KUALA LUMPUR: Aquaculture-based Mag Holdings Bhd will focus on the export markets for its prawns due to the strong US dollar and filling the vacuum of supplies while leveraging on its North Cube Sdn Bhd (NCUBE) acquisition.
MAG Holdings Bhd executive chairman Ng Min Lin said on Monday the group would be able to provide the supplies to South Korea, Australia and China with the expanded capacity.
“The combined strength of 235 prawn cultivation ponds and a processing plant with a capacity of 6,000 tonnes per year allows MAG Group to harvest both NCUBE and its existing farms into finished products. This creates economies of scale and synergy for the enlarged MAG Group,” he said.
He said MAG continues to scout for more merger and acquisition opportunities as it remains upbeat on the outlook for the industry as NCUBE cements the group’s position as one of the top three players in the Malaysian aquaculture industry.
Post-acquisition, MAG has a breeding capacity of 4,000 tonnes of vannamei (white leg shrimp or king prawn) per year, with 235 prawn cultivation ponds.
“The group is looking to increase its capacity to 20,000 tonnes per year in the next five years, by acquiring more breeding farms in Sabah,” it said.
The breeding capacity of entire Malaysia is around 40,000 tonnes per year and this means MAG would have a market share of 35%.
Ng said the Covid-19 pandemic has created a vacuum of supply for prawns due to the disruptions of supply chain caused by the lockdowns globally.
He pointed out producers in Indonesia, India, Ecuador and South America have been facing supply chain and logistic interruption, while issues in the ports meant that it is harder to fulfil the export deals.
“As a result, we have been getting overwhelming enquiries to export more prawns. This situation is similar to domestic producers.
“They have been suffering since the pandemic, which presents us with bargaining power for acquisitions. Consolidation is happening, and we intend to capture this market and grow our market share,” he added.
Ng believes aquaculture players would need economies of scale to survive in this unprecedented situation.
“While the business is under the essential service category, the supply chain players such as packaging are not deemed ‘essential services’. A big player like MAG can absorb a larger quantity of materials needed, while the smaller one will have no choice but to halt their production,” he said.
On the acquisition of NCUBE, it also comes with a profit guarantee of not less than RM18mil in aggregate on a consolidated basis for the 18-month financial period ending 30 June 2022.
Lim said MAG is also looking into the value-added downstream ready-to-eat food such as “peeled and deveined” and “cooked” prawns.
“These products will give us higher margins as customers are willing to pay for the convenience. When the opportunity comes, we will invest in setting up new production lines for this venture,” Ng said.
Malaysia’s marine shrimp aquaculture is important for local food self-sufficiency and also a source of trade income. It accounts for 24.8% of Malaysia’s aquaculture production volume and 41.3% of its production value in 2019.
The local marine shrimp production aquaculture market is projected to expand at a compounded annual growth rate of 11.9%, from RM1.13bil in 2020 to RM1.99bil in 2025.