Chat with Kenny

Good evening to all users of ShareInvestor.com !

Hope you have a great weekend so far. Thank you for your questions over the past few days. I will post my replies shortly.

Best rgds,
Kenny the fish

Against The Gods, you wrote:

"Is there any figures on the sales of the whole of fishery products industry in Singapore, Asean and the world ? If there is, is the demand for this hobby of fish declining?"

Hi Against The Gods,

Welcome back and thanks for your questions.

There are not many figures available for this industry. Overall, according to our industry knowledge, the ornamental fish industry around the world is still growing at between 5 to 8%. Some countries such as Singapore and Malaysia might be consolidating, but not in countries like China, Thailand, USA and eastern European where the ornamental fish industry is still experiencing healthy growth rate.

Kenny The Fish

Jason Lee, you wrote:

"Does the management feel that the growth of Qian Hu (in the Singapore market) is closely tied to the economic growth of Singapore? (ie. better economic outlook leading to more Singaporeans willing to spend on fishes and pets accessories) Or does the management believe that Qian Hu's customers belong more to the higher income group, who are not affected much by the economic swings?"

Hi Jason,

Niche industries like ornamental fishes and pets can be quite resilient to economic downturn as different pets appeal to different people. Lower income customers and higher income customers might be buying the same kind of fish or pet simply because they like it so much.

The situation we have now is not about the market, but the supply of accessories. China produces many cheap accessories. This not only brings in more competitors to distribute accessories to Singapore and Malaysia markets, but this has depressed the prices. The competitive situation is less so in European countries and USA as they have more strict regulations about products going into their markets.

What we are trying to do now for our accessories business is to be the OEM of more products for our overseas customers. This means selling more accessories not in those countries where we have subsidiaries, but to the world market where they needs Asian goods. Just like what we are doing for our ornamental fish.

Kenny The Fish

Hi David Ong, you wrote:

You have a very thin profit margin at just 3.1% as compare to some other trade. Do the management have controls or measures in place to ensure that the overheads do not exceed your gross profit?

With such thin profit margin, you would need to drive up the sales volume up. With sales volume comes cash and collection problem especially in countries like China and Thailand. Does the company had measures in place to ensure that such credit sales do not go bad.

Hi David,

Thank you for your questions.

Yes our profit margin is thin this year. Our fish profit is sustaining but our accessories profit has been affected by the Malaysia/Singapore domestic market distribution. Our overheads from the wholesale division has been reduced but we are still increasing our retail staff headcount. Thus, this year we are in the situation of neither here or there for the accessories business but I believe our efficiency should start improving.

Yes, improving the accessories sales is extremely critical for us now. That is why we are now focusing on increasing our stores' sales, exporting more accessories, OEMs, etc.

Our credit control in Thailand is tight. As for China, we always collect cash and thus not much accounts receivable there.

Kenny The Fish

Dillion, you wrote:

HALLO Kenny, seen the webcast...thanks for your transparent insight into the company.

Hi Dillion,

I thank you for your kind words and support.

Here are my questions:

1. You mentiona few times regarding the consolidation of the industry. Based on your view, how long will it take the industry to pick up again?

A: I was referring to the Malaysia and Singapore domestic markets when I mentioned about consolidation. Other countries do not face such consolidation and this is why our export business is still growing. Since Singapore and Malaysia are still our biggest markets as far as accessories distribution is concerned, that affected us. My gut feel is that these 2 markets are either at the near the end of the consolidation, or that it might be over.

2. The A*Star program the company has been initaited for quite some time now. When will we see the research results being deployed on a commerical basis.

A: It is a three years project and this is our second year. We have uncovered some interesting findings and are currently experimenting some of those findings. I believe that by the end of the project, we will be the pioneer on Dragon fish studies. Hopefully, when we deploy these improved knowledge to our commercial breeding program, our yield, quality, and brand will be enhanced.

3. How do you see your pet shop concept vis a vis others? And what is Qian Hu's competitive edge over your competitors?


A: Our pet shops are more comprehensive. Beside fishes, pets and their accessories, we also provide services such as grooming and veterinary under one roof. Eventually we shall have cost, merchandising, and market advantages by being the first mover in Asia market to have such chain stores.

4. The company cash flow return to positive levels this time round, can we expect to see the same trend going forward?

A: This year we are managing our cash more than managing our growth, for the next half a year, we should see the same trend.

5. Moving ahead, can we expect to see better margins for the company?

A; It is our company main objective now to improve our margin again, especially for our accessories business.

Thanks once again for your interest in our company.

Kenny the Fish

Hi Roger, you wrote:

Thanks again for candid and open communications with investors!

Hi Roger, you are most welcome and I thank you too!

Do we expect to see more financing for the pet shop expansion?

A: Not for this year at least. We are using our cash flow to fund the retail initiative and at the same time, we are also trying to reduce our borrowings further.

Your profits levels have decreased for a few quarters, what ways is the management undertaking into a uptrend of bottomline going forward?

A: If you compare with our 4th quarter last year, our first quarter profit is higher. We have also improve a bit in 2nd quarter this year. We are aiming for quarter to quarter growth.

Thanks

You are most welcome and thanks for your time.

Kenny the Fish

Yellowcard, you wrote:

"Hi Kenny the fish, good to see you here again. Results not so good huh? I think I understand your business and the metamorphosis from a supplier and distributor of fishes / accessories to the front end of the value chain, owning the end customers. I hear this from your radio interview.

My question ... is.... that by going to the front line, your existing wholesale clients will not be happy with you as a new competitor. So far as you have 12 pet stores? Correct? Do u have any stats on how your venture into the retail business has adversely affected your wholesale/distn business?"

Hi Yellowcard,

I am glad to see you here again and how is life?

With regards to your question above, my guess is that our venture into the retail pets chain store business has affected somewhat on our wholesale business but I do not think it has adversely affected. If it has, so be it. We have to invest into our future and the wholesale business can eventually be the support function of the front end distribution. Right now, we will maintain our wholesale business, increase our export of accessories, and continue to drive the growth of our chain stores.

Hope you have a great weekend!

Kenny the Fish

Luong, you wrote:

I noted in the quarterly report that sales was partly hit by the earlier drought which affected the yield of arowana. What was the impact of the drought to others in the industry? Was the industry supply of dragon fish similarly affected?

Among the retail outlets opened to date, how many are beginning to contribute positively to the bottom line?

Is the research with Temasek Life Science making good progress? (General comments will do, details not required)

I notice Qian Hu is starting to retire debt. Will this continue to be a long term goal to retire debt further? "

Hi Luong

You must be new here. Welcome to our Q&A.

Some of your questions have been answered earlier so I won't repeat here. Hope that is OK.

My guess is that other dragon fish farms are also affected by the drought and that makes the supply even tighter. Recently, the rain is back and we should have more fries in the second half of this year.

I believe we will retire some more debt this year.

Thanks for joining us and looking forward to your questions in our next Q&A.

Kenny the Fish

Dear investors, we have now come to the end of this Q&A session. I hope I have answered all your questions about Qian Hu and our strategies moving foward.

I look forward to corresponding with you again in the next quarterly Q&A here on ShareInvestor.

Best wishes to everyone,
On behalf of Qian Hu, Kenny the fish