KUALA LUMPUR: MAG Holdings Bhd (MAG) is expected to capture a 35 per cent domestic market share with a breeding capacity of 4,000 tonnes vannamei (whiteleg shrimp or king prawn) per year from its 235 cultivation ponds.
The capacity expansion will be possible following MAG's acquisition of North Cube Sdn Bhd (NCUBE), which will solidify the company's position as one of the top three players in the local aquaculture industry.
MAG, in a statement, said the breeding capacity in Malaysia is currently about 40,000 tonnes per year.
The company is actively seeking additional mergers and acquisitions (M&A) opportunities and plans to expand capacity to 20,000 tonnes per year in the next five years by acquiring additional breeding farms in Sabah.
Executive chairman Ng Min Lin said the pandemic had created a vacuum of supply for prawns due to the supply chain disruptions caused by the lockdowns globally.
He said, for example, producers in Indonesia, India, Ecuador and South America had been facing supply chain and logistic interruption, while issues in the ports were harder to fulfil the export deals.
"As a result, we have been getting overwhelming enquiries to export more prawns. This situation is similar to domestic producers.
"They have been suffering since the pandemic, which presents us with bargaining power for acquisitions. As a result, consolidation is happening, and we intend to capture this market and grow our market share," Ng said in a statement today.
He said aquaculture players would need economies of scale to survive in this unprecedented situation.
While the business is under the essential service category, the supply chain players such as packaging are not deemed 'essential services'.
"A big player like MAG can absorb a larger quantity of materials needed, while the smaller one will have no choice but to halt their production," he said.
Ng said the acquisition of NCUBE also came with a profit guarantee of not less than RM18 million in aggregate on a consolidated basis for the 18-month financial period ending June 30, 2022.
"We envision that the export market would continue to be the main driver for MAG, riding on the strong US dollar and filling the vacuum of supply to South Korea, Australia, China," he said.
The combined strength of 235 prawn cultivation ponds and a processing plant with a capacity of 6,000 tonnes per year would allow MAG to harvest both NCUBE and its existing farms into finished products.
He added this would create economies of scale and synergy for the enlarged MAG.
"By having this vertical integration in the supply chain, we are also looking into the value-added downstream ready-to-eat food such as 'peeled and deveined' and 'cooked' prawns.
"These products will give us higher margins as customers are willing to pay for the convenience. When the opportunity comes, we will invest in setting up new production lines for this venture," said Ng.
Malaysia's marine shrimp aquaculture is important for local food self-sufficiency and also a source of trade income.
It accounts for 24.8 per cent of Malaysia's aquaculture production volume and 41.3 per cent of its production value in 2019.
MAG said the local marine shrimp production aquaculture market is projected to expand at a compound annual growth rate of 11.9 per cent, from RM1.13 billion in 2020 to RM1.99 billion in 2025.