KUALA LUMPUR: The domestic demand for locally-bred shrimps still far exceeds the supply in Malaysia's marine shrimp aquaculture market, as the sector still needs to overcome several challenges in production and meet local demand.
MAG Holding Bhd (MHB) executive chairman Stephen Ng Min Lin said Malaysia's marine shrimp aquaculture market faces three key challenges - diseases such as white spot syndrome and early mortality syndrome, sustainability and intense market competition.
"On disease, we are tackling this through biosecurity measures, investment in health management practices and teaming up with external professional parties in the research and development (R&D) effort to enhance our farming activities.
"Secondly, sustainability is a challenge, with the need to balance productive farming with environmental preservation.
"To address this, we are deploying technologies to increase efficiency and lessen environmental impact.
"And, as market competition intensifies, locally and internationally, our strategy is to differentiate ourselves through superior product quality and sustainable farming practices," he told The New Straits Times.
Data shows that Malaysia's marine shrimp aquaculture market is expected to reach RM1.99 billion in 2025 from RM1.13 billion in 2020, at a compounded annual growth rate (CAGR) of 11.9 per cent.
The domestic frozen seafood market, which stood at RM2.16 billion in 2020, is expected to reach RM2.64 billion in 2025 at a CAGR of 4.1 per cent.
Further, the global shrimp and seafood market size is expected to grow at a CAGR of 5.2 per cent from 2019 to 2025.
The increased health awareness among consumers is the major driver for the seafood market's growth.
"MHB's prime markets, Korea and China, currently comprise a significant portion of our sales.
"Favourable demographics and economic factors, including population growth, rising income levels, urbanisation, and lifestyle changes, have driven up seafood consumption, a trend we expect to continue.
"As China has transitioned into a net seafood importer, we anticipate strengthening our foothold in this market," Ng said.
MIB is involved in the breeding and selling vannamei prawns and operates 409 active cultivation ponds, of which 99 have been added since May 2023.
The company's prawn breeding, or upstream division, produces 7,000 mt annually or 16 per cent of the total Malaysian capacity.
MIB's downstream division involves conventional processing and producing high-quality ready-to-eat (RTE) and ready-to-cook (RTC) products.
The division produces 6,000 mt a year and will be able to produce another 6,000 mt a year in August this year.
"At this point, we will slow down our upstream expansion to concentrate on downstream further processing products, including the RTE and RTC, which offer higher margins and customer retention.
"With 409 ponds, we have become the largest local aquaculture player, with a capacity of 7,000 metric tons per year, constituting approximately 16% of Malaysia's total capacity.
"As for downstream operations, our current plant can process 6,000 metric tons per year, and an additional facility set to launch in August 2023 will double this capacity," Ng said.
"Our upcoming processing plant will dedicate half its capacity to produce RTE and RTC shrimp products, catering to the escalating demand from Korean and Chinese customers who appreciate their convenience and time-saving benefits.
"We will handle marination and cooking using customer-provided or in-house recipes. Offering RTE and RTC products allows us to command higher profit margins, provide cost savings, maintain product stability, and ensure food safety for our food and beverage (F&B) customers," he said.
90 per cent of MIB's revenue comes from exports to South Korea (50 per cent), China (30 per cent) and Australia (10 per cent), with Europe and Turkey as the upcoming markets.
Donwstream's division constitutes 10 per cent from domestic wholesalers, distributors and main retailers such as supermarkets and hypermarkets.
MIB's revenue in the nine months (9M) of FY23 increased 52.8 per cent to RM114.5 million, as compared to a year ago, mainly due to increased sales from the aquaculture business.
Net profit jumped by 19.6 per cent year-on-year (YoY) to RM23.8 million in 9M FY23, mainly due to the higher revenue recorded.
Hong Leong Investment Bank Bhd (HLIB Research projects MIB's core net profit to increase by 151 per cent/31 per cent/22 per cent in FY23/FY24/FY25, implying a strong FY23-25 CAGR of 27 per cent.
"This growth will be primarily driven by our fourth farm's commercialisation and increasing sales from RTE and RTC products," Ng said.
MIB has a healthy balance sheet with increasing assets, a net cash position of RM49.7 million as of March 2023, and a gearing ratio of 0.15X.
"Our strategic expansion plans primarily target the Chinese and South Korean markets, representing a significant proportion of our export sales of 50 per cent and 30 per cent, respectively.
"While we have not entered into any major collaborations, we are exploring a significant partnership that would catapult MIB to the next level," Ng said when asked about the company's future directions.
He said MIB's plans include establishing a modern processing plant with an initial capacity of 4,000 mt per year, securing the government's support for a consistent prawn supply and securing financial backing from local financial institutions.
In addition, MIB also aims to collaborate with government-linked companies (GLCs) to meet the government's agenda on food security and the development of more than 200 cultivation ponds with a breeding capacity of 3,000 mt a year.
MIB plans to emphasise RTE and RTC products in the new processing plant for its downstream business in August 2023.
The company also aims to achieve a 50 per cent processing product mix and 50 per cent conventional processing product mix under its 5-year goal plan.
The company is also exploring opportunities to supply further processing products to the largest hotpot chain in China.
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