Cutting the loss-making restaurants.
Oceanus has shut down 5 of its restaurants due to loss of RMB8m in Beijing and Shanghai. F&B side has been pulling the stocks down as it is affecting the its whole operation. Meanwhile, Oceanus has opened a new restaurant in Taiwan which targets consumers from middle to upper income
group, in contrast to its previously opened restaurant outlets which target consumers from the average income group.
Expanding the abalone tanks.
It's their main products, adding more tanks (at least 1000) in 1H10. Oceanus is expecting to have at least 32,000 tanks, now have 26,000 tanks. Currently, land is not a problem for Oceanus as they have more than enough land to store all the tanks.
We like Oceanus for its
1) sheer abalone
farming capacity, and
2) low abalone production cost.
Key risks to our call are
1) lack of appetite from Chinese consumers for abalone, and
2) continuing and/or worsening losses of its F&B outlets.
Source: DMG
