Catch of the day: Premier Fishing, Sea Harvest, AVI
Readers may or may not be aware that there is major restructuring under way in the domestic fishing sector. This presents opportunities – and some big risks
BUY: Premier Fishing
Share price: 264c
JSE code: PFB
Premier Fishing & Brands, even given the taint of scandal at its parent company AEEI (controlled by Iqbal Survé’s Sekunjalo Group), probably has the best chance under the fishing rights allocation programme, or FRAP 2020, of gaining quota in valuable species such as hake, pilchards, anchovy and horse mackerel. Its quota position in these areas is modest to none.
With cash in the bank from its 2017 listing, and having expanded its abalone aquaculture and acquired profitable squid business Talhado Fishing, Premier is keen to procure some pelagic fish licences to diversify away from the export-orientated lobster, abalone and squid sectors.
The expanding abalone segment is not subject to quotas, and the lobster presence is mainly in south coast lobster
With a high BEE score in ownership and management, Premier fits the bill of a smaller black-owned fishing counter that could easily pick up some quota in the coming long-term licence agreements. A considerable advantage is that Premier has the capital and expertise to both catch and process as well as distribute.
With a beaten-down share price of 264c on an earnings multiple of just seven times, Premier, if one sets aside the whiff of rotten fish from its owners, looks like a good long-term sector catch.
HOLD: Sea Harvest
Share price: R13.83
JSE code: SHG
Of the larger fishing stocks, Sea Harvest, controlled by empowerment blue-chip Brimstone Investment Corp, has an enviable track record. It ticks all the boxes for FRAP 2020 … unless Brimstone’s significant minority shareholding in Oceana Group, SA’s largest fishing company, is viewed as a competitive issue.
Since its listing in 2017 it has expanded its fishing assets via acquisition of Mossel Bay-based Viking Fishing, which, aside from a large presence in the hake sector, brought valuable and interesting potential in various forms of aquaculture. Sea Harvest recently also signalled an intention to play on a broader food stage when it acquired Ladismith Cheese.
It is in the throes of buying out its Australian Stock Exchange-listed subsidiary Mareterram, a food distributor and shrimp and scallop specialist.
Sea Harvest is a major player in hake and holds a commanding position in the frozen fish segment. With the FRAP process likely to favour empowering smaller and community-based fishing ventures, it seems likely it will lose some quota to smaller players and new entrants.
However, IM believes that with its strong balance sheet and newfound operational diversity, Sea Harvest is the best placed of the bigger fishing stocks to weather the choppy water ahead.
Share price: R93.83
JSE code: AVI
This can’t really be a sell as Irvin & Johnson (I&J) is the fishing and food processing subsidiary of giant blue-chip consumer business AVI Holdings, and has been a wholly-owned business since minorities were bought out in 1999.
But in the context of this article and what is due to transpire under the FRAP 2020 long-term fishing rights, I&J is probably the weakest player in terms of many of the key BEE ownership and management aspects that are critical for existing fishing companies to hang on to their valuable catch quotas — especially in the hake sector, where I&J is the market leader in the frozen brands segment.
Since the last 2005 fishing rights allocation, as the industry has transformed, many say I&J has not done enough and its BEE ownership criteria is materially below its sector competitors. Oceana, for instance, has been set adrift from consumer products giant Tiger Brands, and has bolstered its BEE status with Brimstone recently snagging additional shares during that unbundling process.
In 2017 AVI placed I&J in a "value realisation option" — perhaps realising the writing was on the wall. But nothing transpired. With the clock ticking, it may be too late for AVI to undertake any serious transformation to influence FRAP.