20180910-辉立证券-Qian_Hu_Corporation_Limited_15页_2mb

Qian Hu Corporation Limited Summary

Core Content

Qian Hu Corporation Limited is a Singapore-listed company that has been operating in the ornamental fish business since 1998. It has recently expanded into aquaculture with the objective of producing antibiotic-free, sustainable edible fish. This new business is expected to be significantly larger than the ornamental fish segment in the long term. The company's two new aquaculture farms are located in Wenchang, Hainan, China, and are managed as part of its integrated strategy to capture the entire value chain of edible seafood.

Main Points

• Business Expansion: Qian Hu has embarked on a new aquaculture business to produce edible fish, such as groupers, in Hainan, China. This is a strategic move to diversify and grow beyond the ornamental fish segment.

• Farms Overview:

  • Farm 1: Operates under Qian Hu Aquaculture (Hainan) Co., Ltd. It deals with finfish and is the entity holding the Hainan export licence. It was operational since May 2017.
  • Farm 2: Operates under Tian Tian Fisheries (Hainan) Co., Ltd. It focuses on shellfish and holds the Hainan import licence. It was operational since June 2018.

• Location Advantage: Hainan is chosen as the aquaculture hub due to its year-round favorable climate, which supports continuous farming. The region has over 2,000 aquaculture farms, providing Qian Hu with access to a well-established market.

• Proprietary Technologies: Qian Hu has leveraged its expertise from the ornamental fish business to develop a sustainable aquaculture model. It uses its Hydro-Pure water filtration system and proprietary fish feed to maintain water quality and fish health. These technologies help reduce the dead-on-arrival (DOA) rate to under 3%.

• Strategic Positioning: Qian Hu operates in the fingerling and grown-up fish stages of the supply chain. It sources fingerlings from local hatcheries or imports them and sells them to farms both domestically and internationally. It also quarantines grown-up fish before export to ensure their health and viability.

• Partnerships: Qian Hu has partnered with a herbal medication manufacturer for fish, enhancing its ability to manage fish health and disease prevention in aquaculture.

• Financial Performance:

  • Revenue: Increased slightly over the years, with a peak in FY17 at SGD 87.8 million.
  • Gross Profit: Also showed growth, reaching SGD 26.3 million in FY17.
  • PATMI: Rose significantly in FY17 to SGD 0.33 million, indicating potential for future profitability.
  • EPS: Improved from 0.02 cents in FY14 to 0.29 cents in FY17.
  • Valuation: The current price of SGD 0.19 is valued at 59 times the 1H FY18 annualised EPS of 0.16 cents and has a P/B ratio of 0.42.

Key Financials (FY14–FY17)

Financial Ratios

Conclusion

Qian Hu is transitioning from an ornamental fish business to a more diversified aquaculture venture. The company is leveraging its existing export and water filtration expertise to enter the edible seafood market with a focus on sustainability and antibiotic-free production. While the new business has not yet contributed significantly to revenue, the strategic positioning and proprietary technologies position Qian Hu well for future growth. The company's valuation remains attractive, and its financial performance shows signs of improvement.