Stagnant Waters Seen in Qian Hu Corporation Limited’s Latest Earnings

Listed since 2000, Qian Hu Corporation Limited (SGX: 552) is a Singapore-based ornamental fish company which focuses on breeding Dragon Fish (also known as the Arowana).

Besides fish breeding, Qian Hu is also engaged in the export of aquarium and pet accessories too.

The company reported its fiscal first-quarter results yesterday evening.

For the quarter ended 31 March 2015, Qian Hu’s revenue had grown by a slight 0.3% to S$20.8 million compared to a year ago.

But, the higher top-line couldn’t be translated into bottom-line growth – Qian Hu’s profit for the quarter came in at S$112,000, down 2.6% from a year ago. A lower gross profit had been a big contributor to the smaller profit.

With that, let’s dig into Qian Hu’s segmental results:

Qian Hu's segmental operating profit

Source: Qian Hu’s earnings release

As you can tell, operating profit from the Ornamental segment had improved by 2.6% to S$312,000. This came on the back of Qian Hu’s strong export business.

Meanwhile, the Accessories segment had suffered a big drop in operating profit as a result of a change in sales mix and higher advertising costs which led to a lower profit margin.

Plastics was the brightest spot for Qian Hu as its operating profit managed to clock a 36.1% jump to S$181,000.

A Fool’s take

Qian Hu’s profit has shrank from S$6.5 million in 2009 to just S$400,000 in the 12 months ended 31 March 2015. But, Kenny Yap, Qian Hu’s Executive Chairman and Managing Director, still remains positive about the firm’s prospects. He commented in the firm’s latest earnings release:

“All of our core businesses are growing steadily, even as we continue to transform and position Qian Hu as an innovative ornamental fish company, focusing on cutting-edge product developments in filtration, fish nutrition and genetic-breeding of unique Dragon Fish.

We believe that by strengthening our fundamentals and cash generation capabilities, Qian Hu are on track to being more resilient and sustainable in an increasingly challenging business environment.”

Based on QianHu’s current share price of S$0.073, the firm’s carrying an elevated price-to-earnings (PE) ratio of some 85.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.