PETALING JAYA: Analysts are upbeat on the future prospects of ACE Market-bound Ocean Fresh Bhd, amid some downside risks.
Apex Securities Bhd, which has ascribed a “subscribe” recommendation on the frozen seafood processor and trader, said it liked the company for various reasons.
These include the rising demand for seafood products, ongoing efforts to capture additional market share in the overseas market, expansion into processing and trading of dried seafood products and the addition of a new cold storage facility.
With over 22 years of industry experience, the company has evolved into one of the leading frozen seafood processors and traders in Malaysia.
It commands a 2.6% market share based on the total revenue of RM159.5mil recorded in financial year 2023 (FY23) against the total seafood processing industry market size of RM6.1bil.
While the absolute contribution from Malaysia has grown steadily from RM10mil in FY20 to RM27.4mil in FY23, the portion of contribution has fluctuated over the years.
This suggests a potential shift in the company’s geographic revenue distribution.
Overseas markets remained as the largest total revenue contribution, ranging between 82.8% and 89.3% over the same period.
Apex Securities, however, said there were key risks that could affect the company’s business, one of which is the dependence on foreign workers.
TA Research said the company’s competitive advantage included its wide range of customers, internationally recognised products and consistent supply of frozen seafood products.
At an initial public offering (IPO) price of RM0.28 per share, Ocean Fresh is valued at a price earnings (PE) ratio of 8.47 times based on its FY23 earnings per share (EPS).
“We have applied a target PE ratio of nine times to the calendar year 2025 EPS, to derive a fair value of RM0.35 per share, representing a 10% discount to its peers after considering the relatively smaller market capitalisation and earnings growth.“Our valuations take into account the gradual expansion of storage facilities, increasing demand from both existing and new customers and effective cost management efforts.
“Additionally, we have considered OceanFresh’s medium-to-long-term earnings growth prospects, supported by rising demand in China and the expansion into a new business segment (dried seafood products),” the brokerage noted.
The IPO entails a public issue of 50.1 million new shares with no offer for sale.
Collectively, the share offers account for 31.1% of the group’s enlarged issued share capital.
