KUALA LUMPUR (Sept 4): Strong margins at MAG Holdings Bhd (KL:MAG) could expand further as the prawn farming company expands its downstream products, Mercury Securities said on Thursday.
MAG has pricing power across domestic and export channels while reaping higher income from value-added processed products, the research house said in an initiation note and rated the stock ‘buy’ with a target price of 22 sen. The call also marked its first analyst coverage since 2020.
“Margins are poised to strengthen… supported by scale efficiencies and higher-value downstream contributions,” Mercury Securities said.
Gross profit margin is projected to expand steadily from about 23% in the 12 months ended June 2025 (FY2025) to nearly 26% by FY2028, according to the research house’s estimates.
For more than five years, shares of MAG have been range-bound, swinging between 13 sen and 27 sen. The stock has also stuck to the range so far this year. The aquaculture company changed its name from XingHe Holdings Bhd in August 2020.
Before 2014, the company was known as Key West Global Telecommunications Bhd.
MAG now operates 384 ponds producing up to 7,000 tonnes of prawns in Tawau, Sabah. The company also has a processing arm with a capacity of up to 12,000 tonnes annually. About 60% of its sales are exported while the rest cater to the domestic market.
The company enjoys premium pricing from international buyers, particularly in China, where it has an indirect sales agreement with the country’s largest hotpot chain operator, and in South Korea from seasonal traditions like coastal prawn festivals, Mercury Securities said.
The stock is currently under-owned with institutional investors accounting for less than 3% of its issued shares, which likely underpins its valuation discount versus peers, the research house noted.
“However, we expect the gap to narrow as investor awareness improves” following the initial public offering of Camaroe Bhd set for listing in October, the research house said, stressing that MAG offers exposure to a “shrimp supercycle” anchored by its dominant share in Malaysia’s aquaculture market.