Much has been written about the so-called ‘dining boom’ as Asia’s burgeoning middle-class boosts demand for Australian meat, dairy, fruit and vegetables. Less considered is rising aquaculture demand as people in the region consume more fish.
Aquaculture has improving long-term prospects. Business forecaster IBISWorld predicts annual industry growth in aquaculture of 0.6 per cent (2012-17) will rise to 1.7 per cent (2017-2022) as seafood consumption rises.
Growing import pressures in several seafood segments, principally from overseas, have dampened the aquaculture industry’s gains over the past five years. An increase in wild-caught fishing (aquaculture is farmed) and the substitution effect of other protein being included in Asian diets, such as poultry, are other headwinds.
But rising disposable incomes in Asia – about 2 billion people are projected to join the region’s middle class by 2030 on OECD forecasts – should support higher seafood consumption. Demand for pricier seafood, such as oysters and salmon, will rise.
In developed countries, greater focus on healthier eating will add to seafood demand. One need only look to the plethora of health stories promoting the virtues of Mediterranean diets that are based around seafood, olive oil, vegetables and nuts.
Kids are also getting the seafood message. I’m amazed that salmon sushi is my youngest child’s favourite meal. When I was his age, eating raw seafood was akin to culinary punishment. Now, more kids see raw seafood, particularly salmon, as a treat.
Sustainably is another factor. Australia and New Zealand’s reputation as ethical, clean suppliers of aquaculture (despite the occasional media critique) should stand both countries in good stead as overseas consumers give more consideration to where fish was produced. 
Give me salmon reared in New Zealand or Australia, with all the checks and balances that come with such farming, over those in polluted Asian waters any day.
On balance, aquaculture demand should continue to grow steadily. Perhaps less so than other proteins given that seafood has been an integral part of many Asian diets for years. But enough to make some ASX-listed aquaculture stocks interesting at current prices. 
There are three main stocks to choose: Tassal Group, Huon Aquaculture Group and New Zealand King Salmon Investments, an NZ-based company that dual listed on ASX last year through an Initial Public Offering (IPO).
Tassal’s five-year annualised total returns (including dividend reinvestment) is 34 per cent, shows Morningstar data. Huon is trading below its $4.75 issue price from its 2014 IPO, but at $4.49 is well up on its 52-week low of $3.02 and rapidly gaining momentum.
NZ King Salmon Investments has caught my eye. It continued the trend of Kiwi companies dual listing on ASX to gain access to Australian capital, improve their share liquidity and get in front of a larger investor audience. The company raised $74 million in an IPO at $1.07 a share in October and now trades at $1.30
Chart 1: New Zealand King Salmon InvestmentsSource: The Bull
NZ King Salmon is the world’s largest aquaculture producer of king salmon under its Ora King, Regal and Southern Ocean brands. Salmon has some the best long-term prospects of all seafood categories, in my view. New King Salmon Investments had revenue of NZ$114 million and underlying earnings of NZ$16 million in FY16.
If NZ King Salmon can lift its Price Earnings (PE) multiple closer to its ASX peers, a steady re-rating of its share price in 2017 is possible as its market profile rises. 
Tassal trades on 14.4 times FY18 using consensus analyst forecasts and Huon trades on 14.45 FY18 earnings. NZ King Salmon trades on 13 times forecast FY18 earnings, using the earnings-per-share forecast in the prospectus.
Some valuation discount is warranted because NZ King Salmon has less history as a listed entity. But the gap should narrow as the company gains more traction. 
Consensus forecasts, based on a small number of analyst forecasts, have a median share-price target of $4.50 for Tassal and $3.77 for Huon. That suggests Tassal is fairly valued at the current price and Huon is fully valued after its share rally. 
A median share price target of $1.41 implies NZ King Salmon is a touch undervalued.
NZ King Salmon can do better than the market expects in the next few years. The company has a solid industry position, no debt and a good record. 
Capitalised at $176 million, NZ King Salmon suits experienced investors who are comfortable with micro-cap shares in an industry that has had its share of volatility over the years. 

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Tony Featherstone is a former managing editor of BRW and Shares magazines. The information in this article should not be considered personal advice. The article has been prepared without considering your objectives, financial situation or needs. Before acting on the information in this article you should consider its appropriateness, regarding your objectives, financial situation and needs. Do further research of your own or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at February 2, 2017.