As stock indexes were plunging around the world late last week and into this week due to contagion from ongoing selloffs in China, margin calls on investors and related economic woes, share prices of Pacific Andes International Holdings and its affiliates were in a free fall for another reason. An investigation by police and regulators in Singapore had been launched, and trading of Pacific Andes and China Fishery Group, an indirectly-owned subsidiary, was temporarily halted on August 19 before resuming on “Black Friday,” two days later.
Shares of Pacific Andes, one of the world’s largest vertically integrated seafood companies and a major producer of frozen products, plummeted to 14 Hong Kong cents at the close of trading in Singapore August 25, down by approximately 66% from a year-high level of almost 42-cents. China Fishery Group (CFG) stock closed at 50-cents a share on the same day, off by 86% from the year’s high point.
“The Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) of the Singapore Police Force are jointly investigating possible contraventions of the Securities and Futures Act (Cap. 289) and have obtained documents from Pacific Andes Resources Development Limited and China Fishery Group Limited. As investigations are ongoing, we are not able to provide further information,” a MAS spokesperson told the South China Morning Post.
Both Pacific Andes and CFG have agreed to cooperate completely with investigators, who have requested certain information and documents for the period of October 1, 2011 to August 18, 2015. Meanwhile, the companies have assured shareholders and customers that production operations will continue as normal.
“It’s quite serious when the Commercial Affairs Department (the principal white collar crime investigation agency in Singapore) gets involved. They won’t announce such investigations unless they have strong evidence of wrongdoing,” said Bernard Aw, a strategist with IG Markets in Singapore.”
He added, however, that investors should cautiously “take a wait and see approach.”
The Group’s flagship processing complex in China, situated in Qingdao’s Ocean Tech Development Zone, is regarded as one of the most advanced seafood production facilities in the world. With annual output of over 60,000 tons of finished product, the fish processing and cold storage complex encompasses an area of 333,335 square meters that integrate eight processing workshops, one fishmeal plant and six warehouses with capacity for 40,000 tons.
“Credit Negative,” Declares Moody’s
On August 25 Moody’s Investors Service announced that the investigation by Singaporean authorities has prompted it to classify the China Fishery Group Limited and its parents as “credit negative.”
Noting that while as yet no details of the probe have been made available “with regard to the nature of the offense and the timeline of the process,” Moody’s stated that “a negative rating action is possible if the substance of the investigation and/or the consequence has a material impact on China Fishery’s operations.”
Headquartered in Hong Kong and listed in Singapore, China Fishery Group Limited is engaged in the Peruvian fishmeal and fish oil business and fishing fleet operations. It is 46.5% effectively owned by the Pacific Andes Group through Pacific Andes International Holdings Limited. The Carlyle Group, a global alternative asset management firm, holds a 6.2% stake in the company.
According to the South China Morning Post, the Pacific Andes investigation is the latest blow to a firm that was trading at HK$ 1.16 a share as recently as 2011. “An ill-fated investment in Russia, with high levels of debt, among other problems, has weighed on profits in recent years,” it reported.
Almost Three Decades of History
Pacific Andes’ corporate roots date back to 1986, when the late Ng Swee Hong and his sons established a small frozen seafood trading business in Hong Kong’s Western district. At the time, the company sourced shrimp, squid and scallops from the coastal provinces of China for export to markets in the United States and Europe.
During these early years, Pacific Andes forged links with fishing companies across East Asia. The company also began offering shipping agency services to these companies, diversifying into a segment that was to form the foundation of its supply chain management business. At the same time, it identified the immense global potential for frozen whitefish and turned its focus in this direction. Pacific Andes began processing fish fillets through subcontracted factories in China and was among the first outside companies during this period to enter the China market.
After a phase of rapid development in the early 1990s, the Ng family publicly listed the Group under Pacific Andes International Holdings Limited (PAIH), the investment holding company of Clamford Holding Limited, on the Hong Kong Stock Exchange. The listing in 1994 allowed it to capture market opportunities during a period of steadily rising seafood consumption across the world. Two years later, the Group spun off its trading arm, Pacific Andes Resources Development Limited, for listing on the Singapore Stock Exchange, enabling the trading business to pursue long-term growth independently.
In 2004, Pacific Andes acquired a strategic stake in China Fishery Group Limited, which signaled an extension into industrial fishing activities. Through China Fishery, it began sourcing and harvesting a wide range of fish species in the world’s oceans. In a move to fuel its development, China Fishery was listed on the Singapore Exchange in 2006.
In addition to marketing the Yü label and Andes Premium Catch frozen fish products, over the years the company has invested in frozen seafood brand names around the world to gain further access to overseas markets. Among its holdings is Lüneburg, Germany-based Pickenpack Europe, which transforms frozen raw material into breaded, battered, sliced, portioned, pre-formed, molded or fully-cooked value-added fish products. Capacity is 85,000 tons per annum on 20 lines housed in two production units.
In the USA, the Pacific Andes Group owns Gloucester, Massachusetts-based National Fish & Seafood, a major supplier of value-added seafood to retailers, distributors, institutional foodservice operators and restaurant chains across the nation. Each year it sources, processes and distributes more than 11,5000 tons of frozen raw fish fillets and shrimp, cooked shrimp, breaded fish, stuffed clams and other items under its Matlaw’s and Schooner brands. The division maintains its own 66,000-square-foot processing facility adjacent to the main office in Gloucester.
