Borneo Aqua Harvest - Golden Harvest

Price: RM0.60
Target Price: RM0.80
Recommendation: BUY

· An integrated marine aquaculture operator specialising in rearing high value marine fish for consumption. Key markets including Hong Kong and China offer huge potential given the size and more importantly the purchasing power;

· Proven processes and ready to join the big league marine aquaculture players after gestating for the past few years. With the entire value chain under control, group is now able to chart its own destiny;

· Rising global demand with supply unable to keep pace presents huge opportunity for the aquaculture sector. According to Food and Aquaculture Organisation (FAO), aquaculture now accounts for some 36% of total fish production in 2006 compare with 28.9% in 2001. Should the growth for aquaculture be maintained at 6.4% while fish capture stagnates at the 2006 level, aquaculture’s portion of fish production is set to exceed fish capture by 2016;

· Strategic alliance with major wholesalers in key markets guarantee strong take-up leaving the group to concentrate on its core competencies;

· Minimal expectations with ample room to surprise on the upside. High level of scepticism and perception of risk means little investor interest for now. This will soon change with growing investor familiarity underpinned by strong showing in terms of financial numbers;

· BUY with a fair value at RM0.80 based on 12x CY2010F representing a 40% discount to the overall market’s valuation which should provide some 33% upside from the current levels. Trading at an undemanding 8.9x CY2010 is unjustified given the group’s unique processes, a high level of intellectual content not to mention the immense market potential that the markets in Hong Kong and China on offer.