What happens when we step away from our desks
Investors benefit from getting away from their desks. While reading the financial press and dissecting company announcements and reports is important, I know I enhance my investment research when I get out of the office to meet with company management and observe their operations on a site tour.
The investment team at Perennial spends considerable time travelling to enhance the investment research process. Personally, I am privileged to meet with many companies and visit many sites. Recently, I travelled to Southern Tasmania to catch up with the senior management team at Huon Aquaculture (ASX:HUO).
Huon is a specialist salmon farming and processing company with various facilities around Hobart and the Huon River.
A key goal of my travels to Tasmania was to enhance my understanding of the salmon farming life cycle by witnessing the various life cycle stages. We also wanted to assess Huon’s recent investments in its Whale Point Salmon Nursery and remote feeding capability.
The Salmon Farming Lifecycle
The salmon farming life cycle is fascinating, especially as salmon is a staple in many diets. The investor tour started at Huon’s hatchery at Forest Home, Judbury, near the Huon River. Salmon start their lives in hatcheries as eggs and eventually growing to reach the “smolt” stage. They are then ready to be transferred to ocean sites to grow into adult salmon. While walking around the hatchery and speaking with personnel that operate the facility, it was clear to me that Huon had a well-planned process to growing salmon in the early stages of its life cycle.
Marine Farming – Huon River, Tasmania
The investor tour also involved visits to marine sites in the Huon River, highlighting Huon’s patented Fortress Pens. We also toured Huon’s various vessel boats. These boats are responsible for bathing and the transfer of fish from marine sites to harvest and smolt to sea.
Whale Point Salmon Nursery
Huon has dedicated much of its recent capital expenditure towards its new salmon nursery at Whale Point. Construction and development progress of this facility was pleasing to see. In fact, the facility represents Australia’s first onshore salmon nursery, which is consistent with Huon’s progressive and innovative reputation in the industry. Huon’s is building the onshore salmon nursery to reduce biosecurity risk and limit costs, as the fish will spend less time at sea.
We also learned that environmental and community impacts of the facility had been mitigated through recycling processes and noise reduction efforts. The first delivery of fry, representing salmon in its earliest of stages, is expected to be received by Whale Point late calendar year 2018. It will then transfer to sea from the facility during the second half of the 2019 financial year.
Remote Feed Technology
In recent times, Huon has developed a world first artificial intelligence (AI) solution to feed salmon remotely and automatically from a Hobart control room. The technology enhances fish performance and minimises wastage given that fish are fed according to their natural appetite.
The benefits to employee safety from this technology were evident from the control room. Staff are no longer required to feed fish manually at sea, reducing danger when marine weather is too rough. This also improves Huon’s safety profile in the future as Huon continues to focus on offshore growing. Offshore leases are intuitively more susceptible to rougher seas.
Remote Feed Control Room – Hobart CBD, Tasmania
We also favourably view Huon’s push towards increasing its production capacity by way of expanding its lease area under operation in Storm Bay. Expansion of these sites allows for more oxygen to the fish as the pens are located in areas with stronger currents. This is beneficial for both fish health and the physical environment.
Overall, a value-adding experience
Overall, visiting Huon’s marine farms and other facilities has added a lot of value to our ongoing research on the company. Our conviction in management and in Huon’s operations strengthened as a result of this investor tour.
I have come away with an enhanced understanding of the farming process and appreciation for the new Whale Point facility and the remote feeding capability.
We take important note of Environmental, Social and Governance (ESG) issues as a part of our research and evaluation criteria. Environmental sustainability was an important research consideration and we note the superior environmental and sustainability practices employed by Huon.
Pleasingly, a few days after our site tour Huon received RSPCA approval for its products. This endorsement reinforces our observations of Huon’s sustainable farming practices.
Disclaimer: Please note that these are the views of the writer and not necessarily the views of Perennial. This article does not take into account your investment objectives, particular needs or financial situation.
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Marni Lysaght is an Equity Analyst at Perennial Value Management. She is responsible for researching stocks for Perennial in the areas of Agriculture, Aged Care/Retirement, Diversified Financials, Consumer/Retail, Healthcare and Biotechnology.