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Dear Investors,
Thank you very much for the questions and the opportunities to clarify them. We hope you have a better understanding of our business through this online exchange. Your questions will be reposted in blue italics followed by our replies in black. Rgds, Kenny the fish Qian Hu Corporation Limited |
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Dear Mr Liew Kok Leong
You wrote: I applaud the entrepreneurship qualities of Qian Hu. I understand that you have taken steps to move downstream to the retail industry in order to expand your revenue base; a move which will enable Qian Hu to have more control in your business. However it is also a sensitive move as you will be entering into your existing customers' segment. I believe your customers will view it as a conflict of interest and I would be interested in understanding how you will handle this new relationship. Thanking you in advance. Hi Kok Leong, Thank you for your question. It is inevitable some current retailers might find our move conflicting with their business interest. But if they can view us as a market player that can bring vibrancy to the market, it can turn out to be a win win situation. However, if its not Qian Hu, someone else might make that move. Thus we just have to let time tell whether our move will benefit them as a whole. Having said that, we are still active in our wholesale business. In some countries such as Indonesia and Thailand, the industry can accept wholesaler cum retailer player. In big countries such as China, we are concentrating in big cities such as Shanghai, Beijing, Guangzhou etc and there are rooms for wholesale business in those cities and smaller cities in China. With a more established accessory brand " Ocean Free", we are increasingly doing more export of our own brand of accessories. Best regards. Kenny the fish |
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"Against The Gods", you wrote,
How many staff do you have right now ? Of these staff, how many are overseas based and how many local based ? What are the budgeted promotional expense for your new retail business ? Hi Against the Gods, Cute name! We have more than 800 employees, around 100 in Singapore and the rest are in China, Malaysia, Thailand, and Indonesia. There are no fixed budgeted promotional expenses yet, as most of our retail stores will be opened at the end of this month or beginning of next month. For stores with good traffic, we would need less promotions. Vice versa for stores with less traffic, we will need more promotions. We can ascertain a fixed budgeted expense only after we have all the shops open in cities around the region. That will be by end of this year. Best regards. Kenny the fish |
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Kevin, you wrote:
Increase in investment is having an impact on cash flow. With the plan to open more retail shops, how is the company going to arrest this problem? Hi Kevin, Our debt to equity ratio is still healthy. Thus, with some bank borrowing, we should be able to achieve our target of more than 10 shops this year. When some of the shops achieve certain level of efficiency and profitability, we can finance it by our internal cash flow too. We still have cash input from our export of fish, breeding of dragon fish, and from our wholesale business. Best regards. Kenny the fish |
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Amos, you wrote:
I think this is the most friendly CEO/mgmt company listed in SGX. I've lost count how many times they initiate online Q&A since listed. Hi Amos, Thank you so much for your kind words. It is my duty to answer questions as our company is a public listed company. I also wish the public can understand us better and thanks to shareinvestor.com for providing Qian Hu this platform. Best regards. Kenny the fish |
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Toady, you wrote:
Actually going into pet shop business not a bad idea, esp. Dogs and Cats. More people getting older, those singles may buy pets to accompany them and they willing to spend on pet grooming and food. Hi Toady, We discovered from the trend that other pet accessories business is growing around the world and they are few times bigger than aquarium accessories. By opening up bigger pet stores, we can actually increase the range of accessory products which include non fish accessories and thus making our business more diversified. Best regards. Kenny the fish |
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Warren, you wrote:
Just saw this report from Net Research: Qian Hu reports a 50percent decline in Q2-2004 net earnings to S$0.9mn 20 Jul 2004 After giving profit growth guidance after its Q1-2004 net earnings, Qian Hu surprises with a 50percent fall in Q2-2004 net profit and reverses earlier profit growth guidance to a profit FALL. Valuations cannot support stock price - downgrade from BUY to SELL My Question is: why the sudden U-turn in guidance? Hi Warren, It took sometime for us to look for the most ideal locations while we also need to train a group of capable people ready for the operation. With the deposits, renovation and the gestation period needed before a shop can be operational profitable, we will incur start up expenditures. Thus its better to be conservative to estimate these impacts to our profit. We should have been more conservative in our guidance in Q1 but there was no figure for us to estimate then. Guess we still have lots to learn how to provide guidance when we transform our business. Best regards. Kenny the fish |
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Warren, you wrote:
Another downgrader report, this time from DBSV: "Qian Hu is embarking on a transformation over the next few years, as it scales up retail store chain operations to complement the current wholesale and export businesses. While this could possibly set the platform for long-term growth, short-term impact on earnings is inevitable, with further pressure on margins from accessories sales. We like management forwardlooking approach, but the retail operations is facing keen competition. Wait and see how the latest strategic move pans out over the next few quarters. In the meantime, valuation is unattractive. Fully Valued." My Q: The market place (and forumers here too) feel your move in retail, let alone, Pet Stores (outside your traditional fishy business), is RISKY business. Why did you chose to go down this road? Hi Warren, We feel that in future, with logistic advancement, the front end distributors ( retailers ) will start interacting with back end owners ( manufacturers, brand owners ). Those in between will face intense competition especially for the accessories. We do not want to wake up one day and find ourselves neither here or there. With steady income from export of fish and breeding of dragon fish, we would like to take some calculated risk in
Any business without risk is not a business at all. If a business is too easy to do, usually there are no profit. As long as the risk is calculated, it is a duty for any businessman to take some and not avoid it totally. Best regards. Kenny the fish |
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Mrmoon, you wrote:
How would you describe this set of financial results? Is it within your expectations? Can you explain the significant increase in inventory, how did disruption in the Guangzou factory cause inventory to pile up? The Group has generated negative cashflow for half year. How are you going to improve the operating cashflow? Do you have any update on the prospects/ target for Qianhu for next 3-5 years? How is the performance of the Qianhu - The Family Pet to-date? How long do you expect each shop take to breakeven? What is the value of inventory you think each shop will need to hold? One more question, how is the operations of the Guangzhou factory? Has it been normalised? May I know why there was this shifting of factory? Hi Mrmoon, Thanks for your questions. I am not pleased with the result but I know why. We did not take into consideration some of the pre-operational expenditure. To make matter worst, we moved our Guangzhou factory and disrupted our operation and that caused certain inventories build up. We needed to move to a bigger factory because quite a few of our principals want to shift their production out of Europe and partner with us in manufacturing their products in China. In addition to that, some of the products we have developed are gaining certain momentum as far as sales are concerned. Thus we are investing into the future. The operation is somewhat normalized now and the inventory level should slowly go down. Investors should have a better picture when we announce our Q3 result in October. As most of the shops will be open by this month or early next month, we will report in our full year results announcement the contribution from our retail operations. Operationally, a right shop with a right location should be operationally profitable within a year. If not we will do something about it. As for how much inventory we should carry, it depends on the size of the shop but in general, a retail shop will carry two to three months of its sales. Our vision and direction has not changed. What we are doing now is to expand the distribution mode to include chain stores which also allows us to do more other pet accessories business. We will still aim to be world biggest exporter of fish, be more profitable in breeding dragon fish through R&D and hopefully we own the biggest pet chain stores in the region. Along the way, we will continue to build our accessories brands, manufacture some accessories for our suppliers and for ourselves. Best regards. Kenny the fish |
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Warren, you wrote:
1134 [Dow Jones] STOCK CALL: DBS Vickers cuts Qian Hu (552) to Fully Valued from Hold with 1-year price target of 59 cents; this after reporting 50% on-year fall in 2Q04 net profit. Also cuts FY04 earnings forecast by 27% to $6 million, FY05 by 25% to $7.5 million; while plans to expand retail overseas network positive, near-term pressure likely on earnings, it notes. "We like the management's forward looking approach but the retail operations isn't going to be a bed of roses and will be subject to keen competition," it adds. Shares down 7.6% at 54.5 cents. (ANU) Any comments? Hi Warren, I agree with the comment from DBS Vickers and our management is prepared to invest into our future rather than remaining status quo. Business is for long term and if we can't endure the short term transformation uncertainties, we will remain as a short sighted company. Best regards. Kenny the fish |
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Yellowcard, you wrote:
Hi Kenny the fish, Thanks for taking questions form investors again! You are indeed a open and friendly CEO! Hi Yellowcard, How are you? You are always very kind to me. Thanks! Some questions and comments: 1. Applaud your "audacity" to change the business model completely from distribution / wholesaling to direct retailing. As this will surely make QH lock horns with your existing customers who are in retailing, are we expetcing your distribution business to dwindle a lot further in the years to come? When do you expect your revenue from QH's retail division to exceed the wholesaling? A: We hope we can still maintain a certain level of wholesale business although it might dwindle somewhat in the future. It is not new to us. In 1996, when we decided to go full force into exporting, our wholesale business to local exporters suffered. But eventually going direct proved to be more sustainable. I believe in three to five years time, we should see the retail contributions exceeding wholesale. 2. To be very open to you on my feelings, I am worried that this switch of business focus will increase your business risk tremendously. Can you kindly share with us what is the thought process behind this major change and your message to all shareholders on this? Thanks. A: I believe in my previous answers, I have explained the whole rationale of expanding the distribution to include retail. The whole landscape of distribution in the future is going to be between manufacturers and retailers. Wholesalers' role will be diminishing not only in our industry, but in many other industries too. For instance, "Coca Cola" does not need a wholesaler to ship its product to Wal-mart. 3. Was told by an industry observer that US might be opening up the arowana or dragon fish market? Is this true? If so, how is QH tapping on this massive market? A: Our government has been trying for sometime to open up that market. It would be a great news for Qian Hu but no market is bigger than China as far as dragon fish is concerned. 4. Have a copy of you book with me... makes really good and easy reading. How long did you take to write this book? Hope you didnt have to disrupt your business dealings to complete the book? A: I am very glad you did not use my book as toilet papers. Ha! Ha! I wrote that in between my flights and when I was in the hotels. It took me about 8 months to do that! Thanks again! You are always very welcome! Best regards. Kenny the fish |
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Miss Hanice Tsai Lohan, you wrote:
We are a group of students doing a project regarding agriculture, and we have chosen fish farm as our project topic. So, we would like to ask you a few questions and we would be glad if you could spare us some time and answer our following questions. Thank you. 1. How much capital was spent on this fish farm? 2. How long did it take to earn back the capital? Thanks for your help. Hi Miss Hanice Tsai Lohan, Thanks for your questions but it is difficult for me to answer. This is because I do not know what kind of fish you want to produce, whether you intend to do export, and what kind of technology you are applying. Best regards. Kenny the fish |
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Warren, you wrote:
Xian Leng Holdings (RM2.51) To open 100 outlets in China by 2010 Fish-breeder Xian Leng Holdings Bhd plans to open 100 retail outlets in China by 2010, hoping to rake in revenue of an additional RM25m. Its managing director Ng Huan Tong said, "In the past, we sell Arowana fishes in China through agents and importers. Now, we want to set up retail outlets to capture some of the demand directly." Xian Leng China Holdings managing director Tommy Wong said the company planned to establish its retail network mainly via franchising in Guangzhou, Beijing and Shanghai. On its Johor operations, Ng said Xian Leng had alloted RM11.5m to increase the number of ponds to 246 from 96 by early 2005 to minimise the overcrowding of Arowana fishes in its existing ponds in Parit Sulong. With the additional ponds, the group would be able to increase its production by 10-15% from about 12,000 tails per annum currently, he said. On Xian Leng's local retail business, Ng said plans were in the pipeline to set up more outlets in Johor Bahru, Melaka and Penang. Last December, the company opened its first RM5m retail outlet in Shah Alam. (theedgedaily.com) My Q: What you make of XL's strategy? How is it different from yours? Why didn't you choose to go down the franchising route, instead? Hi Warren, I have no right to comment on the business strategy of fellow industry player. As far as the chain stores are concerned, we believe XL might be very "fish" focus especially on arowana and that in itself might be where the similarity ends between XL and The Pet family. We try to strike a good balance where consumers/pet lovers ( fish and non fish ) will find The Pet family adequately positioned to meet their needs. Furthermore, we concentralise the planning but decentralize our operation since we already have operations in those countries and cities for years. The note on franchising is interesting but it is something to consider only for the future. We want to build our chain stores to establish our brand name first. Best regards. Kenny the fish |
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Asterix , you wrote:
Hi Kenny , Recently many parts of singapore is hit by blackout, may I know if you have any contingency plan with regards to this issue? Hi Asterix, Due to our years of experience, one of the equipment all fish farm need to own is a spare generator, especially in developing countries. All our farms in the region including our Singapore farm have such generators in case there is a blackout. Best regards. Kenny the fish |
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Dear Investors,
Thank you for all your questions and the interest in Qian Hu. We have come to the end of this Q&A session. We have enjoyed and learnt much from your questions and we hope that you have a better insight of our Company and know more about our operations. Rgds, Kenny the fish Qian Hu Corporation Limited |