Bubba Gump Shrimp Company (HQSM)

| About: HQ Sustainable (HQSM)

The Microcap Speculator submits: [L]ike I was sayin', shrimp is the fruit of the sea. You can barbecue it, boil it, broil it, bake it, sautee it. Dey's uh, shrimp-kabobs, shrimp creole, shrimp gumbo. Pan fried, deep fried, stir-fried. There's pineapple shrimp, lemon shrimp, coconut shrimp, pepper shrimp, shrimp soup, shrimp stew, shrimp salad, shrimp and potatoes, shrimp burger, shrimp sandwich. That- that's about it.
- Bubba in "Forrest Gump"

Apparently there really is a Bubba Gump Shrimp Company (who knew?), but this post is about a different aquaculture company that just happens to be one of my favorite ideas at the moment: HQ Sustainable Maritime (OTCPK:HQSM). A special thanks to Ezra Marbach of the China Stock Blog who brought this idea to my attention.

HQSM raises tilapia, shrimp, and other seafood in the Chinese province of Hainan, located on the South China Sea. It also has offices in Seattle, New York City, Montreal, Hong Kong, Shanghai and Beijing. The "HQ" stands for "high quality," and that appears to be how it runs its business:

  • HQSM does not use hormones, and uses only minimal antibiotics. It also controls the farm tanks using natural predators and bottom feeders rather than chemicals.
  • HQSM is branding its products as "zero toxin," and is also seeking organic certification.
  • HQSM has received both HACCP certification from the US FDA and the EU Code assignment of quality, permitting its products to be sold in these markets.

HQ currently has a market cap. of only $28.53 million. Last quarter HQSM achieved revenues of $6.5 million versus less than $500k in the prior year quarter. The company earned $1.19 million on a GAAP basis. Annualized, that gives HQSM a P/E ratio of slightly under 6. HQSM also has a nutraceutical division that sells seafood-derived nutraceuticals, mostly in Asia (fish oil capsules etc.).

HQSM currently sells products in the North American market by the container load. However, it is expanding its Seattle sales force to begin selling on a box basis to retailers. HQSM "believes that this higher margin business will add at least 15% profitability to its current sales." The company also invested $3.8 million in a feedmill that will support a higher level of integrated operations.

Even the chart looks fine. After a big volume thrust to recent highs, it has pulled back on declining volume. I own some now, and will probably buy more once the resistance around .35 is taken out.

DISCLOSURE: I am long HQSM.OB. Not a recommendation to buy or sell any security. For informational and educational purposes only.

About this article:

Tagged: , Farm Products
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here