Ocean Harvest Technology — Harvesting the power of seaweed

Research: Industrials

Ocean Harvest Technology — Harvesting the power of seaweed

Ocean Harvest Technology (OHT), based in the UK, produces animal feed additives products using a composite of blended seaweed. Its patented products have been shown to enhance growth rates in livestock, increase feed efficiency and improve egg quality and quantity for laying poultry. As OHT operates in an attractive market, there is significant potential for its proprietary technology to drive volume growth as awareness of its product benefits increases, along with improving financials.

Written by

Milo Bussell

Analyst, Consumer and TMT

Industrials

Ocean Harvest Technology

Harvesting the power of seaweed

Agricultural products

QuickView

11 April 2024

Price

15.0p

Market cap

£19m

€1.17/$1.26/£

Share price graph

Share details

Code

OHT

Listing

AIM

Shares in issue

125.9m

Business description

Ocean Harvest Technology, based in the UK, is a researcher, developer and supplier of blended seaweed products as additives for animal feed. The company sells to over 45 global customers. In FY23 North America accounted for 50% of the group’s revenue, with EMEA making up 30%, APAC 16% and LATM 3%.

Bull

OHT’s OceanFeed technology is proprietary and patented, protecting its IP and giving it first-mover advantage in the blended seaweed space.

The client base is diverse and global, providing it with revenue resilience despite potential negative events in individual markets.

Supply chain initiatives to improve quality and quantity are benefitting financials. In 2023 OHT expanded supply sourcing into East Africa and the Philippines.

Bear

OHT’s products are relatively high cost compared to other ingredients within the feed mix.

R&D studies are ongoing to prove the benefits within certain livestock verticals, such as dairy, beef, sows and salmon.

The outlook for certain protein end markets is weak, for example pork and beef.

Analysts

Milo Bussell

+44 (0)20 3077 57 00

Russell Pointon

+44 (0)20 3077 57 00

Ocean Harvest Technology (OHT), based in the UK, produces animal feed additives products using a composite of blended seaweed. Its patented products have been shown to enhance growth rates in livestock, increase feed efficiency and improve egg quality and quantity for laying poultry. As OHT operates in an attractive market, there is significant potential for its proprietary technology to drive volume growth as awareness of its product benefits increases, along with improving financials.

Proprietary technology delivering beneficial solutions

The feed additive market represents a $40bn total addressable market, presenting a significant revenue opportunity for OHT. Its products serve the key animal markets of bovine, aqua, poultry, equine, swine and pet verticals, offering varied nutritional benefits by category. The group secured a broad ranging patent in February 2024, which covers the claims of the core benefits of its seaweed blend products, making it the sole patent related to seaweed blends. The group’s products not only enhance animal nutrition but are also an attractive return on investment due to lower mortality rates and greater feed efficiency. OHT estimates its sustainable OceanFeed solution saved 12k tonnes of animal feed and 6k tonnes of CO2 emissions globally in 2023.

FY23 results show improving momentum

OHT’s recent FY23 results showcased the rapid growth of the company’s proprietary OceanFeed product, which grew by 28% in the year. Product revenue grew by 21%, driven by an impressive 18% increase in volume, resulting in reported revenue growth of 12% to €3.4m (FY22: €3.0m). During 2023, the company signed 15 new customers and made its first ventures into India, Taiwan and Korea. Gross margin improved to 38% (FY22: 31%), driven by gains in volume, pricing and cost of goods sold efficiency gains, including supply chain initiatives to improve the quality of seaweed sourced and the efficiency of its processing facilities. Despite the 5% increase in operating expenses, the adjusted EBITDA loss improved by 8% to €2.2m (FY22: €2.4m). The £6m gross proceeds raised at IPO supported the group’s cash flow after a build-up of working capital ahead of its 2024 growth plan. Consequently, OHT ended FY23 with a net cash position of €2.6m.

Valuation: Year-to-date share price rise

Since IPO in April 2023, OHT’s share price has seen a resilient 6% decline in a tough year for new London IPOs. In recent months, however, the share price has risen by 58%, although still below the IPO price of 16p. Using the sole estimates on LSEG, OHT trades on EV/sales multiples of 2.7x for FY24 and 1.5x in FY25.

Consensus estimates

Year
end

Revenue
(€m)

Gross profit
(€m)

Adjusted EBITDA
(€m)

EV/sales
(x)

EV/EBITDA
(x)

12/22

3.0

0.8

(2.4)

5.4

N/A

12/23

3.4

1.1

(2.2)

4.8

N/A

12/24e

6.1

2.2

(1.3)

2.7

N/A

12/25e

10.8

4.0

0.4

1.5

40.8

Source: LSEG

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General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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