Tassal Group recently announced that it had won EPA approval for its waste capture system in Macquarie Harbour in Tasmania, with the company committed to installing waste capture systems on cages that represent biomass in excess of 13 tonnes per hectare.
Previously, the EPA had granted a temporary biomass cap extension up to 28t/ha, which would enable 7,840t to be harvested in FY18E from 280ha. We believe this should help reduce risks over FY18E production from Macquarie Harbour and should help alleviate concerns highlighted by Environment Tasmania at our recent meeting.
Given the current biomass cap is temporary, however, the reduction in the harbour for FY19E and beyond will still have to be made up for elsewhere, as previously planned for by Tassal.
We retain our Buy recommendations positions on both Tassal and Huon Aquaculture, mostly due to strong wholesale pricing, and attractive valuations given plentiful growth. We prefer Huon over Tassal given its cleaner cost-savings story, but note the valuation of Tassal has come back in recent weeks, which could offer an attractive entry point ahead of the preliminary results in August.