Oceanus Group Makes An Immediate S$10.5 Mil Profit From Disposal of Non-Core Aquaculture Farms in China.

Oceans Group has finally released some positive news that it is selling 4 plots of land used for acquculture farming in Fujian Province of China for S$19.2Mil. The cost of the 4 plots of land in the books of Oceanus is at S$8.7Mil. This is a 120% return from this deal and an immediate gain on diposal of S$10.5Mil. Given that the Sale and Purchase Agreement ("SPA") is signed on 20 December 2024, the gain on disposal booking in will only be in early 2025 upon completion of all the warranties in the SPA. 

1. Annoucement on 23 December 2024

The interesting thing here is that no market valuation benchmarking exercise was carried out and the deal is crafted as being on a "willing-buyer and willing-seller" basis. Personally, I am not a fan of willing-buyer and willing-seller as there is a degree of lack of transparency with regard to whether a deal is fairly done if benchmarked to the market.  

2. Immediate Positive Financial Impact Upon Completion of the SPA:

The NTA of Oceanus Group will go up by approximately 22.7% upon the completion of the deal. The S$10.5Mil will be re-deployed into working capital.  

Parting Thoughts

Interestingly, if one had purchased Oceanus recently at S$0.005 per share last week, the current market price of S$0.007 per share would mean a +40% capital gain from holding Oceanus in just one week.

Overall, I thought that Peter Koh, the Group Chief Executive Officer of Oceanus Group, executed a good deal of realising hidden intrinsic value from its non-core assets. Current market value of Oceanus Group is trading at S$0.007 per share as at 24 December 2024 relative to the revalued NTA per share of S$0.0027. This deal maybe essential as Oceanus Group has been making losses at the net profit level and will help to recapitalise the company without further issuance of shares via equity fund raising.  

Oceanus Group Limited and Red-Flag on Strange Loan to External 3rd Party at Incredulous Interest Free Rate.

Oceanus Group Limited just released a very disappointing set of half year 2024 results on 14th August 2024 which revealed a loss of <S$1.17Mil >. This is a hefty 92% worsening of results relative to 1H2023 of <S$610K>. Having years of losses and a mere 5% growth in revenue is one of the red flag indicator that something maybe wrong with its management team. The list of queries from SGX on 22nd August 2024 further add to the uneasiness over its financial health.

Personally, I am a bit spooked by another weird transaction by Oceanus management team. From the SGX query 3, it appears that the management of Oceanus Group has given a S$1.268Mil loan to a 3rd party that is interest free which is honestly absurd. If this 3rd party is so weak financially, why did Oceanus choose to work with it? I am sure there are other vendors out there who can fulfil what they are doing. 

In addition, it is ridiculous to give an interest free loan to a 3rd party and to take up credit risk of default by the external non-related party. This does not make commercial sense at all. Also why not do equity buy-over instead if the platform technology is so unique that the survival of Oceanus Group depends on it?  I am not sure whether it is just me here but do anyone else smell a rat somewhere.... 

Parting thoughts

I am currently vested in Oceanus Group via a small stake of around S$1K as previously I like the growth story sold by its CEO. But seems that there are some "more than meets the eye" stuff going on here. Oceanus Group audit committee should come out to clarify on why their management team entered into something that makes terrible commercial sense. 

Investment Portfolios Updates (26 July 2024) - Net S$620K and Projected Annualised Passive Income of S$42K.

The recent SREIT rally has finally put a brake on the non-stop downward spiralling in market prices. There is a much anticipated worldwide expectation of a US rate cut in September 2024. Based on US inflation reports and moderate job growth data, it seems chances of a rate cut is indeed high. Keeping my fingers crossed that the recent rally in price is permanent with more to come. However, Geopolitics such as the upcoming US Presidential Election (Trump appears to be the favourite to win now after his assassination) and also escalating Middle East conflicts between Israel and Iran back military groups are causing much uncertainty in global economies. There is also the very controversial Allianz offer that affects my current share-holdings in Income Insurance Ltd- please see further remarks under Portfolio 4 section below.

1. Portfolio 1- Stocks held in SGX Central Depository 
(Note: This portfolio is designed to provide immediate dividends for use as it is under my own CDP account and the dividends credited goes directly to my bank account.)

I have given up on Capitaland Investment Limited and sold off all my holdings in it. The proceeds were used to purchase additional units of Keppel Ltd stocks at S$6.62 per unit.

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and can pay off annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

I have took profit and sold off all my Ping An Insurance shares. Have used the proceeds to purchase Link REIT as well as to pare down on expensive margin loan. Margin loan thus went down from S$291K to S$281K. 

Also took a small speculative 5000 units trade in Mapletree Industrial Trust when its price plummeted to S$2.10 per unit and took profit 2 weeks later @S$2.29 per unit after the SREIT rally. 

3. Portfolio 3 (with Tiger Brokers and MooMoo) 

(Venture into higher risk as well as capital growth stocks here)

I have took profit and sold off all my Ping An Insurance shares. The proceeds were used to purchase additional Link REIT units when its price plunged to below HK$30 range (HK$29.80) per unit. Also opened up a small position in a penny stock, Oceanus, which had seen continued strong growth in its food distribution business in China. 

4. Portfolio 4 (Endowus Unit Trusts & Other Investments)

I have continued to build up my bond funds investment via Endowus platform. 

Guess the only news-worthy update here is that my NTUC Income shares market value will go up from S$1,060 to S$4,300 if the controversial Allianz offer gets approved by local regulator and shareholders. The 2 formers CEOs of NTUC Income Co-operative have come out to speak out against the deal as they do not want the insurance group to lose track of its social goal to provide cheap insurance to the lower income of Singapore society. 

Penny Stock Oceanus Group Roared Back To Life.

Recently on 29th May 2024, Oceanus Group announced a RMB 200Mil investment intention agreement with the Shaoxing Huangjiu Town local authority to help grow its alcohol distribution business in China. The town of Shaoxing is known since ancient times for producing yellow wine such as the famous "Nu Er Hong". This will give a boost to its future earnings via its already well established current distribution network painstakingly built up over the years. From this partnership, the local partner will import alcohol distributed by Oceanus, and on the other hand, Oceanus will help expand the distribution and grow the demand of yellow wine produced by Shaoxing.

1. Major Shareholder, Alacrity Investment Group, Mops Up Additional Shares from Market.

Alacrity Investment Group, the largest shareholder of Oceanus Group, has further raised its stake in Oceanus Group to express its vote of confidence in the future prospects of its investee. On 30 May 2024, it acquired 30 million shares for a total of $300,000 from the open market. The following day, it acquired another 25 million shares for $265,000. Following these two transactions, Alacrity now owns 4.43 billion shares or 17.25% of the company. The average price of the purchases is thus around S$0.01 per share. This seems to indicate that the major shareholder is extremely optimistic about the future of Oceanus Group.

2. Historical Oceanus Group Price Recap.

In 2022, Oceanus Group placed out additional 5.2 per cent of its existing share capital with Alacrity also taking part at S$0.023 per share. 

I recalled that in April 2021 I have ventured into Oceanus at S$0.038 per share and exited at around S$0.040 per share a few months later (Oct 2021). Interestingly, Oceanus Group went on to make losses despite initially getting out of the watchlist of SGX after its current CEO turn the business around. Its current prices has plunged to S$0.009 to S$0.01 per share this week.  

3. Financials

While Oceans Group is still making losses for its latest FY2023, it has managed to reduce its losses to <S$2.2Mil> relative to FY2022 staggering losses of <S$11.7Mil>. With the continuous growth in its trading business and topline revenue generation, FY2024 maybe the year of breakeven with some profits.

Parting thoughts

I think that Oceanus Group is roaring back to life with the results of the transformation work set in place for the past 4 years gradually surfacing. Hence I decided to take up a minor position in Oceanus Group again with 65,000 shares @ S$0.01 per share. Perhaps, Oceanus Group is finally ripe for harvesting. 

Oceanus Group Rise From The Ash- From Abalone King to High Tech Food Farming

Oceanus Group has applied for exit from the SGX watchlist on 13th April 2021 after finally swinging back into the black in FY2020.  The revenue actually grew within 1 year from S$9.6Mil in FY2019 to S$91.7Mil. Revenue is expected to grow exponentially further due to its recent investments into prawns and shrimp farming in Singapore and also Hainan, China. The Singapore farm is expected to produce 150 kilograms of prawns daily from June'21 onwards and this will grow to 1,000 kilogram of fresh prawns being produced daily by 3rd quarter of FY2022. For Hainan, Oceanus will produce 200 tonnes of shrimps initially and by next year, this is expected to grow to 1,000 tonnes. Share price of Oceanus rose to an all time high of 7.6 cents per share on 22 Feb 2021. Currently it is trading at around 3.8- 4.0 cents per share.

1. The Oceanus Group troubled history and death of abalones

In 2013 under its old management, a substantial number of its abalone in China farm suddenly experienced unnatural deaths. This happened within a very short time span after the 2013 AGM whereby its Executive Director, Mr Wu Yong Shou was booted out of the Board of Directors. He lost the re-election and his executive director position- he was overwhelmingly defeated by a resounding 95.51% majority of the shareholders. This episode eventually led to the suspension of trading in its shares and a filing by its banker to wind up the Group.

After much restructuring amidst the drama, Oceanus Group finally managed to turn profitable and seems to be on its way out of SGX watchlist and to retain its listing on SGX.

2. Oceanus new strategy under CEO Peter Koh- 4 pillar of growth strategic vision

(i) Food Production

Since inception, aquaculture has been a cornerstone pillar of Oceanus’ business.

From 2021 onwards, Oceanus have diversified beyond seafood. The group is also expanding its food products to include vegetables and meat. Oceanus remain committed to continue delivering the gold standard in fresh and frozen food produce to all their partners.

Oceanus’ strategies to leverage sustainable practices and adoption of cutting-edge aquaculture technologies have positioned us at the forefront of addressing global food security issues.

(ii) Distribution

Oceanus Group oversees the distribution of products from the first to final mile to guarantee punctuality in delivery and impeccable quality. Oceanus Group leverages upon its existing corporate presence and trading network globally to strengthen its position across the value chain–from raw materials to consumer goods.

(iii) Services

Oceanus Group expands beyond product distribution to offer services ranging from consultation, business strategies, media solutions to corporate branding. Oceanus Group’s in-house capabilities in aquaculture consulting, asset management, marketing and branding are also offered to third parties. By serving as profit centres wherever possible, these services boost the overall productivity and profitability of Oceanus Group.

(iv) Innovation

Oceanus Group stays ahead of the curve by continually pursuing cutting-edge aquaculture research & development (R&D) alongside their industry partners and institutions. For example, Oceanus has set up the Oceanus Oceanic Institute in Zhangpu China and Oceanus Innovation Centre @ Temasek Polytechnic Singapore. The group also have ongoing research collaboration with Temasek Polytechnic and Republic Polytechnic on juvenile abalone growth.

3. Financial Evaluation and Future Expectation

As depicted in the attached P&L screenshot, revenue grew aggressively by +S$82Mil (+855%) from FY2019 to FY2020. This is mainly due to expansion of the Group's distribution segment (Fast Moving Consumer Goods) which contributed a solid S$84.7Mil in FY2020 relative to S$6.5Mil in FY2019.

In addition, the business strategy of increasing contract farming business model to external aquaculture farmers allows Oceanus to maintain a fixed monthly income and forgo direct operating costs associated with full scale juvenile farming. This has the additional advantage of allowing Oceanus to hedge against the risks of mortality and volatile abalone juveniles prices.

Operating expenses also dropped by +S$1.6Mil due to successful implementation of cost optimizing strategies which  means that the savings from this point onwards is not one-off and actually recurring in nature. 

This gives rise to an ultra impressive Operating Profit of +S$7.5Mil in FY2020 relative to FY2019 loss of <S$1.5Mil>- this is an incredulous growth of +S$9Mil (+599%). 

Based on current market price of 3.8 cents to its EPS of 0.04cents, this is a PE of 95 times, I think that it will take 3-4 years at least for it to duplicate and expand on its current business model to reach sufficient revenue size and profitability. Basically, profit must increase by 5 times to that of the current FY2020 operating profit level. Not an easy feat in my personal opinion despite turning from loss to profit.

4. Does Oceanus Group senior management really think they can expand the business exponentially  using its 4 pillar strategy over the next few years?

Well, the good news here is that on 15th March 2021, the CEO of Oceanus, Peter Koh, actually went into the market to purchase 12.5Mil of shares at an average price of 4.07 cents- he must be confident in growing the company by at least 5 times over in the next few years and I like his optimism.  

Dr Yaacob Ibrahim, former Minister for Communications and Information has also joined Oceanus Group as an independent director in Sep 2020. This bodes well for Oceanus Group to have director of such super star status willing to come on board its Board of Directors.

5. Parting Thoughts

It is hard to do a valuation of Oceanus Group as it is in the growth stage of its new strategic execution path. If based on FY2020 earnings of 0.04 cent per share,  it is 95 times overvalued based on recent market pricing. But of course, for such "growth" company, the challenge lies in the forecast of its future growth in revenue and profits given the recent investments into new farms and also upcoming growth in its 2nd and 3rd pillar business segments. The half year results which will be announced in July'21 will give us some idea of the strength of its business development momentum. Nevertheless, the best gauge will still be at year end whereby its new investments have commenced production for better visibility of Oceanus future star potential. 

(P.S: Despite the seemingly excessive high valuation at 3.8 to 4.0 cents per share, I have nibbled away some of its share as I like the growth story marketed by its CEO. COVID-19 had exposed weaknesses in the resiliency of the food supply chain in many countries- I believe that Oceanus has embarked on a right path in its current focus of its 4 pillar strategy approach as many countries would be keen to invest in its own locally produced food-tech instead of relying on imports from other countries).