On 11 Feb-15, China Fishery Group (CFG) announced a Rights Issue of 4 Rights shares for every 5 existing shares @ S$0.173/share. Its shares closed at S$0.186, down 28.5%.

We attended CFG’s 1QFY15 Results Briefing on 11 th February. Key Takeaways:

Swapping Debt For Equity – Management said proceeds from the rights issue (minimum: S$199.7m, maximum: S$282.5m) will be used to redeem its US$250m 9% notes due 2017. We think the management is simply exercising its option to call the bond on 16 Mar-15 and lower its interest expense.

Update On Damanzaihao – CFG’s flagship processing vessel was placed on the final list of vessels marked for illegal fishing by the South Pacific Regional Fisheries Management Organization. As a support vessel, Management does not expect any significant impact on operations. A review to remove it from the list is expected in 2 to 3 months. While a fine is expected, Management does not expect it to be excessive.

Closure Of 2014 B Season To Impact 2Q15 – CFG’s 1Q15 revenue was hampered by lower sales volume as a result of a closure of Peru’s fishing 2014 B Season (Nov to Jan). Management shared that the lower sales volume are expected to continue in 2Q15.

Investment Actions

No stock rating or price target provided, as we do not have coverage on CFG.

Source: Phillip Securities Research - 12 Feb 2015