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ASX:MCA
Murray Cod Australia Ltd
Investment Summary
The fund managers believe that Murray Cod Australia Ltd (MCA) is on a positive trajectory following its sequential growth in quarterly cash receipts and biomass. They note a significant 32% increase in customer receipts for 2Q FY24 and a record spawning season, underscoring strong future growth potential. In their opinion, the newly established Australian Sustainable Protein Fund (ASPF) could serve as a key funding source, allowing MCA to divest some of its property and water rights. Despite recent capital raises, fund managers feel the successful establishment of ASPF is crucial for sustaining investments without further equity dilution. They acknowledge challenges from external market conditions but maintain that MCA's future is promising with projections of over 5,500 tonnes of biomass by FY26. Furthermore, ongoing operational improvements and stronger sales strategies are expected to enhance profitability. Overall, the consensus is cautiously optimistic as MCA prepares for significant growth in the coming years.
Commentary From The Managers
Saville Capital
28 Feb 2025
$1.34
- Murray Cod Australia (MCA) reported an encouraging 1H FY25 result.
- Significant inventory build achieved over the past six months (+47% since 2H FY24).
- Statutory profit recorded for the half.
- Inventory has grown a further 27% to 2,002 tonnes as of 26 February.
- Company is now positioned to begin crystallising this value from 2H FY25 onwards.
- Expecting significantly and sustainably higher quarterly cash sales.
- MCA is focused on opening new sales channels (e.g. China).
- Additionally, re-opening prior sales channels to accommodate this supply.
- Saville Capital continues to hold its position based on these developments.
Saville Capital
31 Jan 2025
$1.35
- Sales growth for MCA remains deliberately benign with 2Q FY25 up +2% on pcp.
- Improving sales mix with average weight per fish sold up +29% on pcp to 1.6kg.
- Strategy focused on processing larger fish, replacing smaller live fish sales with processed fish sales.
- Economic benefits from fillet yield of larger fish allow for better pricing per/kg of whole fish weight.
- Options for frozen fillet products expand opportunities for export markets.
- MCA’s biomass is growing rapidly in preparation for increased fish available for sale.
- Expected step-change increase in sales revenue anticipated in 2H FY25 and beyond.
- Company reported excellent Spring spawning season with +20% increase on pcp.
- Saville Capital continues to hold because of these favorable trends and growth potential.
Saville Capital
31 Dec 2024
$1.40
- Saville Capital notes that MCA has secured finance facilities totalling $43m from Westpac, with a three-year term.
- The funds will be utilized to refinance and extinguish the existing $20m facility with iPartners, achieving interest savings exceeding $1m per annum.
- The financing will also enable the purchase of a property adjacent to the Company’s existing Bilbul Site, comprising 10 hectares of irrigated land, including residence and shedding.
- These funds will provide capital for completion of Stanbridge and support ongoing working capital requirements for growing current fish stocks and increasing hatchery and nursery stocks.
- Crucially, this facility provides validation of MCA’s fish inventory and associated assets, while supporting the company through to cash flow positive operations, eliminating the need for future equity raises.
Saville Capital
31 Oct 2024
$1.40
- Saville Capital notes that MCA reported cash receipts growth of +12% on a per-equivalent period (pep) basis for 1Q FY24.
- While cash flow from operations remains firmly negative, this is attributed to increased feed costs due to a significant rise in fish stocks over the last 18 months.
- As fish reach saleable size, Saville Capital anticipates substantial increases in sales, leading to improved operating cash flows.
- Improvements in diet and feeding methods, along with favorable weather conditions, have resulted in larger average weights of grow-out fish than previously forecasted at the end of September.
- With biomass growth expected to accelerate over summer as water temperatures rise, Saville Capital expects a greater availability of saleable-sized fish in 2H FY25.
- The development of the Stanbridge grow-out site is on track for completion by March 2025.
- Saville Capital mentions that the Company is in discussions regarding selling or financing this asset to release capital for operational funding.
Saville Capital
30 June 2024
$1.25
- Murray Cod Australia Ltd (MCA) experienced share price appreciation in June due to the unwinding of an earlier artificial decline.
- The decline in May was associated with a $20m capital raising executed at $0.07/share.
- Saville Capital believes that the completion of the capital raising will refocus market attention on MCA's significant production and sales growth.
- The firm anticipates a move towards profitability in the upcoming years.
- Saville Capital continues to hold its position due to these positive changes in MCA’s financial outlook.
Saville Capital
31 May 2024
$0.95
- Saville Capital continues to hold an interest in Murray Cod Australia Ltd (MCA) due to ongoing developments in their capital strategy.
- MCA recently completed a capital raise of ~$20m at $0.07/share, which is below the previous close of $0.10 and net tangible assets of $0.09.
- The purpose of the capital raise is to fund working capital and infrastructure investment.
- Previously, Saville Capital anticipated that MCA would vend property and water rights into the Australian Sustainable Protein Fund (ASPF) to avoid an equity raise.
- Negotiations for the ASPF were underway but did not conclude quickly enough to prevent the need for raising equity.
- Despite concerns, the capital raise received strong support from existing and new institutions, positively impacting MCA's stock performance.
- This capital raise mitigates the risk of having to sell assets at below market value.
- MCA plans to run a separate sale process for the Stanbridge site with a leaseback arrangement.
- Negotiations are also ongoing with a suitable partner for the ASPF to facilitate future developments.
- Going forward, Saville Capital anticipates that the market will focus less on funding issues and more on significant production and sales growth as MCA aims for profitability.
Saville Capital
30 Apr 2024
$1.13
- Saville Capital acknowledges MCA's positive March quarter update with receipts up +44% from the December quarter and +23% year-on-year, indicating a gradual rebound in sales volumes.
- MCA reported a 44% increase in biomass for the quarter, essential for sustainable growth in supply and sales over the coming years.
- Despite the encouraging updates, MCA faces selling pressure attributed to specific market conditions and concerns about the potential need for equity raising, given its market cap is <$100m.
- The market appears to be dismissing MCA's announcements regarding the Australian Sustainable Protein Fund (ASPF) intended to further capital investment through the sale of property and water rights.
- MCA has initiated discussions with potential Australian and international partners for the ASPF and is confident of securing agreements in the near to medium term.
- In the interim, MCA has a debt facility in place to support working capital and new pond construction.
Saville Capital
31 Mar 2024
$1.25
- Saville Capital notes that MCA provided a broad company update and presentation, revealing detailed numbers on fish stocks, capacity, and future projections.
- The impact of significant sales during COVID, when restaurants were closed, has negatively affected MCA’s saleable fish stocks in CY23 and CY24.
- Fortunately, this issue is rapidly unwinding; MCA expects to achieve 3,000 tonnes of biomass by end of FY25 and over 5,500 tonnes by FY26, compared to 535 tonnes in FY23.
- This growth will necessitate significant capex for hatcheries and ponds, as well as working capital for fish feed.
- MCA aims to fund this growth through external investment in the Australian Sustainable Protein Fund (ASPF), to be established by selling some of its property and water rights valued at over $40 million.
- Saville Capital views the establishment of the ASPF as a key catalyst, enabling the market to concentrate on the significant growth outlook rather than funding concerns.
Saville Capital
31 Jan 2024
$1.42
- MCA resumed sequential quarterly growth during 2Q FY24, with customer receipts up +32% on 1Q FY24.
- This growth was driven by increased supply to the market and a +12.5% price increase for large fish (>2.5kg).
- The 2023 spawning season was the highest to date, creating a foundation for future volume and growth.
- The newly formed Australian Sustainable Protein Fund (ASPF) has contracted to purchase the Stanbridge site, backed by a lease with MCA.
- This site has development approval for 78 grow-out ponds, with ~22 already constructed.
- The ponds are anticipated to be stocked with juvenile fish between February and April.
- Work continues to enable ASPF to accept investment capital from external investors, allowing MCA to vend its property and water rights into the vehicle.
- This strategy aims to create a cheaper source of capital for the Company.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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