Oceanus Awaits Exit from Watchlist and Preps for Food Production Ventures
A decade ago, Oceanus, under a previous management team, was keeling over a disastrous near wipe-out of its abalone farming business in China. As the extent of the damage became apparent, one of its creditors, a local bank, appointed liquidators to get ready to wade in and take the company to the cleaners. Now, in a sign of how the tide has turned, Oceanus’ CEO Peter Koh was recently invited to the same bank’s Lunar New Year celebration and stood next to the bank’s CEO for lo hei.
Back in FY2013, the company was RMB444.6 million in the red. Staunching the bleeding and restructuring the debt took Koh the better part of the past six years. From having the by-now dubious honour of being one of the world’s largest abalone farmers, Oceanus has been steered by Koh into diversifying such that different parts of the company can help support one another.
On Feb 26, the company announcement FY2020 earnings of $8.6 million, a sharp swing from losses of $7.4 million recorded in the preceding year. Revenue in the same period surged 855% to 91.7 million.
Looking back at the restructuring journey, Koh notes with no small measure of satisfaction that this milestone of achieving full-year profitability was something he has spent years slogging towards. “Let’s put it this way, how can we not know what’s our destiny? We really have to get out of the watchlist and one basic criterion is that we need to be profitable,” says Koh in an interview with The Edge Singapore, referring to the status under which troubled mainboard-listed companies are classified.
Koh recalls how when Oceanus acquired a media production business amid the long-drawn turnaround, the decision was not well received. A major brokerage took the view that Oceanus was merely grasping at any business it could get its hands on just to stay in business, and curbed the buying of Oceanus shares. Three months ago, a senior staff from the brokerage came by. “My boss asked me to get to know a bit more about your company,” Koh recalls his visitor saying.
Landlord, not farmers
To be sure, the FY2020 earnings were lifted by a couple of one-off items. For example, there was $1.5 million from the proceeds from the sale of a property in China that was made before Koh took over but which was bogged down for years. There was also a favourable foreign exchange gain of $3.5 million, and some lift from the blanket government wage support to all Singapore employees.
The headline numbers only tell half the story. Oceanus had already changed its abalone business model in the last couple of years. It used to run the farms itself and grow the abalones from juveniles — an undertaking that takes up to three years or more.
Oceanus now operates like a landlord instead. It leases the tanks to other abalone farmers to use for a three-year period at a rate of RMB1,800 ($370) per year. It also helped undertake some contract farming operations. Last year, Oceanus generated revenue of some $4 million from this business, while bearing minimal operational risks. The bulk of Oceanus’ turnover for FY2020, of $84.7 million, was from its relatively new regional distribution business which is a joint venture with a Chinese partner, Season Hong. In the preceding year, turnover from distribution was just $6.5 million.
If Koh can have his way, there is a lot more room to grow, as Oceanus expands its distribution network of both suppliers and customers. He believes that being a Singapore company with a distribution joint venture in China puts Oceanus in a very good stead. The regional heads of multinational FMCG companies — companies eyeing ways to reach the more than one billion Chinese consumers — have a big job title but they are still employees, end of the day.
As such, their biggest priority is not to have any nasty surprises popping up on them. “You guys have the transparency and governance, while at the same time, the distribution into China will give me my numbers,” he reasons, referring to the inherent credibility of being a Singapore company.
The market has presumably gotten wind of Oceanus’ markedly different prospects. From being what was a persistently a micro-penny stock for years, Oceanus’ shares have enjoyed a tremendous surge in market interest in recent months, often hitting top volume day in, day out.
When former cabinet minister Dr Yaacob Ibrahim joined Oceanus’ board last September as one of the new independent directors, trading interest went up even higher. The spike in trading volume came in conjunction with higher volatility.
On Feb 23, it hit a high of 7.8 cents but on March 3, it crashed by around half to as low as 3.6 cents. It closed on March 4 at 4.3 cents. The drastic movements triggered a query from the Singapore Exchange on the morning of March 3. “As previously announced, the company continues to make efforts to grow its business. At present, the company is not aware of any information not previously announced concerning the company, its subsidiaries or associated companies which, if known, might explain the trading,” Oceanus responded less than two hours later.