Oceanus Group: Delivering ambitions

Growing abalone population. Sales grew 38% q-o-q to RMB65m, while fair value gain grew 59% to RMB173m due to its growing abalone population. Adjusted profit, which replaces fair value gain with sales income and excludes exceptionals, improved q-o-q from RMB49m loss in 4Q08 to RMB2.7m loss. We expect adjusted net profit to turn positive in the following quarters if consumer sentiment in China continues to improve.

Biological asset continued to increase to RMB547m due to a larger abalone population and larger abalone size. PP&E also grew to RMB494m following the construction of more abalone tanks. These account for a combined 96% of total asset as at end 1Q09. Cash and debt are almost equal, with minimal net cash of RMB81,000.

Downstream expansion, namely an abalone processing plant and cafeterias, progressed smoothly in 1Q09 and received positive response from clients. We expect these to contribute to group profit when they are fully ramped up in the following quarters.

Oceanus’ cash level is strained (only RMB13.5m on B/S). But it announced that it had received confirmation from AIF Capital regarding a USD25m loan investment with warrants, and it is currently in active negotiations with other investors as well.

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