LABUAN FOOD INDUSTRIES SDN BHD

EMERGENCE OF A NEW “MALAYSIAN'S LOCAL PLAYERS-

CONTROLLED” FULLY INTEGRATED SEAFOOD PRODUCER IN
MALAYSIA
 Presentation Outline (1/2)

of Labuan Food Industries Sdn Bhd

del
ons

est Practices
As At 31 December 2017
Presentation Outline (2/2)
⚫ Major Assets and Infrastructures
⚫ Competitive Strengths
⚫ Business Strategies – On Going
⚫ Overview of Global Seafood Demands
⚫ Summary of Financial Projections
⚫ Commentaries on Financial Projections
⚫ Pictures of Infrastructure Facilities, Operations and Products
Range.
⚫ Conclusion
Background & Introduction of Labuan
Food Industries Sdn Bhd
⚫ Labuan Food Industries SDN BHD (“LFI”) set up by Malaysian
entrepreneurs namely Mr. Lee Sin Teck and brought in new
business partner namely Datuk Mazli Mohan bin Alias.
⚫ Business Operation was founded by Mr. & Mrs. Lee Sin Teck
(“LST”) (3rd generation in a family line that has been involved in
the fishing and seafood wholesale business in West Malaysia)
since 1986.
Background & Introduction of Labuan
Food Industries Sdn Bhd – continued.
⚫ Fully integrated seafood processor involved in deep-sea fishing &
coastal trawling, aquaculture (fish & prawns), simple and value
added seafood processing, packaging & distribution. Export
approximately 80% of products to overseas customers in USA,
Japan, Middle East, Australia, China and etc.
⚫ Be able to offer diversified products range (due to its full
integration) and supported by well established overseas buyers.
⚫ LFI currently had on existing orders in excess of USD 30 Million
of GPO’s businesses.
Fully Integrated Business Model

Mid-stream Activities
• Deep-sea Fishing • Local distribution
• Coastal Trawling • Exports &
• Basic Processing – All
• Hatcheries – Fish & Distribution to
seafood
Prawn overseas buyers
• Value-Added Seafood
• On-growing Aquaculture Processing
– Fish & Prawn Downstream Activities
Upstream Activities
Flowchart From the Sea to Dish
Business Activities and Operations
⚫The Company’s business activities and operations
encompass:
⚫Upstream fishing
⚫Purse seiner deep sea fishing
⚫Midstream processing
⚫Basic processing and value-added fisheries
products processing factories with cold stores
facilities
⚫Downstream
⚫Wide network of seafood distributors into key
global markets
Integration Across Entire Value Chain
Upstream Activities: Midstream Activities: Downstream
Activities:
Purse Seiner Basic Processing Marketing &
Deep Sea Fishing • Raw and Frozen Prawn, Retailing
Fish & Other Value Added • Global & Local
Seafood Marketing of Processed
Seafood Products
• Retail Store

Deep Sea Basic Value-added Marketing &

Fishing Processing Processing Retailing

Value Added Processing

• Cooked Prawn
Processed Tuna Products
• Other Value Added Seafood
Products such as Breaded
Prawn and fish, Seasoned &
dried fish, cuttlefish, squid &
octopus
Location Map

Fishing & Processing

facilities
 Processing Of Seafood - Tuna & Other Fish
⚫ Tuna • Barramundi
 Processing Of Seafood - Other Fish
⚫ Ribbonfish Gum Steaks • Shimaaji
 Processing Of Seafood - Prawn
⚫ Deheading black tiger prawn • Layering HO prawn
Wide Product Range & Strong Export
Markets
⚫ Products include ⚫ Products include
⚫ Frozen tuna / marlin / mahi-mahi ▪ Seasoned and dried products
products e.g. loins, saku, steaks, e.g. cuttlefish, squid, octopus,
cubes, slices /minces etc. milkfish, yellow scad, fish
⚫ Frozen vannamei / black tiger oval / tatame, squid/cuttlefish
prawn e.g. cooked pdto, raw pdto sheet, etc.
etc.
⚫ Frozen cuttlefish / squid / baby
octopus e.g whole cleaned, whole
round, fillets etc. ⚫ Export Markets include
⚫ Frozen fishes - barramundi, ▪ USA, Japan, Middle East
snappers, milkfish etc. : whole countries, Australia, New
round, whole cleaned, butterfly cut,
Zealand, China, Hong Kong,
fillets, steaks, etc.
South East Asia countries
⚫ Frozen value added products e.g.
prawn spring rolls, breaded
butterfly prawn, breaded fish,
breaded kirimi, dim sum, etc.
Commitment To Quality & Best Practices
(Fulfilled Stringent Quality Criterion
⚫ FDA registrations issued by the US Food and Drug Authority
⚫ Allows for exports to the US

⚫ HALAL Certifcation
⚫ Assurance of Halal products produced

⚫ Hazard Analysis & Critical Control Point (HACCP) Certification

⚫ Testimony of high levels of quality and hygiene in food processing in accordance with
international standards

⚫ EU Registration (in the re-audit process for EU registration)

⚫ Allows for exports to the EU countries
LFI - PROFORMA BALANCE SHEET
AS AT 31 DECEMBER 2017
RM’000
Fixed Assets 110,746
Goodwill 30,000
Inventories & Receivables 35,415
Cash 78,301
Total Assets 254,462

Share Capital 69,407

Share Premium 60,693
Profit 24,362
Long Term Loan 100,000
Total Funds 254,462
STRONG CASH FLOW POSITION
FYE 31 Dec 2018 2019 2020 2021 2022
RM’000 RM;00 RM’000 RM’000 RM’000
0
Cash from (298) 30,949 70,915 99,408 122,450
Operations
Cash used in (86,500) (36,075) (34,000) (34,200) (17,600)
investing
activities
Loan & Equity 165,000 (20,000) (20,000) (30,000) (30,000)
(Repayment)
Increase/ 78,201 (25,125) 16,915 35,208 74,850
(Decrease in
Cash

Cash B/F 100 78,301 53,176 70,091 105,299

Cash C/F 78,301 53,176 70,091 105,299 180,149
Major Assets and Infrastructures Owns
by LFI
⚫A fleet of fishing vessels for coastal and deep-sea fishing;
⚫Processing facilities;
⚫Cold rooms;
⚫Fish hatchery with incubation facility and nursery facility;
⚫Fish/Prawn ponds for on-growing activities;
⚫Fish cages for on-growing facilities;
⚫One retail outlet at Labuan Airport;
⚫Prime landbanks in Labuan.
 Competitive Strengths
⚫ Technical knowledge and expertise
⚫ Strong management team
⚫ Hands-on daily management of operations
⚫ In-depth knowledge of deep sea fishing and integrated value chain
⚫ Continuous Food R&D and marketing networking
⚫ Good Manufacturing Practices in place to ensure food safety

⚫ Wide range of processed prawn, fish and other seafood products

⚫ Able to cater to customers’ variety needs including the Halal Food
markets worldwide

⚫ Strong distribution network

⚫ Good understanding of individual export markets
⚫ Strong relationship with local distributors in various export
markets
Competitive Strengths - continued
⚫“Experience” and “Proprietary Technical knowledge” in Sea
Fishing, Aquaculture, Seafood Processing and Marketing
activities.
⚫LFI will continue to offer wide range of seafood products,
meaning that the group positions itself as a one-stop shop for
the convenience of its buyers especially overseas importers;
⚫LFI’s readiness to seek HALAL certification for its products
means that it could serve huge Muslim market especially the
Middle Eastern buyers and Indonesia for its value added
products.
Competitive Strengths - continued
⚫ Existing customers means immediate coverage to the international
seafood markets, i.e. in USA, Japan, Middle East, Australia, China
and etc;
⚫ Adopting “Zero waste” management concept would drive down
production costs and increase the revenues by using the by-catches
and secondary processed materials to manufacture other value added
products;
⚫ US buyers augurs well for LFI as it could immediately gain entry
into a huge (biggest seafood importer) but tough market (very
stringent checking by US FDA).
LFI’s Business Strategies – On Going Business
Up To December 2017
⚫Increase deep-sea fishing fleet, specifically the deep-sea purse-
seiners. So far there is no major industrial fishing activity in
Labuan and Sabah EEZ (exclusive economic zone, up to 200
nautical miles from the Labuan and Sabah shore) towards
South China Sea. This sea area is well known for its Rich
marine resources;
⚫Increase more seafood processing lines to fulfill the
outstanding purchase orders demands by foreign buyers. There
are a few China seafood companies that are willing to
outsource their seafood processing activities to Mr Lee and
these will be passed to LFI;
LFI’s Business Strategies – On Going
Businesses Up to December 2017 - continued
⚫Increase Fish aquaculture ie Sea-bass specie by enlarging the
hatchery. LFI hopes to produce 100,000 to 200,000
fries/fingerlings per month. There is a China aquaculture
company that is willing to joint veture with Mr Lee to expand
the aquaculuture business including prawn and fish farming.
This would be passed to LFI;
⚫Participate in International Seafood Trade Show such as those
held at Boston, Brussel, Middle East, Shanghai and etc to tap
new buyers that are willing to offer better prices for our quality
products.
Overview of Global Seafood Demands
⚫Seafood Industry Lifecycle
⚫ The global seafood industry is currently at the “Growth” stage of
the industry lifecycle;
⚫ Strong growth trend in “aquaculture” will spur the growth of the
global seafood industry;
⚫ Increased seafood supply from the global aquaculture industry to
meet the global rising demand for seafood;
⚫ Current trend prove that the demands for seafood cannot be met
by the current supply, therefore the seafood industry is only
growing as fast as the rate of growth in the supply division;
Overview of Global Seafood Demands –
continued.
⚫ Research shows that the global supply will not be able to meet the
global demands for the next 20 years even with strong growth in
the aquaculture sector, indicating that the seafood industry will
continue to “thrive” in future and the price of seafood will stay
firm or trending upwards;
⚫ Annual global seafood demands is worth approximately USD150
Billion and is still growing at 2% to 3% per year (Source: Frost &
Sullivan).
LFI - Summary of Financial Projections
FYE 31 December 2018 2019 2020 2021 2022
(RM mil)
REVENUES 131.1 364.89 639.80 963.57 1,207.31
2
EBITDA 36.1 94.6 146.9 190.7 196.7
DEPRECIATION 5.7 8.8 10.9 13.0 14.3
INTEREST EXPENSE 6.0 8.0 6.4 4.8 2.4
PROFIT BEFORE TAX 24.4 77.8 129.6 172.8 180.0
TAXATION 0 0 0 0 0
PROFIT AFTER TAX 24.4 77.8 129.6 172.8 180.0
EBITDA MARGIN 27% 25% 22% 19% 16%
PBT MARGIN 18% 21% 20% 17% 14%
NET PROFIT MARGIN 18% 21% 20% 17% 14%
Commentaries on Forecast and Projections
⚫ The forecast and projections assumed working capital funding of RM
40 million from the Bank;
⚫ With the draw-down of the working capital loan, LFI will expand its
deep-sea fishing activity ie in purse-seine fishing;
⚫ Lead time for the first set of purse-seiner to be operational is 6 weeks
from the drawdown of the loan;
⚫ LFI is confident of good catches from the purse-seining activity
because Labuan and Sabah’s EEZ (stretching into the South China
Sea), so far there is no major industrial fishing player at this fishing
ground. No major fishing players is partly due to no major seafood
processors located at Labuan and Sabah that demand for the raw
materials.
Commentaries on Forecast and Projections –
Continued.
⚫ GPO did embark in coastal purse-seining in early to mid 1990s and
the catches were very good. However at that time, GPO did not have
strong marketing network and unable to sell the abundant catches at
good prices (only managed to sell at USD 0.50 or RM 1.25). Worst
still, the freezing technology at GPO’s factory then was very basic
and needed a long time (14 hours) to freeze the catches. These
factors caused GPO to stop purse-seining activity and move on to
high-value prawn processing and aquaculture business.
⚫ After a lapse of 15 years, it is right time for LFI to embark in deep-
sea purse-seining activity because LFI now has the right freezing
technology at the factory (freezing process now takes only 20
minutes) and ready buyers from USA, New Zealand, Japan, Australia
and Middle East to absorb the abundant catches expected.
Commentaries on Forecast and Projections –
Continued.
⚫With the purse-seining activity in place, LFI would also want
to expand its Sea-bass aquaculture activity;
⚫LFI foresees strong results in FYE 31/12/2017 ie with its
purse-seining and value-added processing activities taking off
nicely in 2014.
⚫There are ready China seafood companies that wish to
outsource their processing activities to LFI at a reasonable
processing fees. Main reason is due to high wages demanded
by their Chinese factory workers thus making it non-
economical to process them in China in near future. This would
be a good revenues for LFI.
Valuation- EBITDA basis
FYE 31 2018 2019 2020 2021 2022
Dec RM’000 RM’000 RM’000 RM’000 RM’000
EBITDA 36,116 94,645 146,941 190,677 196,676
Weight 3 2 1 1 1
Applied
Weighted 108,349 189,290 146,941 190,677 196,676
EBITDA
Weighted 103,992
Average
EBITDA
Valuation 415,968
@4X
Valuation: Profit After Tax (“PAT”) basis
FYE 31 2018 2019 2020 2021 2022
Dec RM’000 RM’000 RM’000 RM’000 RM’000

PAT 24,362 77,834 129,624 172,833 180,001

Weight 3 2 1 1 1
Applied
Weighted 73,086 155,668 129,624 172,833 180,001
PAT
Weighted 88,902
Average
PAT
Valuation 355,608
@4X
LFI’s Processing Factories
Certifications to GPO from Government
authorities and authorized organizations
Authorised Labels on Safety and
Quality for GPO
Purse-seining – Prime activity lined up by
LFI.
Purse-seine netting Purse-seine luring
 Purse-seining – Bountiful harvest
LFI remains hopeful of its purse-seining activity.
 Orders received from:
⚫ Sea Delight LLC – USD10 million
Hand-line Fishing – Approved by WWF
Deep-sea Fishing Products
Emberjack
 Deep-sea Purse-seine Fishing Products
Yellow-Fin Tuna Mahi-mahi
Trawling Seafood Products
Cuttlefish Yellow Scad
 Conclusion
⚫ Advantage position as the industry leader with track records in
seafood processing and exports to tap the multi-trillion dollar
Halal Industry.

⚫ Highly confident to produce HALAL products for the worldwide

markets especially to Middle East countries.

⚫ Seek government recognations and support for Malaysian

Entrepreneurs become strong player and control our local
market as well as global demands for fresh fish and seafood
products via fully IQF Integrated System process in Labuan,
Federal Terriotary