Friday 29 Mar 2024
By
main news image
This article first appeared in The Edge Malaysia Weekly, on February 27 - March 5, 2017.

 

FOR more than a decade since commencing operations in 2004, Borneo Aqua Harvest Bhd (Bahvest) has been keeping its head down and working hard at growing its fishery business.

The Sandakan-based integrated aquaculture group has spent more than RM80 million on research and development (R&D), ­focusing on breeding and hatchery technology for the production of marine fish over the last 15 years.

Some quarters were sceptical about the prospects of the aquaculture business in Malaysia, but Bahvest managing director and CEO Datuk Lo Fui Ming was not one of them.

“About 15 years ago, when I started Bahvest at the age of 45, everybody said Lo was stupid and crazy because nobody has ever been successful in the aquaculture business in Malaysia. But that’s exactly why I was interested in venturing into it. Since nobody could do it, we wanted to do it,” he tells The Edge in an exclusive interview.

Lo, 60, was appointed to the board in May 2005. He started his own logging company in 1980 before venturing into the plantation industry in 1995. He was the managing director and deputy chairman of Cepatwawasan Group Bhd, a Sabah-based oil palm planter.

“I used to own 20,000 acres of plantation land and one of the biggest palm oil mills in the country, but I don’t believe this is a good industry. That’s because you can’t keep on planting [new crops] — one day the soil will run out and your business will be finished. But my fishery business can survive for 100 years, 200 years, 500 years,” he says confidently.

Bahvest was listed on the ACE Market, previously known as the Mesdaq Market, in 2005. The group is mainly involved in the breeding and rearing of marine fish. It also owns two carriers to transport live fish to customers in Hong Kong, Southern China and other parts of the Asia-Pacific region.

As at June 30 last year, Lo was the ­single largest shareholder of Bahvest with an 11.44% stake, while Lembaga Tabung Haji owned 9.36%.

For the financial year ended March 31, 2016 (FY2016), Bahvest’s fish fry production was about 1.8 million tails (net of fatalities), while some 236,000 tails of juvenile fishes were transferred to sea cages from the nursery centres.

It is worth noting that Bahvest has been reporting net losses for four consecutive financial years — RM4.8 million in FY2013, RM4.3 million (FY2014), RM2.3 million (FY2015), and RM3.3 million (FY2016).

The financial loss in FY2016 was attributed to the recognition of non-cash employee benefit cost of RM2.55 million, arising from the adoption of fair value accounting standards (Financial Reporting Standard 119) pursuant to an Employees’ Share Option Scheme.

Bahvest’s results were also partially impacted by the sluggish economy in China, which has affected the overall demand for its products in international markets.

But Bahvest’s financials have improved with the group turning in a small net profit of RM435,000 in its first quarter ended June 30, 2016. However, net gearing worsened slightly to 0.09 times as at Sept 30, 2016 from 0.08 times as at June 30, 2016.

Lo acknowledges that over the years, the group’s financial performances have been mainly dragged down by the RM80 million spent on R&D.

“From breeding to hatchery and rearing, it involves a lot of money and high technology. To me, yes, this technology is very costly, but it is sustainable for hundreds of years, something that money cannot buy. Today, we can do all these by ourselves, even predict the exact time when our fish will lay the eggs. It’s not an overnight success story,” he says.

To date, the Bahvest R&D team, comprising experts from Japan, South Korea and Malaysia, has succeeded in producing various species of grouper and red snapper for commercialisation, as well as cross-bred grouper species and other high-value marine fish.

Interestingly, Lo claims that 90% of the fish sold in Malaysia are not safe, or not fit, for consumption, because they may contain formalin, toxin, antibiotics or preservatives.

“Have you ever bought a live fish in the wet market? No, right? That’s because they are mostly deep sea catches, where fish that are caught are usually put in cold storage on boats for a few weeks at times, before being taken ashore and sold to local distributors,” he says.

Going forward, Bahvest aims to step up  marketing efforts as well as promote its own brand by selling frozen fish products directly to consumers in Asia, which Lo believes has vast potential for development.

Currently, Bahvest sells its fish products in Hong Kong and China, distributing fish fry and live adult fish to distributors. The group sold about 84.5 metric tonnes of live fish to its key markets in FY2016, compared with 73.2 metric tonnes in FY2015.

“The wholesalers usually buy live fish not only from us, but also from other farms, so they mix all the fish together. We can’t build our brand by selling live fish through the local distributors, but we can do it as frozen products,” he explains.

Lo says Bahvest may even consider selling frozen fish products on Taobao, the Chinese online shopping website founded by Jack Ma, to expand further into China.

“Frozen products are easier for us to handle because we can pack our fish in a more convenient and sellable manner. We can sell them to Shanghai, Guilin and Dalian. Many people there have never eaten grouper and sea fish as they only eat freshwater fish. So, we see a huge market there,” he says.

Bahvest is undertaking a private placement exercise to raise RM53.29 million for capital expenditure and working capital for the mining operation as part of its diversification plan.

Last November, the group proposed to ­wholly purchase gold mining company, Wullersdorf Resources Sdn Bhd, for RM131 million.

Wullersdorf Resources, in which Lo has a 70% controlling stake, is a special purpose vehicle set up to venture into the mining business on a piece of land measuring 317.7ha at Bukit Mantri in Tawau, Sabah.

Lo says Bahvest’s long-term growth plan is to build a sustainable aquaculture business as well as to diversify its revenue source by venturing into the mining business, to broaden its earning base.

“I want to reward my shareholders, my partners, those who put their trust in me over the years. I have to do something for the investors, make them happy, let the company make more profit,” he says.

“Once the gold mining business starts kicking in, the profit growth for Bahvest will be exponential from FY2018 onwards,” Lo says.

Year to date, Bahvest’s shares have declined 7.8% to close at 88 sen last Thursday, giving it a market capitalisation of RM482.2 million.

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

      Print
      Text Size
      Share