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Qian Hu dips into high tech for fish breeding and management; eyes better 2H sales

Chloe Lim
Chloe Lim8/11/2022 03:46 PM GMT+08  • 7 min read
Qian Hu dips into high tech for fish breeding and management; eyes better 2H sales
Yap: With a 24-hour monitoring system to watch over the livestock, we have enough time to react if anything happens across all relevant parameters. Photo: Albert Chua/The Edge Singapore
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When Yap Kok Cheng took up the CEO role at aqua farmer Qian Hu Corporation early last year, he had a big and “colourful” pair of shoes to fill.

Kenny Yap, his predecessor and uncle by relation, had an almost larger-than-life personality and was part of the company’s founding core team together with his siblings. The elder Yap remains Qian Hu’s executive chairman.

No thanks to the pandemic that made Yap’s job tougher, his list of challenges now has also grown. This includes higher power costs and keeping up with more technologically advanced systems in the urban farming space.

“The price surge in electricity [was] a real killer for us as we went more and more into high-tech farming,” Yap explains in an interview with The Edge Singapore. “We [have to] pack a lot more into the filtration systems [these days], where the levels of circulation and air need to be consistent.”

According to Yap, the company’s power bill has increased by 20% and one of their biggest difficulties lies in predicting which way electricity prices are heading.

In any case, Yap is up to the challenge and more than ready to bring the company to the next chapter. He might be relatively new to the CEO role but he is certainly no stranger to the company.

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Yap joined in 2005 as a management trainee, coming under the wings of the previous senior management team. Throughout the years, Yap was given various key appointments to broaden his management chops, including years spent in China to run the company’s businesses there.

Digitalisation of fish farming

Qian Hu started by rearing ornamental fishes and was well known for the so-called Dragon Fish, or Arowana, where some prized specimens can sell for thousands of dollars. Under Kenny, the company also diversified into farming fish and shrimp for food, opening up new markets to capture.

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Qian Hu’s business mix might have changed but as a listed company, it still faces the typical business challenges of rising costs and generating higher revenue and returns for shareholders. To achieve this, Qian Hu plans to invest more in newer technology.

“Traditional farming is increasingly difficult, especially in the estimation of food required or batch supplies, for instance,” says Yap. “The traditional ways are fundamentally not efficient and ultimately very time-consuming.”

To this end, Qian Hu and AquaEasy, a unit of the Bosch Group dedicated to strategic aquaculture, signed a five-year collaboration deal. Under its terms, Qian Hu is giving a $1 million unsecured convertible loan to AquaEasy to help fund working capital and capital expenditure. Since 2020, AquaEasy has been working with Qian Hu to help improve its shrimp-farming operations.

Qian Hu says AquaEasy provides the systems that collect and analyse data to provide insights on the water quality, optimal amount of feed needed and even the harvest amount.

Both parties plan to do more together in certain areas. These include R&D, product development for new markets, and the digitalisation of the supply chain with AI and internet of things technology so Qian Hu can better monitor its operations and improve the traceability of its products with real-time insights.

“When it comes to high-intensity farming, shortening any kind of reaction time is essential,” explains Yap. “With a 24-hour monitoring system to watch over the stock, we have enough time to react if anything happens to any relevant parameter.”

“For areas that are out of reach of the [water monitoring] system, alerts [are programmed] to be sent to our handphones to inform us of what we need to do, which is very useful,” he adds.

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In the next phase of innovation, smart-feeding systems, which use in-water sensors to detect the needs of the fish, will be rolled out in Qian Hu’s fish farms.

“Unlike traditional feeding methods that require us to set a timer and a couple of people to carry out the feeding process, our smart-feeding system uses a hydrophone submerged in water to ‘listen’ and detect the right time to feed our stock,” explains Yap. “Only when the hydrophone [receive signals] that the shrimps in the streams are hungry will the feeder be activated.”

The smart feeder has improved the so-called feeding rate by 30%, which helps to cut costs. “Naturally, this is a much more dynamic system where the process is leaning towards an ‘on-demand’ model for what the fish need,” he adds. “It takes away a lot of the guesswork that traditional farming usually depends on.”

According to Yap, the system is also able to detect the health of the livestock and inform the team if any problem crops up. “The system uses sound to detect the level and type of activities in the water,” explains Yap, “During the first year of our collaboration with AquaEasy, we were able to detect the moulting and pre-moulting stages of our shrimps and prawns, which better determines our harvesting timelines [and the planning we have to make].”

Before starting Qian Hu, the Yaps were a family of pig farmers. As owners and managers of a listed company, the underlying business of farming remains the same. However, Qian Hu no longer practises traditional methods as it wholeheartedly embraces new farming practices and aims to help other farmers follow suit. “At the moment, we are helping Arowana farmers switch over to the digital methods we are currently using by doing trials with them and getting the farms to use our equipment,” he says.

“Ideally, if more of these farmers adopt the Hydropure filtration system and its related nanobubble technology, we can all strive towards more consistent outputs [with greater ease], and perhaps even achieve higher density [levels],” he adds.

The way Yap describes it, there is plenty of high-level science behind shrimp cultivation. He says that Qian Hu is working towards producing a “mono-sex” stream of shrimps. In this special stream, the shrimps will be given certain probiotics to produce offspring of the same gender. “We’d prefer to cultivate male shrimps as they are heavier and bigger in size [compared to female shrimps] so that we will have a more productive output for our consumers,” explains Yap.

Other solutions that Yap and his team have considered to increase productivity and output include modifying the food the shrimps consume to improve their digestive performance and reduce water pollution.

Qian Hu also holds the patent for the Hydropure filtration system. This system ionises water to control its quality which is vital to intensive shrimp farming. “Integrating nanobubble technology into the system improves the water quality that the shrimps are reared in so that more of them can be harvested per metre square,” Yap explains.

Better second half?

In FY2021 ended December 2021, Qian Hu reported earnings of $1.7 million, compared to a loss of $1.5 million in FY2020. This comes on the back of a 6.3% y-o-y increase in revenue to $80 million from $75.2 million a year ago.

However, in Qian Hu’s more recent 1HFY2022 ended June, both earnings and revenue fell. Revenue for the period came in at $38.1 million or 4.0% lower y-o-y while earnings were 4.8% lower at $0.82 million from $0.86 million in the previous year.

The company’s revenue from rearing and selling fish for the six-month period was down 6% over 1HFY2021. Qian Hu says this was due to softer demand and prices in China because of the Covid-19 lockdown. Sales outside China were also affected by the war between Russia and Ukraine, which dampened buying sentiment.

Qian Hu’s largest business segment for 1HFY2022 was the sale of accessories, which ranges from pumps, filters and other gadgets. This segment generated a revenue of $19.8 million, down 3.5% y-o-y.

The company’s third and smallest segment is the manufacturing and sale of plastics, especially in the form of packaging materials and products. This segment was largely steady with a revenue of $3.8 million, up 1% y-o-y.

Looking ahead, Yap is cautious although the company expects to report higher revenue for the second half of the year. “The inflationary pressures arising from these widespread disruptions, along with higher energy, inventory and finance costs, will continue to affect our short-term profitability,” he warns.

Qian Hu shares, which typically receive low trading interest, last traded at 19 cents on Aug 4, down 8.57% year to date. This values the company at $21.3 million.

Photo: Albert Chua/The Edge Singapore

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