$Oceanus^(579.SI) What EXACTLY is their Business so u ALL IN?

 

He knows that many producers know how to farm but do not know how to sell he observes how major agri-food companies do not necessarily own their own farms. Rather, they are the middlemen between producers and buyers. When their trading network grows, their influence grows too.

To this end, Koh is committing heavily to a distribution joint venture, Season Global Trading, where Oceanus holds a 50.1% stake and a distribution company, Season Hong, holds the remaining 49.9%. Season Hong has a history of some four decades, has more than 1,000 stock keep units in its distribution catalogue ranging from foodstuffs to alcohol, and generates around $200 million in annual turnover.

From its base in China, Season Hong has set its sights on new markets such as Kazakhstan and Southeast Asia. The two parties have already committed $4 million and will inject another $16 million. This will mark Oceanus&rsquo most significant investment to date.

Oceanus, while relatively new to the distribution business, can bring a level of governance and system to the partnership with Season Hong, especially when it comes to dealing with parties outside China, says Koh.

The joint venture has gotten off to a swinging start. When the markets in China re-opened in April, Season Global Trading quickly collected $13.7 million in confirmed orders. Koh sees the momentum growing as several other Southeast Asian markets such as Thailand, where Season Hong already has a presence, open up following Covid-19 lockdowns. With the additional capital, Koh expects a significant ramp-up in turnover, although he was restrained from openly saying what the company&rsquo s projection is.

Koh acknowledges that distribution tends to generate very thin margins. When prices are good, producers can make handsome profits even though they incur fixed costs and bear more risks ranging from weather to labour. In contrast, a distribution company is not as exposed. Whatever it can resell, it can do so without losing money. &ldquo It is still a profit,&rdquo Koh reasons.

In recent years, as part of the rebuilding, Oceanus has established an increasingly diversified business profile. Besides distribution and farming, Oceanus even has subsidiary companies providing interactive digital media, video and marketing consultancy to the likes of National Gallery Singapore and National Heritage Board.

From Koh&rsquo s perspective, there is a method to this diversification. &ldquo I can&rsquo t rely on one product, one market,&rdquo he says, alluding to the disastrous years when Oceanus swung from being a popular growth stock to a company mired deep in the red because of its absolute reliance on abalone farming.

 

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