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Dear Investors,
Thank you very much for the questions and the opportunities to clarify them. 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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Masteryoda, you wrote:
Is it absolutely necessary for QianHu to pursue vertical integration? The profit margin for accessories is continuously being squeezed, and entry barrier for that segment is low. Vertical integration make sense if the whole is greater than the sum of its parts. Does it really apply to QianHu? whose core competency is really ornamental fish. Disappointed Investor. Hi Masteryoda, It is absolutely necessary for Qian Hu to move forward and backward in the value chain. I believe the role of wholesaling will gradually diminish over time. It is diminishing faster than ever due to the globalization and the ease of moving goods. Qian Hu needs to build brands, invest in R&D to develop better products, concentrate on breeding Arowanas and eventually own the consumers by running Qian Hu pet stores. Our core focus right now is still very much in ornamental fishes and its related activities, by owning the chain stores. We can further diversify our range of products to the end consumers, for instance: small animals, dog food, reptiles etc. I sincerely hope you can understand we have to invest in the future and endure the present pain a bit! It is better to temporarily disappoint some investors now than to greatly disappoint investors in the future. Rgds, Kenny the fish |
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Cyclone, you wrote:
I think the Group is biting the bullet while changing your business focus to the Pet Store setups which also explained the higher inventory? Also noticed that your cash balances has dropped as at Sept 04 versus Dec 2003. Can you advise what is your capex going fwd in view of the new stores you are setting up. Maybe good to update us on the developments in the pet store setups. Lastly, are you disappointed with the loss and honestly, are you surprised by it? Thank you for being so upfront and transparent to shareholders. Hi Cyclone, By end of this year, our group will have 11 stores in 4 countries, 7 cities. Progressively, they started operations since July '04. The 11th store will open in the beginning of November. We have already experienced the biggest challenges in setting up these stores from scratch and at the same time, fine tuning the store concepts. Next year we will concentrate in making all these stores profitable. Once that is done, we will increase the pace of setting up new stores. Thus, we can't give estimates on Capex requirements but it will be lesser than this year. I should not be surprised by the profit fluctuations this year. But we are also inexperience to predict the kind of fluctuations to expect. Hey Cyclone, its my duty to explain and answer questions once we have released the result. You are most welcome! Rgds, Kenny the fish |
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Pipipapipu, you wrote:
There is talk that Q4 is also a loss, is this likely to happen? What are the key strategies and tactics the management is doing to turnaround the losses and go back to healthy profits? Thank you. Hi Pipipapipu, We believe the fluctuations of profit should not be a norm. We believe these are some of the reasons. Our export of fishes should continue to grow and we should also have more dragon fish fries this year. We are also making the pet stores profitable and working on running a very productive factory with good R&D capabilities. Rgds, Kenny the fish |
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Entropy, you wrote:
They should make more Chinese families (Sgp, Msia, China) rear Arowanas as a symbol of good fortune. They could carry out more frequent roadshows, in the various countries of operations, to market their ornamental fish. This could be a joint effort with the distributors in the roadshow region. The pet-shop initiative has turned former partners into competitors - not a very good move. They could provide regular on-site professional services to monitor the health and development of arowanas / ornamental fish + offer decorative services for the tanks. In homes and businesses alike. The accessories business, if it helps to contain supply-side cost, leave it be. If it is burning cash, close it down. Hi Entropy, Thank you very much for your suggestions. I need to build the 4 pillars of growth :- export of fishes, breeding dragon fishes, manufacturing products under good brands and transforming the Group from wholesaling slowly to retailing. It might not be a good idea for us to do the transformation now, but I believe our move will suit tomorrow's business landscape for Qian Hu better. We are offering services in our stores such as setting up aquatic plant tanks, dogs grooming, training for dogs. Some bigger stores even have veterinary service. We hope to professionalize this highly fragmented industry. Rgds, Kenny the fish |
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Yellowcard, you wrote:
Hi Kenny, can you please elaborate on the short-term bank loans of S$6.3m YTD compared to just S$0.86m last financial year ended 31 Dec 2003? How much will you need to invest in one pet store? How many will you open by year end? Thanks for taking questions even during this moment of negative publicities. Hi Yellowcard, How are you lately? Loans are mainly for factory expansion and setting up all those 11 stores. We will have 11 stores by year end. I should answer questions regardless of result. It is just my duty to do so! Rgds, Kenny the fish |
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Papabull, you wrote:
I saw a run-up of you in a TV portrayal and recognise your strength and sincerity in attempting all your challenges, both personal and in business. As the vicissitudes of business are all too wellknown in any trade one undertakes -- especially the pet trade types, proliferated by eager new entries because of the relative cheaper entry cost -- it will eventually leave for the best of the players to remain successful with pro-active management. I have every confidence in your sincere endeavours and wish you all encouragement. Hi Papabull, This is a very sweet comment and I thank you. You seem to have good insight and if you are in business, you will be a very good businessman. Once again, thank you for your faith in Qian Hu. Rgds, Kenny the fish |
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Katak, you've highlighted the Business Times article "Why the late profit warning, Qian Hu? " which was published in on 26 Oct 2004.
The following is my reply to Business Times which was published on 27th Oct 2004. I repost here for the forumers. Qian Hu warning was promptly made I REFER to 'Why the late profit warning, Qian Hu?' (Hock Lock Siew by Wong Wei Kong, Oct 26) Your commentary enquired whether Qian Hu could have known of its third quarter losses earlier and whether it could have issued its profit warning earlier? Qian Hu has a consistent track record since our listing of being one of the earliest companies to announce our results in a full, complete and detailed manner, year after year. Indeed, we are also one of the very few listed SMEs to announce our consolidated quarterly results since two years ago. Our group has expanded to 10 foreign and local subsidiaries since our listing in November 2000. To capture accurate and detailed financial information from each of our 10 foreign and local subsidiaries on a quarterly basis, we have in place an effective system which enables our group to track, analyse and assimilate periodic financial data expeditiously from each of our group subsidiaries. Our group puts great emphasis on timely and accurate financial reporting of our results. Although we have a substantial number of overseas operations, we are still able to complete assembling our consolidated financial results for the third quarter within 21 calendar days from the end of our last quarter, Sept 30, 2004. We were only aware that the last quarter would be a loss on the morning of Oct 22 just before our profit warning, after our accounting team had verified all the financial data from all our foreign and local group subsidiaries. We had earlier announced on Oct 11 that our company would be announcing our third quarter results at the end of market trading on Oct 25. When the management became aware of our third quarter losses, we brought forward our results announcement to the early morning of Oct 25 before the market started trading. This was to ensure that the market obtained detailed information of our group's consolidated results for the last quarter as soon as our audit committee had completed its review, before investors and shareholders made any trading decision on our company's shares. We, therefore, have not forgotten our obligations as a listed company to be prompt with the dissemination of material information. Kenny Yap Kim Lee Executive Chairman and Managing Director Qian Hu Corporation Limited |
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Roland, you wrote:
Mr Kenny Yap mentioned that the main reason for the 3rd quarter loss is due to the initial startup costs for the pet shop ventures. What is so unique about this venture compared to other businesses that is existing in the market that would bring in a sustainable profits. Besides this venture, is Qian Hu looking into other areas of growth? Hi Roland, I have stated the 4 areas of growth of Qian Hu in my previous reply. As I mentioned, when there is an ease of goods flowing through the market, the players at the two ends will survive in the long term, ie. those who own the brands and manufacturing (Production) capabilities and those who own the consumers. It is about the future business landscape , not just for the industry, but many others as well. Thus, Qian Hu better start positioning ourselves to suit the future business landscape. If not, one day we might wake up and finding ourselves neither here nor there. Rgds, Kenny the fish |
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Brian, you wrote:
1. What was the absolute reduction of ornamental fish sales in Singapore and Malaysia for the 9 months of 2004? And what is the exact contribution (in absolute terms) by Qian Hu's new acquisitions, PT Qian Hu and Kim Kang? A: Kim Kang is contributing quite significantly to our group. We only completed the JV of PT Qian Hu end of March and thus the whole year's figure might not be reflective. Both of them are profitable and growing entities. 2. Ignoring sales contributions from the above PT Qian Hu and Kim Kang, which type(s) of fish(es) is driving this deficit ornamental fish sales? A: The reason lies in Singapore and Malaysia's wholesale market for ornamental fishes. The wholesale businesses in these two countries attracted more new players, hence, competition is keener as a result. 3. The idea of Qian Hu venturing into retail as a one-stop shop for fish and pet accessories is bold, however, are there any economic foundations (like economies of scale or scope) for selling pet accesories and food since Qian Hu's core competency lies in the breeding and sale of ornamental fish? We will enjoy economies of scale when we open more shops. Our core business is still ornamental fish and its related activities but pet stores allow us to sell wider range of products such as cat food etc. Yes, our house brands such as Aristocats, Bark, and Ocean free are slowly gaining market shares in the region. Rgds, Kenny the fish |
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Hi Against the Gods,
Thanks for your questions. , Here are my replys in black. 1. With regards to your reply to BT on why late profit warning. Internally, does the management get monthly report on each of Qian Hu business ? If the management does get monthly report, shouldn't you realize that Q3 would be loss before even end of Q3? Or is it that September was very bad so you still unaware in the first 2 months ? A: When a business is undergoing some transformation, the lineal way of capturing data will be temporary delayed. We set up stores in 7 cities and the complexity of getting data on time is challenging at this moment. Some stores are in operation, some are under construction etc.. Once things settle down this year, we will be back to the normal pace of capturing on time data. 2. Plastics division. With the cost of plastics materials going up a lot this year, are you able to raise your selling price ? A: We can't raise prices immediately but we have adjusted some prices in September. 3. You mentioned during Qian Hu result briefing (maybe in 2002) that Qian Hu business model is recession proof. However, it seems that even Qian Hu revenue is very volatile. What do you mean by recession proof ? In my mind, recession proof mean that the business can grow or at least stable during good or bad times. A: It is a recession proof industry. We face competition in two markets but the whole market in the world is still vibrant. That explains why our export business should continue to grow. The competition appeared at the wholesale level and thus we have decided to move forward to prevent such thing from happening again in other markets where we have entities. We choose to self destruct some of our old way of doing things by creating brands and owning consumers. Thank you very much. You are my most admired SGX-listed CEO. Thank you so much. I am blessed with very good teammates and thus we are able to receive SQA award. Thus you should admire my luck to have such a team than me as a person. Rgds, Kenny the fish |
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Hi Alan, you wrote:
I am Mr Alan Kwek and I am from Mayflower Secondary School. I am not a shareholder nor an investor of Qian Hu. I would like to request of a visit to your farm for a group of my school teachers. This visit is part of our Staff Retreat Learning Journeys on 19th Nov. (9am-11am) Through this visit, we hope to learn more about Qian Hu and any innovations and enterprising ideas as well as to give teachers a broader perspective of the world outside the school. You can contact me either through email or HP and I really look forward to your favourable reply. Mr Alan Kwek Hi Alan, There are many schools visiting Qian Hu now and we have a team to cater for such visit. Please contact Jimmy Yap either by calling our office at 6766-7087 or his HP 90701311. He will make the necessary arrangement for you. Do enjoy your visit to our farm. Rgds, Kenny the fish |
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Albert Kong, you wrote:
I applaud you for your steadfast determination in pursuing your retail concept. As you have stated on many occasions, this strategy involves upfront investment cost, which is clearly evident in the recent quarters' results. What I would like to see however is your strategy in diversifying your predominant risk - into other sustainable business areas. What are your expected timeframe for such diversification plans (business/geographical, etc.)? I would also like to see QH management putting their money where their mouth is. Its share price has dropped quite substantially over the past months and if you truly believe in your grand vision, start buying up (either personally or thru share-buy-back) the stock. It would also be good to see more liquidity in the stock. Hi Albert, I am very glad you can tell that we are determined to transform. It will take another half a year or one year for the whole business model to stabilize. Although we are ready for share-buy-backs, due to the poor liquidity, this is not the right time to do that. Maybe it will improve the share price temporary, but it will put further pressure on the liquidity of our counter. Rgds, 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 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 |