KUALA LUMPUR: GP Ocean Food Bhd makes no bones about it - it is the country's biggest integrated fisheries group, but even given its size, it still has a lot of room to grow because its market is the whole world.
The company will issue a prospectus next month prior to its listing on the Bursa Malaysia Main Board.
Following a slew of mostly Mesdaq listings, this is one of the few Main Board companies coming into the market, and one of the most promising. No wonder then that fund managers are keen on the stock.
It has helped that GP Ocean has prominent personalities on board. Former Securities Commission chairman Datuk Ali Kadir is GP Ocean’s chairman and Rio Capital, a company associated with him is a shareholder.
CIMB Group's CEO Datuk Nazir Razak and his brothers Nizam and Datuk Johari, who are businessmen, are also understood to be shareholders of GP Ocean. “It has lent credibility to the company that the Razak boys are there,” said a fund manager.
In addition, two former director-generals of the Fisheries Department are GP Ocean's board members.
GP Ocean is one of the few integrated fisheries group in the region. It is engaged in upstream activities in trawling and rearing fish fry and in mid-stream in aquaculture and seafood processing as well as downstream in packing cooked seafood.
It will be the first public-listed company to hail from Labuan where GP Ocean is based. Labuan may in future be known not only as an offshore financial services hub, but also a fisheries hub.
GP Ocean's profit track record shows an ability to rapidly scale up its operations profitably. The company's net profit surged from RM5.7mil in its financial year (FY) ended Jan 31, 2004 to RM14.8mil in 2005 and RM37.1mil in 2006. The net profit margin last year was wide at about 20%.
The group, founded by Lee Sin Teck, executive chairman, had help from corporate investors such as Datuk Andrew Lim who joined a couple of years ago.
GP Ocean expanded on several fronts in the last two years. “The company had started with two trawlers and today, it has 24 trawlers,” said Lim who has since become the CEO.
At the same time, the group expanded its two seafood-processing plants and a cooking plant.
The group opened a new dimension to its range of activities with fish and prawn aquaculture farms in April last year. It launched 1,600 fish cages into the sea and opened 175 ponds for tiger prawns in a mangrove swamp, Lim said in a meeting with StarBiz last week.
So far, the group has harvested from only 400 cages in which it reared sea bass and garoupa. Each cage holds 1,000 fish. As such, a single harvest can yield sales of RM30,000 per cage.
This activity carries very high profit margins, as broad as that of software companies. GP Ocean's fish rearing provides a net profit margin of 80% while prawn farming gives a margin of 60%, Lim said.
The exceptional margins in fish farming are due to very low operating costs as the feed that is used is the “waste catch” from the group's trawler fleet. Herein lies the advantage in its integrated operations. The feed pallets for its farmed prawns are, however, imported.
Additionally, the entire profit is captured in the group, as it does not have to pay tax in its aquaculture division. This is due to tax incentives given by the Government to encourage the private sector to develop aquaculture.
It is remarkable that the profit margins could widen further. GP Ocean is awaiting organic farming certification with which it would be able to price its farmed fish some 30% higher. This would be similar to organically farmed vegetables that fetch much higher prices.
The level of GP Ocean's exports and margins showed it is a globally competitive company. The group's sales totalled RM180mil last year of which 91% were exports.
While exports offer narrower profit margins than domestic market sales in some industries, GP Ocean gets higher prices in export markets.
Its focus presently is the US, the biggest market for seafood, to which the company has certification from the US Food and Drug Administration or FDA.
There are many countries that GP Ocean can sell its seafood to. “We haven't even ventured into the Middle East yet,” Lim said.
The Government has set a target for Malaysia to become a net exporter of seafood by 2010. In the past, no one could have imagined that the country, considered depleted of fish, could one day become an exporter.
GP Ocean found rich resources in the South China Sea and the coastal areas of Sabah for aquaculture. It has established a significant role as a lead exporter and as a global player.