Financial Highlights

The table below sets out a summary of the statements of profit or loss and other comprehensive income, financial position, and cash flows of the Group for FYE 2019 to FYE2022:

• The revenue increased from RM 116 mil (FYE 2019) to RM 349 mil (FYE 2022) which shows the company is continuously expanding its market share.
• The gross profit margin decreased from 22.1% (FYE 2019) to 11.1% (FYE 2022) due to the competitive pricing of the product, which also shows the company does not have bargaining power. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin also decreased from 13.1% (FYE 2019) to 6.0% (FYE 2022).
• The gearing ratio decreased from 1.49 (FYE 2019) to 0.69 (FYE 2022) because of the increase in retained earnings. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for the Financial Years Under Review are as follows:

According to the details, the top 5 customers are around 53%. We realize that the portion of the customer is considered balanced which means the company is hard to face the customer concentration risk. In addition, the company mentioned they do not depend on any major customer as the top 5 major customers generally vary from year-to-year and given the group’s diverse customer base in view that they have more than 300 customers in the FYE 2022.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are around 69%. The top 1 supplier contributes 31.5% out of all purchase contributions. This shows that the company is having good bargaining power with the supplier and should be able to deal with the advantageous price of the product. The company mentioned that they are not dependent on Revitec Seafood Supply Sdn Bhd as the group can source similar seafood suppliers from other suppliers. In addition, there will not be any switching costs involved if the Group were to purchase seafood supplies from other suppliers.

Industry Overview

According to the research from Providence Strategic Partners, the frozen seafood processing industry size in Malaysia can be indicated by the overall industry revenue of seafood processing companies in Malaysia. The seafood processing industry in Malaysia grew at a CAGR of 13.8% between 2015 and 2021, from RM2.9 billion in 2015 to RM6.3 billion in 2021. The frozen seafood processing industry in Malaysia is largely driven by the local and global demand for seafood, as well as advancements in seafood processing technology and a growing number of marketing and sales channels. Moving forward, Providence estimates that the seafood processing industry in Malaysia will grow from an estimated RM7.0 billion in 2022 to reach RM8.7 billion by 2024, at a CAGR of 11.5% between 2022 and 2024.

Demand conditions: Key growth drives

1. Strong local demand for seafood will drive demand for frozen seafood processing in Malaysia.
2. The rising global demand for seafood will lead to higher exports of frozen seafood products from Malaysia.
3. Advancements in freezing technology will benefit the frozen seafood processing industry.
4. Expansion in reach to consumers through the use of online channels will increase revenue for frozen seafood processing companies.

Supply conditions and dependencies

1. Availability of seafood supplies
2. Availability of machinery and equipment and labor for the processing of frozen seafood.

The Grocery Retails Industry in Malaysia

The grocery retails industry comprises grocery retailers involved in the retail sales of grocery products and includes provision stores, supermarkets, hypermarkets, mini markets, department stores, and convenience stores. The grocery retails industry in Malaysia, as depicted by retail sales value from grocery retailers, grew at a CAGR of 8.4% between 2013 and 2021, from RM 101.2 billion in 2013 to RM 193.5 billion in 2021. Moving forward, Providence forecasts the grocery retail industry size in Malaysia to grow to RM233.4 billion in 2024, at a CAGR of 7.3% between 2022 and 2024.

The growth of the grocery retail industry in Malaysia has been, and is expected to continue to be driven, by the following factors:

1. Growing population and disposable income signifies continuous demand for grocery products, thus benefiting the grocery retail industry
2. Increasing consumer accessibility to grocery retail outlets through the use of online channels
3. Growing need for convenience leading to an increase in the number of grocery retail outlets

Source: PROVIDENCE STRATEGIC PARTNERS

Business strategies and prospects for PT RESOURCES HOLDINGS BERHAD

The group plan to strengthen the business by implementing the following future plans:

1. The company plans to set up a new cold storage warehouse on the Group’s vacant land located approximately 5 km from the KIFPP Processing Facility and the“MO Wholesale Centre” outlet. The new cold storage warehouse will house 6 separate cold rooms that will be used to store frozen seafood products, frozen seafood supplies, chilled meat, frozen meat, fruits, and vegetables, and will increase the maximum storage capacity from 700 tonnes at the KIFPP Processing Facility to 4,000 tonnes. This would facilitate the Group to cater to the growing demand for frozen seafood and other products;
2. The company plans to grow its exports to the Asia Pacific and the Middle East by tapping onto the existing network for business referrals and continue participating in international exhibitions. The company also intends to launch its brand of frozen seafood products, be it “MyLaut” or any other brand they deem fit, to expand the existing customer base consisting of wholesalers in these markets, including retailers and end customers. In addition, the company also obtained the CAIQ registration which facilitates the Group to market its frozen seafood products through sellers on online marketplaces in China and grocery retailers; and
3. The company plans to expand its network of “MO FoodmartTM” outlets through a licensing business model. The envisaged licensing business model will entail collaborations with licensees to set up “MO FoodmartTM” outlets, whereby the licensees will be responsible for funding the set-up of the “MO FoodmartTM” outlets while the Group will supply its frozen seafood and other products to these outlets.
   

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Opportunities

1. The KIFPP Processing Facility is equipped to produce quality frozen seafood products. The KIFPP Processing Facility is equipped with an IQF freezer and semi-contact blast while preserving the quality and freshness of frozen seafood products in terms of shape, color, and taste. The company supplements the above-mentioned machineries with a freezer hardener to undertake the glazing process, and a defrosting machine to minimize supplies. All these machineries enable the company to consistently provide quality products to meet customers’ demands.
2. The company is compliant with locally and internationally recognised quality and food safety management certifications. The KIFPP processing Facility has been designed to meet QC measures for hygiene and food safety. As a testament, the company has obtained quality and food safety management certifications, including the ISO 22000:2005, HACCP, and GMP as well as the MeSTI Secure Food Certification Scheme. The company has also obtained ‘Halal’ certification from JAKIM which is beneficial to the group as it allows them to target a wider market.

Risk

1. The company is dependent on the availability of foreign workers in the processing operations. Although the company has invested in machineries and equipment to reduce the amount of labor required for the processing operation, the company is still dependent on manual labor to perform a variety of processing activities, whereby foreign workers comprise 56.2% of the workers at the KIFPP Processing Facility.

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