MAG is food security anchor in aquaculture sector

PETALING JAYA: MAG Holdings Bhd is a market leader in the shrimp-farming industry, where demand is expected to remain strong and robust, says TA Research.

The research house, in a note to clients, described the group as a reliable food security agent with strong earnings visibility, responsibility and transparency.

In initiating coverage on MAG, it said: “We like food-producing companies, especially those involved in upstream operations, such as agricultural and aquacultural products, poultry, dairy and the like.”

From a recent visit to MAG’s shrimp farms in Tawau, Sabah, TA Research noted established infrastructure supporting farm operations and proactive solutions to mitigate foreseeable operational risks.

Currently, MAG owns four prawn aquaculture farms in Tawau with up to 384 ponds, supporting a total annual breeding capacity of 7,000 tonnes of L. Vannamei prawns (white shrimp).

This significant capacity allows MAG to achieve annual harvests of approximately 5,500 tonnes, firmly establishing it as the market leader in Malaysia’s shrimp-farming industry.

The company has also invested heavily in downstream processing capabilities.

It operates two processing plants with a combined capacity to process up to 12,000 tonnes of in-house and third-party shrimps into ready-to-eat and ready-to-cook products.

According to TA Research, MAG has demonstrated robust business fundamentals through a diversified pool of local and foreign customers, helping to mitigate client concentration risk.

Exports, comprising 60% of the company’s sales, are mainly to trading houses in South Korea (35%), Taiwan (10%), Australia (10%) and China (5%).

“Earnings visibility is strong, as these foreign buyers typically communicate their order expectations six months prior to shipment,” added the research house.

Looking ahead, TA Research projected adjusted annualised core profit growth of 8%, 3.9% and 4.6% for the financial years 2025 (FY25), FY26 and FY27, driven by favourable pricing.

Specifically, profit forecasts are premised on:

> FY25 to FY27 survival rates of 80%, 83% and 83%, contributing to annual harvests of 5,550 tonnes to 5,784 tonnes,

> Purchasing third-party prawns of up to 1,500 tonnes annually for FY25 to FY27, and

> Average selling prices of RM50 to RM53 per kg for exports and RM45 to RM47 per kg for the domestic market.

TA Research, which has a “buy” recommendation on the stock with a target price of 19 sen, said: “We like MAG’s market leader positioning in the shrimp-farming sector.

“However, notwithstanding the strong earnings outlook, the absence of a dividend policy and the relatively low dividend yield may cause MAG to trade below our target price/earnings multiple of 16 times for the consumer sector,” it said.