Oceanus CEO Peter Koh says the company will continue to look out for investments

 

AFTER swinging back to the black in FY2020, Oceanus Group is looking to " tech up" its business model and diversify its products and operations further.

 

With a clean balance sheet and a source of steady revenue, group chief executive Peter Koh now expects the company to invest more in new farming technologies that will make the business more efficient and deliver better returns for shareholders.

 

In September last year, Oceanus invested an undisclosed amount in a newly formed deep-tech company called Universal Aquaculture. The latter has established an indoor prawn breeding facility in Tuas that will produce its first harvest in June.

 

The farm will reportedly be able to produce 150 to 200 kilograms of vannamei prawns a day for a start, but can produce some 1,000 kilograms of these prawns daily when an additional site is opened in the third quarter of next year.

 

In November 2020, Oceanus announced an agreement with Hainan Raffles Group to set up a foodtech hub in Hainan, China.

 

The hub will produce some 200 tonnes of shrimp for the first year of production with the aim of hitting 1,000 tonnes of shrimp in the following years.

 

While these farms are likely to have higher operating costs compared to traditional farms, Mr Koh said Oceanus will be able to save on logistical costs such as trucking or freight - incurred when farms transport their goods to China' s financial districts or city areas.

 

In addition, Oceanus can also charge a higher price for fresh products compared to frozen ones. Mr Koh said this will help narrow the cost difference between operating a vertical farm and a traditional one.

 

Mr Koh' s moves have attracted the attention of the market.

 

This year, shares of Oceanus rose as high as 7.6 Singapore cents on Feb 22 - briefly giving the company a market value of S$1.85 billion.

 

They have since fallen significantly, however, and were down 30.3 per cent on Wednesday to close at 2.3 Singapore cents. Oceanus was the most heavily traded counter on the Singapore Exchange on Wednesday by a long way, with 1.17 billion shares changing hands. Oceanus is now valued at S$558.8 million, or 88.6 times its earnings of S$8.6 million for FY2020.

 

The recent profit takes Oceanus a step closer towards exiting the Singapore Exchange' s watch list. Oceanus had previously been loss making. In FY2019, it reported a loss of S$7.4 million.

 

The turnaround is partly attributable to the company' s record-high revenue of S$91.7 million - up from S$9.6 million in the previous year.

 

Revenue from the aquaculture segment rose to S$4 million from S$0.22 million previously due to an increase in contract farming and rental revenue.

 

Mr Koh said Oceanus has transitioned from operating its own farms to leasing its aquaculture farm plots out to other farmers. Under these " contract farming and leasing" models, Oceanus either collects a rental fee from farms who lease the land, or take a portion of the profit from the farms when they sell their produce.

 

Besides boosting revenue, this shift has also allowed it to sidestep the high operating costs that are typically associated with full scale farming.

 

Revenue from distribution, meanwhile, grew to S$84.7 million from S$6.5 million as Oceanus increased the range of fast-moving consumer goods it distributes.

 

Once best known as an abalone company, Mr Koh is keen for Oceanus to shed this reputation as he said the company now sells a wide range of food products.

 

Several one-off items contributed positively to Oceanus' s profit last year. These included proceeds of S$1.5 million from the prior sale of a processing facility in China, as well as a foreign exchange gain of S$3.5 million compared to a loss of S$3.2 million in FY2019.

 

While some might worry that the return to net profit might be short-lived, Mr Koh said the firm' s " sustainable revenue" will allow the company to grow steadily as it taps on opportunities in the markets.

 

He said Oceanus will continue to innovate in terms of its business models and product offerings to keep abreast of new trends in the market. The firm is also not ruling out new investments that may surface, particularly those that involve technology to supplement the company' s business segments.