The New Criterion

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At the risk of coming the raw prawn with investors, the WA-based fishing operator presents its own sums as to why the worth of its fishing licences alone justifies its market valuation.

Mareterram holds 10 of the 18 perpetual licences to fish at Shark Bay, a World Heritage Area 800 kilometres north of Perth, for prawns, scallops and crabs. Each licence is valued on the company’s books at $1.5m each but in February the public auction of another licence fetched $4.3m and two weeks later another commanded $4.3 million.

“We think we are a fair reason for that,” says CEO David Lock. “Corporates are getting involved in prawn fishing and that has created excitement.”

On the raw numbers, the implied valuation uplift boosts Mareterram’s net assets from 17 cents a share (as of December balance date) to 37 cents.

Mareterram has a 50-year operating history, but has only been listed since January last year, having raised $18 million at 20 cents a share.

But it’s been an eventful period. In April last year 19.9 per cent shareholder Sea Harvest offered 35 cents a share in a proportional shareholder and now has a controlling stake of 56 per cent.

South Africa’s biggest fishing company, Sea Harvest supplies all of Mareterram’s hake, the company’s biggest selling line. Sea Harvest is keen to expand out of South Africa, partly because the licences there are not perpetual and partly to reduce its exposure to the country’s currency, the rand.

This year Mareterram won a regulatory free hit by gaining an exemption on a six-month prawn import ban, aimed at curtailing an outbreak of the white spot disease, detected in a Queensland prawn farm and then in the wild (in isolated cases).

Unlike anyone else, Mareterram is allowed to ship prawns to its certified processing plant in Thailand and then re-import them for local consumption.

In effect, the ban removes 32,000 tonnes of import volume and affects 1500 tonnes of local farmed output, leaving a local wild catch of 20,000 tonnes.

The ban is subject to a Senate review, reporting in June. “Unless the government lifts the ban – which I would be surprised about – supply will be quite constrained,” Lock says.

Consumers learned all about this over Easter, with prices for the crustaceans soaring.

Mareterram recently struck a deal with Coles to supply 200 tonnes of catch. Because no one else can supply, there was little of the one-sided negotiations that defines the supermarket-supplier relationship.

Students of Latin would appreciate that Mareterram means “sea” and “land”, which hints at the company’s acquisition strategy. The company wants to expand into other proteins and this could mean expanding into intensive farming (pigs and chickens) or land-based aquaculture.

Whatever the case, management wants something that will double its underlying earnings.

Speaking of the numbers, Mareterram reported December half net profit of $3.4 million and EBITDA of $4.3m, on sales of $26.6m.

Broker Select Equities forecasts current year earnings of $2.6m, rising to $3.7m in 2017-18.

The company’s ASX code is MTM, its share price 27 cents and its market cap $32 million.


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