Zoneco shares at five-year low as investors shun China seafood sector

Published on
April 8, 2016

Shares in the country’s largest listed seafood firm are at a five-year low, to RMB 9.58 (USD 1.40, EUR 1.30). Shares in Zoneco Group Co Ltd, listed on the Shenzhen exchange, are down from RMB 16.68 (USD 2.50, EUR 2.27) in 2015 and from RMB 37.26 (USD 5.58, EUR 5.07) in April 2011.

Investors were turned off Zoneco when profitability fell 44 percent in 2014, but the company’s share price was helped upwards by China’s bull market prior to the sharp fall-off in stock prices late last summer.

Debt remains a worry for would-be investors in China’s seafood firms. Zoneco’s debt-to-equity stands at 293, compared to an industry average of 6.59. Zoneco’s long-term debt to equity is 97.4, while interest coverage at 0.84 is well below an industry average of 32.7 and puts a question over the company’s ability to service debt.

Debt-to-equity levels are also high at processor and aquaculture firm Shandong Homey at 61.6 while interest cover at 1.5 is just about enough to service the company’s debt. The price-to-earnings ratio on the company’s shares is also very high at 169.

Indeed, it’s hard to find much cheer in the figures coming out of Chinese seafood firms. Dalian Yi Qiao Sea Cucumber Co has forecast net profit for 2016 will decrease by 50 to 100 percent: i.e. zero to CNY 4.5 million (USD 675,000, EUR 611,963). Demand has dipped for sea cucumbers, the company’s main product, though mid-priced products have stayed steady.

Meanwhile, China’s leading tilapia exporter Baiyang Investment Group has flagged net profit for the first quarter of 2016 to be a maximum CNY 3.5 million (USD 525,000, EUR 476,025). While modest, that’s an improvement on the same period last year when the company lost CNY 11.8 million (USD 1.7 million, EUR 1.6 million). Last year, Baiyang changed its name in order to attract more investors and to reflect the company’s entry into newer businesses like ingredients for cosmetics.

All of this comes at a time when investors have shifted focus to the country’s meat processing firms, which are riding high on a rebound of prices for pigs, due to a shortage of supply.

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