Growth opportunities for QL Resources’ seafood

PETALING JAYA: There are opportunities for QL Resources Bhd to grow its seafood harvesting and processing business in Sabah, says MIDF Research.

Noting that QL is one of the largest integrated seafood processors in Sabah, MIDF Research believes the group could further expand its shrimp farm and downstream production in the second biggest state in Malaysia.

“The rising fisheries and aquaculture industry in Sabah present an opportunity for QL to expand its marine-products manufacturing (MPM) segment.

“According to our recent conversation with the Sabah Agriculture, Fisheries, and Food Industry Ministry, we gather that Sabah boasts a self-sufficiency rate for fish at 106%, indicating the potential for export to Peninsular Malaysia and overseas markets.

“This highlights the sustainable fisheries resources within Sabah, either from marine capture or aquaculture, which benefit QL’S surimi and frozen seafood-processing products,” the research house said in a note on the company.

MIDF Research recently visited QL’S MPM plant in Tuaran, Sabah, and following the visit, it came away optimistic about QL’S outlook for the financial year 2024.

The Tuaran facility is an integrated seafood processing plant involved in surimi, fishmeal and frozen seafood processing.

The plant boasts a total annual production capacity of 10,000 tonnes for surimi, 20,000 tonnes for frozen seafood, and 20,000 tonnes for fishmeal.

QL’S Sabah MPM plant exported 80% of its processed seafood products, including surimi, fishmeal, and frozen seafood.

Notably, China and Taiwan are the primary markets accounting for 30% of the company’s exports, followed by Japan with 20%, and Australia 10%.

“Exporting frozen seafood commands higher profit margins compared with selling in the local market. However, the export dynamics for shrimp vary across countries due to differing customer preferences.

“QL caters to China, Taiwan, and Singapore with both cooked and frozen shrimp, while only exporting prawn meat to Australia,” according to MIDF Research.

The research house noted QL ventured into shrimp farming in 2013 and total investment to date has reached Rm56mil with the operations covering 260 acres of land in Kudat.

The farm has a total production capacity of 2,000 tonnes a year.

“We gather the group transports the harvested shrimp to the Tuaran MPM processing farm for further processing according to customer requirements.

“The shrimp are primarily priced in US dollars for restaurants and hotels, with prices varying based on market supply and demand, as well as shrimp quality,” it said.

It is noteworthy that Sabah is renowned for its aquaculture practices, particularly in brackish-water culturing for fish, tiger prawns and other species.

In 2022, Sabah’s brackish-water aquaculture sector achieved a total production of 10,000 tonnes, with a wholesale value amounting to Rm240.5mil.

QL’S production capacity of 2,000 tonnes for prawn aquaculture solidifies QL’S position as one of the largest contributors to the brackish-water aquaculture industry in Sabah.

MIDF Research has maintained its “buy” call on QL, with an unchanged target price of RM6.50 per share.