Apex Foods shines as revenue up amid declining costs

Apex Foods Limited, an export-oriented shrimp processor, has demonstrated a stellar growth in its topline over four years till the fiscal year 2021–22.

The publicly traded company could secure this growth due mainly to a rise in revenue and an exponential fall in operating and financial costs.

The processed shrimp exporter showcased an exceptional performance in the bottom line in FY22.

During the period, its profit after tax grew by 148 per cent to Tk 2.93 crore against Tk 1.18 crore in the year before, as per an equity report of EBL Securities Limited.

Similarly, in the first nine months of the fiscal year 2022–23, due to a substantial decrease in operating and financial expenses—41.9 per cent and 38.8 per cent respectively—the company posted a staggering net profit growth of 192 per cent.

During this period, it registered a net profit of Tk 4 crore, which was Tk 1.4 crore in the same period the year before.

Over the period of the last four years till FY22, the company demonstrated stellar growth (CAGR 27.1 per cent) in its topline, with revenue rising to Tk 351 crore in FY22 from Tk 171 crore in FY19.

As a fully export-oriented frozen fish processing company, Apex Foods receives a 7–10 per cent cash incentive against its export value. In FY22, the company reported a cash incentive receivable of Tk 24 crore, which was around 7 per cent of its total revenue.

Therefore, any potential withdrawal or reduction to these cash incentives in the future would result in a significant setback to the company’s overall profitability, the EBL Securities report read.

The equity report said the company on a regular basis has been paying cash dividends to its shareholders. Cash dividend distribution ranged from 15 per cent to 20 per cent in last five years.

The recent approval of commercial Vannamei shrimp cultivation has the potential to provide a significant boost to the country’s shrimp exports. In the long effect, Apex Foods can significantly benefit from this transformative development by expanding its product offerings and accessing a larger share of the global market, the stock broker said in the equity note.

EBL Securities said that the profitability margins of Apex Foods are significantly lower compared to its listed peer— Gemini Sea Food.

In FY’22, Apex Foods’ gross profit margin, operating profit margin, and pre-tax profit margin stood at 10.3 per cent, 4.2 per cent and 3.8 per cent respectively, which was 22.6 per cent, 16.1 per cent and 8.8 per cent for Gemini Sea Food, respectively, in the same period.

The stock market regulator, BSEC, has directed Apex Foods to raise its paid-up capital to Tk 30 crore.

As on Q3 of FY23, there was a shortfall of Tk 24 crore in the required paid-up capital, although the company retained earnings of Tk 18 crore during the same period.

Therefore, in order to comply with the regulatory requirement, the company may decide to declare a bonus dividend or make a rights offer.

The company’s earnings per share (EPS) were Tk 3.71 for January–March 2023, as against Tk 1.40 for the same period of the previous year. The EPS was Tk 7.29 for July 2022–March 2023, against Tk 2.50 for July 2021–March 2022.

Apex Foods is engaged in processing shrimp and exporting them to foreign markets. The company purchases shrimp directly from the shrimp cultivators and processes them for export to mainly European and North American markets.

In FY22, the company's total exports stood at $41.4 million, out of which shrimp worth $20.8 million were exported to the USA, making it the largest market for the company, followed by Belgium, where the company exported shrimp worth $6.7 million.

Apex Foods shares closed at Tk 427.10 each on the DSE on Wednesday.