01-Feb-2021:  Ord Minnett: Murray Cod Australia (MCA): The Codfather

• Analysts:  Nicholas McGarrigle, Head of Institutional Research, (02) 8216 6345, nmcgarrigle@ords.com.au
• Jason Korchinski, Research Associate, (02) 8216 6348, jKorchinski@ords.com.au

MCA’s 2QFY21 release shows significant progress since the onset of COVID-19. Cash receipts have rebounded strongly, growing 95% (qoq). This illustrates that MCA has been able to shift its income streams away from exports and into fresh and live domestic sales. A strong spawning season and additional nursery capacity has already started to bolster MCA’s fish stocks meaning it is well-resourced to capitalise on future demand when borders re-open and global sales recommence. Domestic retail and restaurant relationships continue to drive demand and offer compelling medium-term revenue (FY22-25 42% CAGR) and EPS growth (FY22-25 109% CAGR) with MCA’s PE falling to ~8.0x by FY25. We retain our buy rating and increase our price target to $0.32 per share.

2QFY21 result

• The key takeaways from MCA’s result were: 1) Cash receipts grew 119% on pcp, 2) Hatchery performance and forecasts exceeded expectations, 3) Lower average fish sold means faster turnover of inventory, and 4) MCA remains well capitalised with $3.6m of cash and $8.1m of headroom. We continue to hold the view that MCA should continue to invest into fish stocks due to its substantial ROI (>100% gross profit) and maintain a lean surplus cash position.

Changes to forecasts

• We have made substantial changes to our model off the back of the increased fish stocks, hatchery performance and reduced average weight of fish sold. This, combined with the new hires, has meant flat EBITDA in FY21 and increases to EBITDA of 4% and 2% in FY22 and FY23. 

Key risks

• Key risks for MCA include, but are not limited to 1) proving out new target markets to sell existing fish stocks, 2) capital needs as fish numbers expand, 3) fish survival, and 4) Impacts of COVID-19 and reliance on export sales.

--- click on the link above for the full OM report on MCA ---     [I do not hold MCA shares.]

• Last Price: A$0.19 (A$0.215 on 05-Feb-2021)
• Target Price: A$0.32 (Previously A$0.30)
• Recommendation: Buy
• Risk: Higher
• ASX Code: MCA
• 52 Week Range ($): 0.09 - 0.20
• Market Cap ($m): 107.1
• Shares Outstanding (m): 563.9
• Av Daily Turnover ($m): 0.0
• 3 Month Total Return (%): 8.6
• 12 Month Total Return (%): 26.7
• Benchmark 12 Month Return (%): -6.0
• NTA FY21E (¢ per share): 4.9
• Net Debt FY21E ($m): 3.3
• Index Participation:  None