Qian Hu released its Q3 2008 results today.

It expects its revenue and profit to continue to increase in Q4 2008. The increased revenue should come from its ornamental fish operations, improvement in its accessories export business, coupled with the positive contributions from its overseas operations in Malaysia, Thailand and China.

Q3 revenue rose 4% to S$23.6 mln as sales of its ornamental fish increased and it exported more accessories. Its plastics business also registered an increase in revenue, although the increase in the price of raw materials eroded its profit margin. Its net profit went up 21% to S$1.5 mln.

It generated S$3.2 mln in cash from operations compared to the S$2.8 mln it gained the previous year.

Analysts surveyed by Reuters have on average a HOLD call on the stock with a price target of S$0.13, compared to its last traded price of S$0.10.

~ Jin San’s take ~
Qian Hu is ranked number 1 on the Business Times Corporate Transparency Index, and with good reason - its reports are usually detailed and give explanations for its actions. But starting in FY2007, its free cash flow turned negative and this trend is apparent in its Q3 report as well.

According to its cash flow statement, it gained S$2.23 in cash from operations, but it spent S$1.1 mln on property, plant and equipment, and another S$1.8 mln on brooder stocks. Put together, the capital expenditure comes up to S$2.9 mln, more than what its cash from operations can cover.

Although this is more a sign of a company with ambition that believes in investing in itself, and the margin is not that wide, investors might want to take note of this.

As always, please see your licensed financial advisor before making any investment decisions.