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Wednesday, 23 September 2009

Oceanus Group Limited

DMG initiated coverage on Oceanus Group Limited. Initiation report is always detailed and filled with many pictures and update about the company. I decide to make this blog more informative by including initiation reports (the more interesting ones) and you can download the report by clicking on the link below.

Oceanus Group: S$0.36               

BUY (TP: S$0.52)

Emergence of an abalone behemoth

Initiate  coverage  with BUY; Target price at S$0.520. Oceanus, the largest land-based  abalone  producer,  is  gunning  to  be  the  first  vertically integrated  abalone  group.  Its  tie-up  with  renowned  restaurant chain, HK-based Ah Yat Abalone Group, is particularly exciting. With plans for 170 stores  by  FY11,  the  JV  may  be  able  to rake in as much as RMB100m in earnings. If it were to list by then, it should be able to easily dwarf all restaurant  groups  in  Singapore.  Organically,  its  production  business continues to thrive and we expect stronger sales in FY10.

Volume  and  cost  leader  can potentially drive market share gains. As the largest  abalone  producer,  it  has  ~110m  caged  abalone  ready for sale (excluding  ~140m  uncaged young abalone) and a staggering 12km2 of abalone farm  stretching  from  Zhangzhou  (Fujian) to Guangzhou (Guangdong). Given economies of scale, it is able to sell its abalone more cheaply compared to its   competitors   (RMB0.30/kati   vs   RMB0.60-0.70/kati).   Oceanus  can potentially  consolidate  the market by reducing its price, a move which we consider to be plausible.

170  restaurants  to  earn RMB100m by FY11. Oceanus entered into downstream abalone  retail  and  processing business through a 70:30 JV with Ah Yat in favour  of  Oceanus  in  2H08.  The  restaurants  are  targeted at the mass affluent  rather  than the rich. Currently, there are six operating outlets in  Shanghai  and  Hong  Kong  with  16  more  to  come  by the end of year (including  one  in  Singapore  which  will  open on 21 Sep 09). Management targets 170 restaurants and RMB100m earnings by FY11.

Attractive  vis-à-vis  peers.  We expect Oceanus' PATMI to rise 46% and 25% for  FY09F  and  FY10F  respectively  on  the  back  of  growing  number of profitable retail  outlets  and  the  contribution  from  the  processing business.  Our  target  price  of S$0.520 is based on a 30% discount to the peers'  P/E  relative to their respective indices (15.6x FY09 and12.2x FY10P/E).

Oceanus Research Initiation by DMG


Collin Yeo said...

Vested =)

Anonymous said...

thot tis is a IPO blog ???

Anonymous said...

yeah. i think this is a good one to watch. rose 2cents already.

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