KUALA LUMPUR: Aquaculture-based Mag Holdings Bhd will focus on the export markets for its prawns due to the strong US dollar and to fill the vacuum of supplies while leveraging on its North Cube Sdn Bhd acquisition.
Executive chairman Ng Min Lin (pic) said the group would be able to provide the supplies to South Korea, Australia and China with its expanded capacity.
“The combined strength of 235 prawn cultivation ponds and a processing plant with a capacity of 6,000 tonnes per year allows the group to harvest both North Cube and its existing farms into finished products.
“This creates economies of scale and synergy for the enlarged the 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.
The acquisition of North Cube 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 or 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,” Ng 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 that 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 fulfill 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 onset of the pandemic, presenting us with bargaining power for acquisitions. Consolidation is happening and we intend to capture this market and grow our market share,” he said.
Ng believes aquaculture players would need economies of scale to survive in this unprecedented situation.
“While the business is under the essential services 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 ones will have no choice but to halt their production,” he said.
The acquisition of North Cube 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.