New Zealand Professional Investment Services Firm

Forsyth Barr

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Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Sanford (SAN)</h2>
Greenshell Mussel breeding programme results
Sanford (SAN) has released the final results of its Greenshell Mussel breeding programme, showing mussels from its SPATnz hatchery can grow up to twice as fast as those caught from the wild.
SPATnz is a key enabler of growing SAN’s EBIT/kg in our opinion, providing security of supply, desirable product characteristics through selective breeding, and improved production economics. Upside to our forecasts exist should SAN leverage additional mussel volume through the hatchery at a faster rate (currently assume ~+2% a year). We continue to like SAN given (1) its strategy of moving up the value chain, (2) undemanding valuation at 14x 12-month forward PE, and (3) possible upside through aquaculture opportunities. OUTPERFORM.
Results&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<ul>
<li>Growout up to twice as fast: SPATnz Greenshell mussels took on average 16.7 months to grow from seed to harvest size, versus 28.3 months for the weighted average of the wild caught varieties. The biggest contrast being against Kaitaia mussels (majority of industry spat comes from Kaitaia).</li>
<li>Seeding rates higher: Although not highlighted in the release, we understand seeding rates are also much higher for SPATnz mussels, 15%-25% compared to 5% for wild mussels.</li>
<li>Breeding for other characteristics: SAN is also breeding strains for other characteristics such as condition and anti-inflammatory qualities.&nbsp; &nbsp; &nbsp; &nbsp;</li>
</ul>
<ul>
<li>Research is currently underway into the health benefits of Greenshell mussels, and recently received further <a href="https://www.highvaluenutrition.co.nz/2019/09/18/novel-research-to-study-the-health-benefits-of-greenshell-mussels-awarded-further-funding/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.highvaluenutrition.co.nz/2019/09/18/novel-research-to-study-the-health-benefits-of-greenshell-mussels-awarded-further-funding/&amp;source=gmail&amp;ust=1571440893129000&amp;usg=AFQjCNEme602nXjguJwZ3pLqou7xvGnp-g" rel="noopener">funding</a>.</li>
</ul>
Figure. Mussel growout times by strain
<table class="table table-striped"><colgroup><col> <col> <col></colgroup>
<tbody>
<tr>
<td style="width: 86.4pt;">Strain</td>
<td style="width: 96.6pt;">Average months from 7g to 55 g</td>
<td style="text-align: left; width: 79.8pt;">% longer growout time</td>
</tr>
<tr>
<td>SPATnz</td>
<td style="text-align: right;">16.7</td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Golden Bay</td>
<td style="text-align: right;">22.7</td>
<td style="text-align: right;">36%</td>
</tr>
<tr>
<td>Kaitaia</td>
<td style="text-align: right;">30.8</td>
<td style="text-align: right;">84%</td>
</tr>
<tr>
<td>Industry average</td>
<td style="text-align: right;">28.3</td>
<td style="text-align: right;">69%</td>
</tr>
</tbody>
</table>
Source: Forsyth Barr analysis, Company reports
Background&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<ul>
<li>The mussel breeding programme was a Primary Growth Partnership jointly funded by SAN and MPI&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; o Although SAN own SPATnz, the exclusivity over the intellectual property rolls off in 2024</li>
<li>SAN’s SPATnz hatchery has a GWT (green weight tonne) capacity of ~30,000MT&nbsp; &nbsp; &nbsp;&nbsp; &nbsp; &nbsp; &nbsp; o&nbsp;&nbsp;Industry volume ~90,000MT. FY17 SAN production 31,631MT (FY18 impacted by algae bloom)</li>
</ul>
Guy Hooper Analyst, Equities Forsyth Barr Limited
T:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 4 495 5255 TF:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;0800 367 227 F:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 4 495 8193 P:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;PO Box: 5266, Wellington 6145 W: &nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp;&nbsp;<a href="https://foundry.smartkarma.com/www.forsythbarr.co.nz" target="_blank" rel="noopener">www.forsythbarr.co.nz</a> Twitter:&nbsp; @forsythbarr

Sanford (SAN)
Greenshell Mussel breeding programme results
Sanford (SAN) has released the final results of its Greenshell Mussel breeding programme, showing mussels from its SPATnz hatchery can grow up to twice as fast as those caught from the wild.
SPATnz is a key enabler of growing SAN’s EBIT/kg in our opinion, providing security of supply, desirable product characteristics through selective breeding, and improved production economics. Upside to our forecasts exist should SAN leverage additional mussel volume through the hatchery at a faster rate (currently assume ~+2% a year). We continue to like SAN given (1) its strategy of moving up the value chain, (2) undemanding valuation at 14x 12-month forward PE, and (3) possible upside through aquaculture opportunities. OUTPERFORM.
Results&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Growout up to twice as fast: SPATnz Greenshell mussels took on average 16.7 months to grow from seed to harvest size, versus 28.3 months for the weighted average of the wild caught varieties. The biggest contrast being against Kaitaia mussels (majority of industry spat comes from Kaitaia).
Seeding rates higher: Although not highlighted in the release, we understand seeding rates are also much higher for SPATnz mussels, 15%-25% compared to 5% for wild mussels.
Breeding for other characteristics: SAN is also breeding strains for other characteristics such as condition and anti-inflammatory qualities.&nbsp; &nbsp; &nbsp; &nbsp;


Research is currently underway into the health benefits of Greenshell mussels, and recently received further funding.

Figure. Mussel growout times by strain
  


Strain
Average months from 7g to 55 g
% longer growout time


SPATnz
16.7



Golden Bay
22.7
36%


Kaitaia
30.8
84%


Industry average
28.3
69%



Source: Forsyth Barr analysis, Company reports
Background&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

The mussel breeding programme was a Primary Growth Partnership jointly funded by SAN and MPI&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; o Although SAN own SPATnz, the exclusivity over the intellectual property rolls off in 2024
SAN’s SPATnz hatchery has a GWT (green weight tonne) capacity of ~30,000MT&nbsp; &nbsp; &nbsp;&nbsp; &nbsp; &nbsp; &nbsp; o&nbsp;&nbsp;Industry volume ~90,000MT. FY17 SAN production 31,631MT (FY18 impacted by algae bloom)

Guy Hooper Analyst, Equities Forsyth Barr Limited
T:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 4 495 5255 TF:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;0800 367 227 F:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 4 495 8193 P:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;PO Box: 5266, Wellington 6145 W: &nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp;&nbsp;www.forsythbarr.co.nz Twitter:&nbsp; @forsythbarr

Sanford (SAN): Greenshell Mussel Breeding Programme Results

Sanford Limited

Sanford (SAN): Greenshell Mussel Breeding Programme Results