Tuesday, June 05, 2007

China Fishery - Acquisition of Panamanian Companies in Peru

Yesterday, China Fishery announced another strategic acquisition in Peru. They have acquired 2 Peruvian fishmeal producers with assets which include fishing vessels, fishmeal plants, canning plant and a dock. The total consideration is US$26 million, which is a US$5 million discount to the appraised market value of the assets at US$31 million done by an independent valuer.

With this acquisition, China Fishery (and thus Pacific Andes which is going to recognize 63.9% of the profits from CFG) has increased its fishmeal combined processing capabilities to 442 tonnes per hour, and it now has 29 purse seine vessels (up from the preious 26 in my last posting). The vessels total capacity is 8,419 cubic metres and represent 5% of the total fishmeal processing capability of Peru currently.

This acquisition is notably different from the previous ones in that the assets acquired are more diversified (rather than just supertrawlers or purse seine vessels). The canning facility is of note as it will allow for CFG to produce Peruvian anchovies as canned sardines for sale to consumers. As this specie is highly regenerative, there is no immediate danger of extinction for the species and this represents a highly lucrative income source for CFG and PAH. CFG also plans to start harvesting more of the under-utilized fish species in order to broaden their product range and offerings.

Peru will act as CFG's logistical base in South America and allow CFG and PAH to get a foothold in the Exclusive Economic Zone, where the government has already halted the issue of new licences for fishing. Thus, licences can only be obtained by purchase from existing Peruvian companies, hence PAH/CFG's strategy. They are simply continuing their vertical integration strategy by acquiring more control over the production/catch aspect, in order to boost the capacity in their fishmeal plants. Thus, it is an entire SCM system whereby catch increases, processing facilities increase (for fishmeal) and new product lines are also introduced.

So far for FY 2007 (for CFG), they have been embarking on an aggressive expansion plan to set up base in the South Pacific and to increase their processing and catch volume. Below are a list of the announcements made so far for FY 2007:-

1) December 27, 2006 - CFG acquires 2 fishing vessels to bring their purse seine vessel fleet to 18.

2) January 4, 2007 - Third VOA signed to add 3 supertrawlers to their fleet, boosting their number to 17. Total harvest will be no less than 210,000 tonnes of fish.

3) January 24, 2007 - Fourth VOA signed with Perun Limited, adding another 7 supertrawlers to their fleet and bringing the total number to 24. Total harvest has increased to become no less than 270,000 tonnes of fish.

4) March 15, 2007 - Acquires 4 more purse seine vessels bringing total fishing fleet to 23. Fish hold capacity increases to 6,671 cubic metres.

5) May 22, 2007 - Acquires 3 more purse seine vessels bringing total fleet to 26. Fish hold capacity increases to 7,363 cubic metres.

6) June 4, 2007 - Acquires 3 more purse seine vessels, total fleet now 29. Fish hold capacity increases to 8,419 cubic metres. Also acquires fishmeal processing plants (from 4 to 6 currently), one canning plant, a 200-metre dock and related fishing permits.

These 6 announcements show CFG's aggressive growth strategy to increase their fishing fleet which includes supertrawlers (VOA-related) and purse seine vessles (fishmeal related). I project that there will be more acquisitions to come in order to boost their fleet and to entrench themselves as one of the dominant players in the market. PAH can only stand to benefit from this as CFG's earnings will grow strongly. Currently, the terms of the 4th VOA are also being restructured. Once that is successful, margins are expected to increase. I am hoping for a net margin of 10% for PAH eventually.

Honeymoon from 6 June to 17 June, 2007 - Hiatus from the Stock Market

As readers may already know, my honeymoon starts from 6 June (midnight) till 17 June (early morning). I will be travelling to several parts of Europe, in an effort to study the various bourses and stock markets throughout Europe including the Amsterdam Exchange, FTSE and Parisian Exchange.

Gotcha ! No way, I was just kidding ! haha anyhow I will NOT be posting for these 2 weeks. Any announcements from my companies will have to be put on hold till I am back before I can analyze them; and my mid-June review of my portfolio will have to wait till 17 or 18th June.

Wishing myself a pleasant flight ! Hehe.


Shingo T said...

You got me.
Haha. =p

Nenix said...

Enjoy ur trip!

Anonymous said...

have a nice trip! =p