Oceana | Reeling it in
Oceana Group (OCE) reported core earnings growth of 63% yoy for FY 18. African operations experienced volume growth of 13% yoy in canned fish and 33% yoy in horse mackerel. SA catch rates and size mix across species both improved. We expect this trend to also support volume growth in FY '19. Daybrook revenue recovered off a low base and grew 24% yoy in FY '18. Price growth of 4% reduced volume growth by 20% yoy in Daybrook operations. Daybrook average prices of fishmeal and oil should remain stable with 3% yoy growth in FY '19, which will annualise on 2% higher volumes. The Group's diversification reduces volatility in catch rates and currencies. We forecast 11% earnings CAGR over the next five years. Oceana is non-core in the portfolio of major shareholder Tiger Brands (TBS). The share price has been volatile following the announcement of the unbundling on 22 November 2018. We believe the share price will remain volatile until the unbundling is complete in April 2019. Higher liquidity post the unbundling may improve OCE's rating. We believe the company can improve its black shareholding (FY '17: c.63%) to prepare for the SA pelagic fishing rights renewal process in 2020.Oceana Group is engaged in the fishing and commercial cold storage industries. Co.'s fishing activities relate to the catching, processing, marketing and distribution of canned fish, fishmeal, fish oil, lobster, horse mackerel, squid and hake, covering inshore, midwater and deep-sea fishing, as well as the purchase of frozen and canned stock from external suppliers. Co. conducts its fishing businesses through four operating segments: canned fish and fishmeal; lobster, squid and french fries; horse mackerel and hake; and commercial cold storage. Co.'s products are sold and consumed in many African countries, the Far East, European Union, U.S. and Australia.
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