MAG Holdings Bhd aspires to be among the top 3 Malaysian aquaculture industry players following its proposed move to acquire 100% equity interest in North Cube Sdn Bhd (NCUBE) for RM200 mil.
MAG which is the acronym for “Malaysian Aquaculture Group” received 99.99% approval from shareholders who voted in favour of its latest venture.
This is the second acquisition undertaken by MAG since the group’s decision to diversify into the aquaculture industry.
The first acquisition of Wakuba Farm which was completed in December 2019 has helped to turnaround MAG Group last year. Wakuba Farm provides the group with a breeding capacity of 2,000 tonnes of vannamei (whiteleg shrimp or king prawn) per year with 102 prawn cultivation ponds.
A circular to shareholders showed that the proposed purchase consideration will be satisfied via a cash consideration of RM60 mil, issuance of 300 million shares at 20 sen apiece and 400 million new redeemable preference shares (RPS).
The prawn aquaculture farming of NCUBE is situated in Tawau (Sabah) with a total of 133 prawn cultivation ponds. Following this acquisition, the breeding capacity of the enlarged MAG Group will increase to 4,000 tonnes/year from the current 2,000/tonnes/year.
The proposed acquisition also comes with a profit guarantee of not less than RM18 mill in aggregate on a consolidated basis for the 18-month financial period ending June 30, 2022.
“As both MAG and NCUBE are involved in the aquaculture business, this earnings accretive proposed acquisition will enable both companies to leverage their combined strengths and accelerate our expansion plan with a continuous growth to emerge as a key player in the aquaculture industry in Malaysia,” commented MAG’s executive chairman Ng Min Lin.
The combined strength of 235 prawn cultivation ponds and processing plants will allow the MAG group to harvest both NCUBE and its existing farms into finished products. This will thus create economies of scale and synergy for the enlarged MAG group.
“Having own processing plant is an essential vertical integration in the supply chain of prawn aquaculture business that provides the enlarged MAG group with operational and cost advantages,” justified Ng.
“We are also exploring to produce more value-added products with better margins such as ‘peeled and deveined’ and ‘cooked’ prawns to a wider geographical market globally.”
After suffering a loss after tax of RM28.6 mil in its financial year ended Dec 31, 2019 (FY2019), the group has successfully turnaround in FY2020 with a net profit of RM8.4 mil, contributed mainly by the Wakuba Farm. Revenue stood at RM50.6 mil in FY2020 as compared to RM1.6 mil a year ago.
Malaysia’s marine shrimp aquaculture is important for local food self-sufficiency and also as a source of trade income. It accounts for 24.8% of Malaysia’s aquaculture production volume and 41.3% of its production value in 2019.
Going forward, the local marine shrimp production aquaculture market is projected to expand at a compound annual growth rate (CAGR) of 11.9% from RM1.13 bil in 2020 to RM1.99 bil in 2025.
At 3.05pm, MAG was unchanged at 5.61 million shares traded, thus valuing the company at RM154 mil. – July 2, 2021
