www.jpmorganmarkets.

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Australia Equity Research
14 February 2014
Tassal Group
Overweight
TGR.AX, TGR AU
1H14 Result: Not Enough Fish in the Sea, Salmon
Market Continues to Be Undersupplied

Price: A$3.48
Price Target: A$3.90
Previous: A$3.70
Australia
Emerging Companies
Armina Soemino
AC
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
Bloomberg JPMA SOEMINO <GO>
Russell Gill
(61-2) 9003-8625
russell.j.gill@jpmorgan.com
Garry Sherriff
(61-2) 9003-8621
garry.sherriff@jpmorgan.com
J.P. Morgan Securities Australia Limited
YTD 1m 3m 12m
Abs 5.5% 7.4% 6.7% 103.5
%
Rel 6.4% 7.1% 6.9% 96.5%
Tassal Group Limited (Reuters: TGR.AX, Bloomberg: TGR AU)
Year-end Jun (A$) FY12A FY13A FY14E FY15E FY16E
Revenue (A$ mn) 271 282 291 320 334
EBITDA (A$ mn) 59 68 81 87 89
Net Profit (A$ mn) 28 33 43 47 48
EPS (A$) 0.19 0.23 0.29 0.32 0.33
P/E (x) 18.2 15.3 12.0 10.8 10.7
EV/EBITDA (x) 7.3 6.0 5.1 4.7 4.5
DPS (A$) 0.08 0.10 0.13 0.17 0.17
Dividend Yield 2.3% 2.7% 3.6% 4.9% 4.9%
Normalised EPS (A$) 0.15 0.18 0.22 0.27 0.28
Normalised EPS Growth 2.0% 19.9% 20.7% 25.7% 2.0%
Normalised PE 23.1 19.3 16.0 12.7 12.5
Source: Company data, Bloomberg, J.P. Morgan estimates.
Company Data
Shares O/S (mn) 146
Market Cap (A$ mn) 509.14
Market Cap ($ mn) 459.55
Price (A$) 3.48
Date Of Price 13 Feb 14
Free Float(%) -
3M - Avg daily vol (mn) 0.32
3M - Avg daily val (A$ mn) 1.04
3M - Avg daily val ($ mn) 0.9
ASX100 4407.30
Exchange Rate 0.90
Price Target End Date 30-Dec-14
Price Target (A$) 3.90
See page 11 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
1.5
2.0
2.5
3.0
3.5
4.0
A$
Feb-13 May-13 Aug-13 Nov-13 Feb-14

Price Performance
TGR.AX share price (A$)
ASX100 (rebased)
TGR beat our 1H14 NPAT estimate by 7% despite an 11% decrease in
volumes due to strong pricing growth. We expect FY15 to deliver a
recovery in volumes as well as sustained pricing outcomes and margin per
kg improvement. We remain Overweight with a PT of A$3.90.
Solid Beat Despite Volume Decrease. TGRs 1H14 operating NPAT
(ex SGARA) was A$15.3m, up 25% on the pcp and 7% above our
estimate despite an 11% decrease in volumes.
Volume Decline Expected to Be Temporary. Volumes declined due to
the impact of the hot 2012/2013 summer period. TGR shifted volumes
from the wholesale market and imported smoked salmon from Norway
in order to meet retail demand. These supply constraints are expected to
continue over FY14 but volumes are expected to recover in FY15 due to
the new harvest and feed diet strategies.
Price Increases to Be Sustained by Structural Undersupply of the
Market. Pricing per kg increased by 7% in the retail market and 17% in
the wholesale market in 1H14. We think pricing will be sustained due to
two things: 1) contracts with Coles and Woolworths have been
negotiated for the next 2-3 years, 2) Domestic per capita consumption
has grown to such an extent that the market is ~10% undersupplied.
Introduction of Franking. TGRs 1H14 interim dividend of 5.5cps was
50% franked. This was the first time that dividends have been franked in
the companys history and should be sustained as it has begun to pay
cash tax.
Remain Overweight FY15 Sees the Culmination of Volume
Growth, Sustained Pricing Increases and Margin Improvement. We
expect volumes to recover (10% growth), pricing to increase by 2.5%
and margins to improve due to lower processing costs associated with the
expansion of Macquarie Harbour and the selective breeding program.
With ongoing conservative pricing (+2.5% pa) and volume growth
(+2.0% pa) assumptions, we get a price target of A$3.90.
2
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
Key Numbers from the 1H14 Result
TGR reported 1H14 operating NPAT (ex SGARA) was A$15.3m, an increase of
25% on the pcp and 7% above our expectations. 1H14 operating revenue of A$131.7,
flat on the pcp and 1% below our expectations. This flat result was achieved despite
an 11% decrease in volumes with a hot 2012/2013 summer impacting harvested
volumes.
A 50% interim dividend of A5.5cps was declared, which was up 22% on the pcp and
equated to a normalised payout ratio of 53%. This was a key positive as this is the
first time the company has declared partially franked dividends with previous
dividends unfranked.
Table 1: Group Earnings
Actual Actual Actual % Change
Group 1H12 2H12 FY12 1H13 2H13 FY13 1H14 1H on 1H 1H on 2H
Revenue (A$m) 130.2 140.5 270.7 140.1 141.5 281.6 144.4 3.1% 2.1%
Operating Revenue (A$m) 125.3 131.7 257.0 132.0 134.1 266.1 131.7 -0.2% -1.8%
EBITDA (A$m) 28.7 30.3 59.0 33.3 34.8 68.1 41.7 25.3% 20.0%
EBITDA ex SGARA (A$m) 26.1 24.0 50.0 28.6 30.6 59.2 31.8 11.0% 3.7%
EBITDA Margin 20.8% 18.2% 19.5% 21.7% 22.8% 22.3% 24.1% 2.4 ppt 1.3 ppt
EBIT (A$m) 20.8 22.9 43.7 25.2 27.4 52.5 34.1 35.5% 24.8%
EBIT ex SGARA (A$m) 18.1 16.6 34.7 20.5 23.2 43.7 24.2 17.9% 4.2%
EBIT Margin 14.5% 12.6% 13.5% 15.5% 17.3% 16.4% 18.4% 2.8 ppt 1.0 ppt
Reported NPAT (A$m) 13.0 15.1 28.1 15.8 17.6 33.5 22.5 42.0% 27.5%
Operating NPAT (A$m) 10.9 11.2 22.2 12.2 14.4 26.6 15.3 25.5% 6.2%
Normalised EPS (c) 7.4 7.6 15.1 8.3 9.8 18.1 10.4 25.3% 6.1%
Dividend (c) 4.0 4.0 8.0 4.5 5.0 9.5 5.5 22.2% 10.0%
Payout Ratio 54% 52% 53% 54% 51% 53% 53%
Source: J.P. Morgan estimates, Company data.
Table 2: Divisional Earnings
Actual Actual Actual % Change
Group 1H12 2H12 FY12 1H13 2H13 FY13 1H14 1H on 1H 1H on 2H
Revenue
Domestic retail 72.3 81.1 153.4 88.3 92.4 180.7 100.9 14.3% 9.2%
Domestic wholesale 41.7 47.1 88.8 43.0 41.6 84.6 30.8 -28.4% -26.1%
Export 11.2 3.6 14.8 0.7 0.1 0.8 0.0 -93.8% -60.0%
Volume (Hog Tonnes)
Domestic retail 5,588.0 6,442.0 12,030.0 6,991.0 7,305.0 14,296.0 7,487.0 7.1% 2.5%
Domestic wholesale 4,104.0 4,554.0 8,658.0 3,805.0 3,600.0 7,405.0 2,337.0 -38.6% -35.1%
Export 1,637.0 465.0 2,102.0 226.0 7.0 233.0 3.0 -98.7% -57.1%
Price (A$/kg)
Domestic retail 12.94 12.59 12.75 12.64 12.65 12.64 13.48 6.7% 6.6%
Domestic wholesale 10.17 10.34 10.26 11.29 11.56 11.42 13.16 16.5% 13.9%
Export 6.84 7.76 7.04 2.88 14.29 3.22 13.33 363.6% -6.7%
Source: J.P. Morgan estimates, Company data.
3
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
Key Issues from the 1H14 Result
Volume Decline Temporary
Total volumes decreased 11% due to the hot summer 2012/2013 period impacting the
FY14 year. These supply constraints are expected to continue over the remainder of
the year. As a result of the robust demand from the retail market, the company has
had to shift volumes from the wholesale market and also import smoked salmon from
Norway to satisfy its retail contracts.
However, timing of fish input and feed diet strategies have been implemented such
that the company is confident that production volumes will return to growth in FY15.
Figure 1: TGR Historical and Forecast Sales Volumes
Source: Company data, J.P. Morgan forecasts.
And offset by Strong Pricing in any Case
Pricing per kg increased by 7% in the retail market and 17% in the wholesale market.
This increase is linked to two things, both of which should persist:
1. Completion of Retailer Negotiations for 2-3 years
The two major supermarket chains continue to see salmon as a growth
category. This is not due to the margins on the product itself but because of
its capacity to increase the margin of the whole supermarket basket as many
of the complementary products to salmon (avocado, cream cheese, etc.)
have high gross margins.
Just prior to the end of FY13, TGR renegotiated its contracts with both
Coles and Woolworths and achieved favourable pricing and supply
outcomes. As such, we expect this strong pricing to continue over the next
couple of years.
2. Structural Undersupply in the Market
ABARE data shows that per capita consumption of salmon rose from
1.87kg per capita in FY11 to 2.25kg in FY12. If you assume this level
remains, then demand equates to ~52.8mt of salmon in FY14. Based on
industry feedback from major domestic salmon producers, estimated FY14
production only meets ~82% of this demand. TGR estimates that the market
is ~10% undersupplied. Because of the nature of the salmon growing cycle,
0
5,000
10,000
15,000
20,000
25,000
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
4
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
it is expected to take until FY17-18 for this undersupply to be resolved,
ensuring sustained price increases in the medium-term.
Table 3: Net Apparent Consumption per Capita of Salmon
Tonnes FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Total production 21,900.7 20,488.3 22,455.2 20,772.0 25,155.3 29,133.8 29,089.1 33,619.9 35,346.8 38,651.8 46,593.1
Plus Imports 9,219.0 10,393.0 11,065.0 11,018.0 10,739.3 13,350.3 10,178.0 10,883.2 9,783.4 9,937.7 10,186.1
Less Exports 1,653.0 1,071.0 452.0 1,511.0 1,306.3 1,707.7 2,774.7 6,320.5 4,032.8 6,378.3 5,750.1
Net Apparent Consumption 29,466.7 29,810.3 33,068.2 30,279.0 34,588.2 40,776.4 36,492.4 38,182.6 41,097.4 42,211.2 51,029.2
Aust Population ('000s) 19,840.1 20,103.8 20,403.5 20,744.3 21,120.0 21,513.8 21,902.3 22,268.4 22,606.0 22,710.4
Net Apparent Consumption
per capita (kg) 1.50 1.64 1.48 1.67 1.93 1.70 1.74 1.85 1.87 2.25
Source: ABARE, ABS.
Figure 2: Total Consumption and Total Production Estimates for FY13, FY14 and FY15
Source: Tassal Group, Huon Aquaculture, ABARE, ABS, J.P. Morgan.
TGR achieved price increases in the wholesale market of A$1 per kg in February
2013 and A$1 per kg in April 2013. We estimate ongoing pricing growth for the
retail and wholesale markets of 2.5% pa, but this may be overly conservative.
Figure 3: Historical and Forecast Pricing in the Domestic Wholesale and Retail Markets
Source: Company data, J.P. Morgan forecasts.
Margin Improvement Continues
Margins continued to improve markedly with operating EBITDA per kg improving
by 68% and operating NPAT per kg almost doubling from A$082 to A$1.56. This
was namely due to pricing, however, as most operating costs per kg direct selling
0
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20,000
30,000
40,000
50,000
60,000
FY13E FY14E FY15E
Net Apparent Consumption Total production
Tonnes
8.0
9.0
10.0
11.0
12.0
13.0
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15.0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
Domestic retail Domestic wholesale
5
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
costs, logistics and storage, materials and packaging and processing increased on a
per kg basis.
Figure 4: Change in Margins per kg over time
Source: Company data, J.P. Morgan.
The chart below outlines what costs increased and what costs decreased. We believe
that further improvements can be achieved through a reduction in processing costs.
This should be aided by the new harvest strategy, the expansion of the Macquarie
Harbour lease and the selective breeding programme. Furthermore, TGR will spend
less on marketing in FY14 vs. last (~$2m less) as the TVC will run over shorter time
periods, concentrating on Christmas and Easter.
Figure 5: 1H14 Operating NPAT $/kg drivers
Source: Company data.
New Harvest Strategy
TGR is now removing fish earlier to decrease the impact of hot summers on its fish,
which resulted in high level of mortality and biomass loss in the previous summer.
This time around, the average fish size harvested was 4.18 Hog kg, which is within
the optimal 4-5kg band for the domestic market. Mortality levels also decreased.
Macquarie Harbour
TGR gained approval to expand its leasing area in Macquarie Harbour. This will
allow the company to put in an additional 0.7m fish pa from 2013 onwards
(increasing from 1.4m fish to 2.1m fish pa). The company will now have 30% of its
stock in Macquarie Harbour. This is a significant positive as Macquarie Harbour
does not suffer the effects of AGD, like the South East coast of Tasmania does. This
0.00
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FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1H14
Contribution Margin $ per kg EBITDA per kg EBIT per kg
0.0
0.5
1.0
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2.0
2.5
3.0
1H13
Operating
NPAT
Sales
revenue
Direct selling
costs
Logistics
& Storage
Materials &
Packaging
Processing
costs
Corporate
costs
Depreciation Interest Tax 1H14
Operating
NPAT
6
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
significantly reduces processing costs for the company as it costs A$1.50/kg to bathe
the fish to eradicate AGD. Currently global best practice for growing costs is
~A$4/kg while Macquarie Harbour has a cost of growing below $4/kg.
Selective Breeding Program
100% of smolts that go to sea in CY13 for harvest in FY15 will be under TGRs new
Selective Breeding Programme. TGR predicts a 3-5% gain in Hog weight for this
population relative to previous ones, and a commensurate decrease in AGD bathing
costs (the SBP allows for TGR to forego one AGD bath per fish). AGD costs
currently equates to ~A$30m for the company.
Fish feed costs
Fish meal and fish oil prices have increased globally by an average of 3-4%.
However, TGR are achieving better feed conversion ratios with new diets in place.
Cash Flow remains Strong, Key Positive is Partly Franked
Dividends
TGR generated 1H14 operating cash flow of A$29.0m, up 30% on the pcp even
despite paying cash tax for the first time ever of A$1.5m. Cash conversion was 79%,
which was higher than 76% in the pcp.
Capex ticked up due to the expansion of Macquarie Harbour. Company guidance is
for capex of A$30m in FY14 and we forecast in line with this.
Gearing reduced
Net debt remained fairly stable from the FY13 result at A$57.0m and gearing
(ND/ND+E) of 14.7%. Gearing including TGRs Receivables Purchasing Facility
(ND+RPF/ND+RPF+E) increased from 24.9%to 29.1% but remains comfortable.
Dividend Net Yield Becomes More Attractive due to Franking
Despite strong cash flows and a reduction in gearing, TGR have maintained a payout
ratio of 53% in 1H14 (54% in the pcp). The company began paying cash tax in 1H14
and as a result were able to pay a 50% franked dividend vs. them being historically
unfranked. We expect TGR to continue to pay a minimum 50% franked dividend.
Significant Valuation Support
Our TGR valuation current assumes:
Volume decline of 7% in FY14 to be followed by 10% growth in FY15 and 2%
pa thereafter.
Ongoing pricing growth of 2.5% for both the retail and wholesale markets in line
with CPI.
Ongoing capex of A$30-40m each year. Despite this, the company remains FCF
positive going forward.
We note that management is incentivised to deliver an EPS CAGR of 10-20% over
the three years from FY12 to FY15 and Statutory ROA (EBIT/Total Assets) of 15-
17% by FY15. We currently forecast an EPS CAGR of 22.0% over this timeframe
and Statutory ROA of 13.8% in FY15.
7
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
We see these as fairly conservative assumptions and yet we get a valuation of
A$4.15. We have discounted this for agricultural risk by 10% and rolled forward at
the cost of equity less dividends, to get our price target of A$3.90. NTA for the
company is A$2.00.
Outlook for FY14 and beyond
TGR does not provide specific guidance. However, we believe that FY14 will
continue to be impacted by the undersupply of volumes due to the cycle through of
hot summers. Positively, we expect volumes to recover in FY15 as well as the
continuation of pricing growth as well as a reduction in operating costs from
Macquarie Harbour and the Selective Breeding Program. As such we expect margins
to be boosted markedly to allow management to achieve their FY15 EPS and ROA
incentive targets.
Earnings Forecasts Revisions
Following the 1H14 result, we have adjusted our forecasts which results in an
increase to normalised NPAT of 7% in FY14 and 5% in FY15 but a flat outcome in
FY16.
Table 4: Earnings Revisions
Year to 30 June 2014 Revised Previous % Change
NPAT (A$m) 42.8 36.3 17.9%
Norm NPAT (A$m) 32.1 30 7.1%
EPS (c) 29.0 24.7 17.5%
Norm EPS (c) 21.8 20.4 6.8%
DPS (c) 12.5 13 (3.8%)
Year to 30 June 2015 Revised Previous % Change
NPAT (A$m) 47.4 44.6 6.2%
Norm NPAT (A$m) 40.4 38.3 5.4%
EPS (c) 32.1 30.3 6.0%
Norm EPS (c) 27.4 26 5.3%
DPS (c) 17.0 16 6.3%
Year to 30 June 2016 Revised Previous % Change
NPAT (A$m) 48.2 47.6 1.2%
Norm NPAT (A$m) 41.2 41.3 (0.4%)
EPS (c) 32.7 32.3 1.1%
Norm EPS (c) 27.9 28.1 (0.7%)
DPS (c) 17.0 17 0.0%
Source: J.P. Morgan estimates; Company data.
Investment Thesis, Valuation and Risks
Tassal Group (Overweight; Price Target: A$3.90)
Investment Thesis
We have fairly conservative volume and pricing growth assumptions and like three
key things about TGR: 1) The company is achieving significant pricing growth due
to structural undersupply in the market, 2) TGR is increasing its contribution margin
by reducing costs such as logistics, packaging, Amoebic Gill Disease costs and feed
conversion ratios, and 3) cash flows are improving for the company and gearing
remains manageable despite the high capex nature of the business.
8
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
Valuation
Time frame: December 2014
Derivation: DCF Valuation
Key inputs: (DCF) WACC 8.8%, e 0.8, TGR 3.0%
Risks to Rating and Price Target
Key downside risks: A sudden and meaningful decrease in salmon consumption by
Australians, a decrease in domestic salmon pricing, larger capex spend than forecast,
agricultural risk. Corporate action is a key risk as a key investor has ~23% of the
shareholding but the company is currently trading on a P/E discount to TGR and
would probably not look to pursue corporate activity whilst this is the case.
9
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
JPM Q-Profile
Tassal Group Limited (AUSTRALIA / Consumer Staples)
As Of: 07-Feb-2014 Quant_Strategy@jpmorgan.com
Local Share Price Current: 3.41 12 Mth Forward EPS Current: 0.24
Earnings Yield (& local bond Yield) Current: 7% Implied Value Of Growth* Current: 22.32%
PE (1Yr Forward) Current: 14.2x Price/Book Value Current: 1.6x
ROE (Trailing) Current: 10.96 Dividend Yield (Trailing) Current: 2.88
Summary
Tassal Group Limited 442.49 As Of:
AUSTRALIA 0.7842823 SEDOL 6710701 Local Price: 3.41
Consumer Staples Food Products EPS: 0.24
Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg
12mth Forward PE 14.21x 6.93 19.63 9.05 10.48 17.23 3.74 -51% 38% -36% -26%
P/BV (Trailing) 1.58x 0.61 4.34 1.38 1.59 3.43 -0.24 -61% 174% -12% 1%
Dividend Yield (Trailing) 2.88 1.12 6.45 3.37 3.23 5.93 0.53 -61% 124% 17% 12%
ROE (Trailing) 10.96 9.84 21.67 13.53 13.66 20.57 6.75 -10% 98% 23% 25%
Implied Value of Growth 22.3% -0.44 0.50 -0.05 0.00 0.49 -0.48 -299% 126% -123% -99%
Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)
7-Feb-14
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10
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
Tassal Group: Financial Summary
Relative recommendation: Overweight
A$ in millions, year end Jun
Profit And Loss FY12 FY13 FY14E FY15E FY16E Valuation Summary A$m A$ps
Revenue 271 282 291 320 334 Current mkt capitalisation 509.14 3.48
Revenue growth 13.4% 4.0% 3.3% 10.0% 4.3%
COGS (148) - - - - Price Target 3.90
Operating Expenses (63) (214) (211) (233) (245) Capital growth to price target 12.1%
EBITDA 59 69 81 87 89
EBITDA growth 0.5% 16.0% 17.5% 7.8% 2.4% Trading Multiples FY12 FY13 FY14E FY15E FY16E
EBITDA margin 21.9% 24.4% 27.8% 27.2% 26.7% PE Pre-abnormals 17.8 15.3 12.0 10.8 10.7
Amortisation (0) (0) (0) (0) (0) PE Reported 18.2 15.3 12.0 10.8 10.7
Depreciation (15) (16) (15) (16) (17) EV/EBITDA 7.3 6.0 5.1 4.7 4.5
EBIT 44 53 65 71 73 EV/EBIT 9.8 7.8 6.3 5.7 5.6
Other Income - - - - -
Other Expenses - - - - - Key Ratios FY12 FY13 FY14E FY15E FY16E
Net Interest (6) (6) (5) (4) (4) Dividend Yield 2.3% 2.7% 3.6% 4.9% 4.9%
Pre-Tax Profit 38 48 61 67 68 Franking 0.0% 0.0% 50.0% 50.0% 50.0%
Tax (9) (14) (18) (20) (20) Return on Assets (%) 6.1% 6.7% 8.1% 8.4% 8.1%
Tax Rate 25.5% 29.6% 29.4% 29.4% 29.4% Return on Equity (%) 10.1% 11.0% 13.0% 13.3% 12.7%
Minorities 0 0 0 0 0 ROIC (%) 8.9% 9.7% 11.5% 11.8% 11.5%
Abnormals (post tax) (1) 0 0 0 0
Reported NPAT 28 33 43 47 48 Leverage FY12 FY13 FY14E FY15E FY16E
Gearing (Net Debt / Equity) 25.6% 18.4% 15.5% 13.3% 12.1%
Normalised NPAT 22 27 32 40 41 Gearing (ND / (ND + E)) 20.4% 15.5% 13.4% 11.7% 10.8%
Growth 2.6% 20.1% 20.7% 25.6% 2.0% Net Debt / EBITDA 127.1% 84.4% 65.6% 56.3% 53.0%
EBIT Interest Cover (x) 7.0 9.2 13.8 16.6 16.4
End of Period Shares 147 147 147 147 147
EFPOWA 147 147 147 147 147 Balance Sheet FY12 FY13 FY14E FY15E FY16E
Cash 16 15 18 18 18
Reported EPS ($) 0.19 0.23 0.29 0.32 0.33 Receivables 9 13 11 13 13
Normalised EPS ($) 0.15 0.18 0.22 0.27 0.28 Investments - - - - -
Growth 2.0% 19.9% 20.7% 25.7% 2.0% Inventories 60 50 53 60 63
Other Current Assets 147 163 186 197 207
DPS ($) 0.08 0.10 0.13 0.17 0.17 Total Current Assets 232 242 270 288 301
Growth 300.0% 18.8% 31.6% 36.0% 0.0% Net PPE 212 218 225 237 249
Total Intangibles 39 39 40 43 46
DPS/EPS payout 41.9% 41.8% 43.1% 52.9% 52.0% Other Non Current Assets 8 8 11 12 12
Total Non Current Assets 259 265 276 291 307
Cash Flow Statement FY12 FY13 FY14E FY15E FY16E Total Assets 491 507 545 579 608
Net Profit for Cashflow 28 33 43 47 48 Creditors 40 43 46 51 54
Depreciation & Amortisation 15 16 15 16 17 Current Borrowings 42 31 32 32 32
Non Cash Items - - - - - Current Tax Provisions 0 1 0 0 0
Working Capital Changes (10) 9 1 (2) (1) Other Current Provisions 4 6 5 5 5
Other Operating Cashflows 17 (8) (9) (4) (5) Other Current Liabilities 4 1 1 1 1
Cashflow from Operating Activities 50 50 51 57 59 Total Current Liabilities 90 81 83 89 91
Non Current Creditors - - - - -
Net Capex (27) (20) (30) (31) (32) Non Current Borrowings 49 42 40 36 34
Net Acquisitions 0 0 0 0 0 Deferred Tax Liabilities 56 67 79 85 90
Other Investing cashflows 0 0 0 0 0 Other Non Current Provisions 1 1 1 1 1
Investing Cash Flow (30) (20) (30) (31) (32) Other Non Current Liabilities 0 0 0 0 0
Total Non Current Liabilities 105 110 119 122 125
Inc/(Dec) in Borrowings (4) (18) (2) (4) (2) Total Liabilities 196 191 202 210 216
Equity Issued 0 0 0 0 0 Equity 154 154 154 154 154
Dividends Paid (9) (12) (15) (22) (25) Other Equity 0 0 0 0 0
Other Financing Cashflows 0 0 0 0 0 Reserves 10 9 10 10 10
Financing Cash Flow (13) (31) (17) (26) (27) Retained Profits 131 152 180 205 228
Outside Equity Interests 0 0 0 0 0
Net Cash Flow 8 (1) 3 (0) (0) Total Shareholders Equity 295 316 343 369 392
Net Debt 75 58 53 49 47
Source: Company reports and J.P. Morgan estimates.
11
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
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KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Important Disclosures
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covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing
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Date Rating Share Price
(A$)
Price Target
(A$)
07-Nov-07 OW 3.88 4.35
07-Jan-08 OW 4.00 4.50
09-Jan-08 OW 3.90 4.35
13-Feb-08 OW 3.34 4.25
27-Feb-08 OW 2.71 3.95
18-Mar-08 OW 2.25 3.85
27-Aug-08 OW 2.40 3.00
01-Oct-08 OW 2.29 2.80
24-Feb-09 OW 1.98 2.89
22-Jun-09 OW 1.95 2.31
25-Aug-09 N 1.90 2.06
15-Jan-10 N 1.82 2.06
23-Feb-10 N 1.72 1.85
14-Apr-10 N 1.69 1.85
16-Jun-10 N 1.52 1.57
25-Aug-10 N 1.40 1.76
18-Feb-11 N 1.76 1.72
27-Jun-11 N 1.37 1.65
22-Aug-11 N 1.26 1.44
20-Feb-12 N 1.24 1.35
22-Feb-12 N 1.24 1.21
18-Jul-12 UW 1.30 1.27
10-Aug-12 UW 1.20 1.12
24-Aug-12 UW 1.30 1.23
12-Feb-13 N 1.74 1.73
15-Feb-13 OW 1.88 2.20
18-Jun-13 OW 2.11 2.60
23-Jul-13 OW 2.63 2.90
20-Aug-13 OW 2.59 3.10
08-Jan-14 OW 3.10 3.70
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
0
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4
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7
Price(A$)
Oct
06
Apr
08
Oct
09
Apr
11
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12

Tassal Group (TGR.AX, TGR AU) Price Chart
OW A$4.35 OW A$3.85 N A$1.85 UW A$1.226 OW A$3.1
OW A$4.5 OW A$3.95 OW A$2.8 N A$2.063 N A$1.847 N A$1.756 N A$1.439 N A$1.209 UW A$1.123 OW A$2.2 OW A$2.9
OW A$4.35 OW A$4.25 OW A$3 OW A$2.893 OW A$2.31 N A$2.064 N A$1.57N A$1.721 N A$1.653N A$1.348 UW A$1.266 N A$1.729 OW A$2.6 OW A$3.7
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Nov 07, 2007.
12
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.jpmorganmarkets.com.
Coverage Universe: Soemino, Armina: Ardent Leisure Group (AAD.AX), Breville Group Limited (BRG.AX), CSG Limited
(CSV.AX), Corporate Travel Management (CTD.AX), Domino's Pizza Enterprises Ltd (DMP.AX), Flight Centre Ltd (FLT.AX), GUD
Holdings (GUD.AX), Helloworld Ltd (HLO.AX), Retail Food Group Limited (RFG.AX), Salmat (SLM.AX), Tassal Group (TGR.AX),
UXC Limited (UXC.AX), Village Roadshow Limited (VRL.AX), Webjet Limited (WEB.AX), Wotif.com Holdings (WTF.AX)
J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2014
Overweight
(buy)
Neutral
(hold)
Underweight
(sell)
J.P. Morgan Global Equity Research Coverage 43% 45% 12%
IB clients* 57% 49% 36%
JPMS Equity Research Coverage 43% 50% 7%
IB clients* 75% 66% 59%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.
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13
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
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14
Australia Equity Research
14 February 2014
Armina Soemino
(61-2) 9003-8620
armina.x.soemino@jpmorgan.com
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