SINGAPORE (Jan 17): NRA Capital is expressing positive sentiment on Qian Hu Corporation after news of the company’s intention of diversifying into the business of breeding edible fish.

Together with the release of its earnings for FY16 ending Dec, Qian Hu last week announced it had set up a 51%-owned joint venture company,  Qian Hu Aquaculture (Hainan) Co, with a local partner to breed edible fish on Hainan Island of China.

The company expects its new business to begin contributing in FY18 ending Dec 31.

Additionally, Qian Hu also will be venturing into the breeding of albino dragon fish for its ornamental fish business.

“We find the recent events interesting for a company that has kept a lower profile in recent years, but refrain from providing a rating at this juncture,” comments analyst Liu Jinshu in a Monday report.  

Even so, Liu remains positive on the stock – noting its improved top-line prospects in its latest set of results, and how the edible fish market is significantly larger than that of ornamental fish in terms of volume.

“Based on our interpretation, the idea is that Qian Hu’s proprietary filtration technology Hydropure and its fish nutrition know-how will allow it to breed fish with higher survival rates. Meanwhile, its local partner will provide herbal medication expertise to grow fish without the use of antibiotics, thus differentiating itself from other fish farmers,” he adds.

Liu also believes the company has potential to increase the value of its products by cultivating the ability to breed unique varieties of Arowana, highlighting the ornamental fish as a billion-dollar market of which Qian Hu has a 5% market share.

“Based on Qian Hu’s historical earnings, the company trades at 11.4x 10-year average earnings and 3x the earnings high of 2009,” observes the analyst.

As at 11.16am, shares of Qian Hu are trading 20.1% higher at 20 cents.