Pacific Andes Resources

Pacific Andes Resources Dev (PARD): to buy a 19.8% stake in Tassal, a leading Australia-listed salmon producer, for A$51.7m (S$67m). The deal was done at A$1.79/sh, 3.2% above Tassal’s closing px yday at A$1.735. This values Tassal at 9.3x P/E, vs PARD’s 7.3x P/E. The deal is expected to be completed by Jan ’11, with funding to be entirely from internal sources…

Tassal earned A$28.1m net profit on A$413m revenue for FYJun10, vs PARD’s HK$773m net profit, HK$7.4b revenue for FYSep10 (1AUD = 7.61 HKD). Tassel employs ~650 staff and this year harvested over 12k tons of salmon (70% of Australia's total salmon pdtn). PARD on the other hand, supplies frozen seafood worldwide and is one of the biggest suppliers of frozen fish to China…

While not earnings accretive at the moment, PARD notes this invmt would give it deeper insight into a new seafood biz that offers high growth potential and is well-protected with high barriers to entry. The venture into vertically integrated aquaculture also brings PARD one step closer towards a sustainable, farming biz model, similar to that of plantations…

News likely to be viewed positively. Recall StanChart at end Nov initiated on all 3 co’s within the Pac Andes group of companies at Outperform.
PARD ($0.47 TP), China Fish ($2.61 TP), Pac Andes International (1174 HK, HK$2.10 TP)