Patersons Security is the only share-broker of whom I am aware, to provide company analysis, and their current recommendation is a Moderate Buy.
David Head is the widely experienced, recently appointed Managing Director and CEO of Clean Seas following on from Dr Craig Foster who has been involved with restructuring operations over the past four years.
Although ten years has elapsed since listing, it is still not making a profit, expecting to report a pre-tax loss of $7 million in H1FY15, mostly due to write-downs of $4 million. A profit is expected for 2H2016. As yet no dividends have been paid.
It is however been expanding its operations, and growing sales for products that enjoy a growing global demand. FY15 sales were 1,098 tonnes, up 92% from the previous year, whilst it is considered that FY16 will see a further increase to about 2,000 tonnes.
With growing earnings the company projects that the P/E ratio will decline from 52.2 at present to 36.15 in 2016, and to 29.38 in 2017.
After receiving $6.031 million from a FY15 R&D Tax Incentive refund, the company considers it has adequate cash reserves and banking facilities for the coming year.
Technical Analysis
The Weekly and Daily candlestick charts tell a sorry story for investors. It has been pretty well all down-hill since a pre-GFC high of $2.15 on the 7th March 2008.
Observations
- In the 1H 2014 an uptrend carried the price from 4 cents to 9.2 cents on 23/10/2014, but fell away from then, reaching near rock bottom support at 4.6 cents
- The resulting down-trend remains intact but the last two candlesticks have formed a bullish engulfing pattern suggesting that the fall could be bottoming out.
Discussion
Every investor should have set for him(her)self a set of investment guidelines to reduce the risk of loss. Not rigid rules but with flexibility to allow speccies and venture capital companies that could transition to stable mid-cap stocks, to be included in one’s portfolio.
It is doubly important to discuss such investments with a qualified stockbroker who is aware of your financial reserves, and risk tolerance. It may take some years for such transformations, and so retail investors should wait for upwards trending to emerge.
Categories: Chart Review, Company review, Uncategorized
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