SINGAPORE (Oct 3): With Qian Hu’s hobby fish business providing steady cashflow that should enable it to ramp up its aquaculture business, the company make a comeback in terms of profitability in FY19, says RHB Research.

However, management will need about six to nine months to conduct more research and development, and improve the survival rates of its grouper fry, says lead analyst Jarick Seet in the unrated report on Wednesday.

In 2017, Qian Hu entered into a JV with partner Zhang Mei Yu to develop herb-based medication to improve the survival rate of the fishes. Qian Hu holds a 51% stake in the JV, and management has not ruled out the possibility of owning it entirely in the near future.

Qian Hu has also ventured into Hainan where it established new fish farms. It is currently rearing and selling grouper fingerlings which are reared for two to four weeks, during which they can grow 2-5cm.

Currently, the average survival rate is 60-70%, but the company is working to boost it to 80% before ramping up production, says Seet.

The cost per fingerling is estimated at RMB1-2, and they are sold at about RMB4 (80 cents) – implying a rate of RMB0.5-0.6 per cm. Currently, Qian Hu is selling an average of 100,000-200,000 fingerlings a month but can ramp this up to 400,000-500,000.

According to Seet, Qian Hu is one of the few fish farms in China that has managed to secure an export licence valid up to 2022. Currently, it mainly exports grouper and snapper fry, as well as marble goby to China, Singapore and Malaysia. In future, management is also looking to export more types of fishes, like pompano.

Qian Hu is also exploring and experimenting with other types of aquaculture farming like lobster farming and a shrimp hatchery.

Seet notes that there are also a large number of snail farms in the vicinity and management is exploring lobster farming as a viable option – since it offers a much higher ROI compared to snail farming.

If successful, the company could then supply local farmers with lobster fry and work with them to rear lobsters, instead of snails.

Year to date, shares in Qian Hu are up 20% to 24 cents on Wednesday.

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