SOVEREIGN wealth fund Khazanah Nasional Bhd has confirmed that it is not in talks with XL Holdings Bhd for a joint venture between its shrimp farming unit Blue Archipelago Bhd and the investment holding company.

In an emailed response to a query from The Edge about whether there was any truth to market talk of a joint venture, Khazanah’s answer was a one-word response — “No.”

Speculation that Khazanah would sign a joint venture with XL Holdings has been ongoing for at least two months now.

Talk of the joint venture was possibly sparked by XL Holdings’ wholly-owned unit, XL Hatchery Sdn Bhd, signing an agreement involving shrimp fishery. XL Hatchery is involved in the breeding, hatching and rearing of aquaculture products.

In mid-2021, XL Hatchery inked a collabo­ration and management agreement with Alethea Marine Culture Sdn Bhd, a company providing consultancy services on the setting-up and management of shrimp fry hatching facilities and operations.

The company recorded sharply higher annual revenue of RM84.2 million for the financial year ended Jan 31, 2022 (FY2022) against RM27.8 million in FY2021. It attributed the substantial rise in revenue to the commencement of operations in the food business of trading of softshell shrimps and related products in 2QFY2022 with contribution of RM63.9 million.

Its net profit was lower, however, at RM116,044 in FY2022 compared with RM468,513 the year before.

Meanwhile, talk of Khazanah looking to divest Blue Archipelago has been ongoing, with the former said to be eyeing a price tag of RM300 million. When contacted in mid-2020, it declined to comment on the possible sale.

Sources say Khazanah was looking at the joint venture after the successful initial public offering (IPO) of dairy outfit Farm Fresh Bhd, in which it owns 11.8% equity interest.

Farm Fresh was listed on Bursa Malaysia in March at an IPO price of RM1.35, valuing the dairy company at RM2.5 billion, or 69 times its FY2021 profit of RM36.2 million.

Blue Archipelago was established in June 2004 and, according to its website, operates two farms—iKerpan (Integrated Kerpan) in Kuala Kerpan, Kedah, and iSHARP (Integrated Shrimp Aquaculture Park) in Setiu, Terengganu.

The first phase of iSHARP covers an area of 432ha, with 255 ponds that have an annual production capacity of 3,000 tonnes as well as a dedicated hatchery that has an annual production capacity of 720 million post larvae. Its second phase covers 568ha with the potential of producing 5,000 tonnes of shrimps a year. Phase 2 of iSHARP is slated to be developed in stages over the next few years.

iKerpan, which is located on a 368ha site and has 172 ponds, is capable of producing 2,200 tonnes of shrimps and 180 million post larvae a year and 10 tonnes of processed shrimps a day.

Blue Archipelago also has a 51% stake in AB Hatchery Sdn Bhd, which operates a shrimp hatchery in Kuala Kerpan and specialises in the production of shrimp post larvae.

Things might be picking up for Blue Archipelago. For its financial year ended December 2020, the company turned the corner, chalking up after-tax profits of RM5.67 million on the back of RM82.27 million in revenue. Accumulated losses, however, amounted to RM342.76 million as at end-2020. The company’s total assets stood at RM227.71 million and total liabilities at RM84.57 million.

XL Holdings has been rather busy with diversification and fundraising in the past two years.

The company invested RM40 million cash to take over pineapple planter Ergobumi Sdn Bhd in March.

Prior to that, XL Holdings also took over XL Plantation Sdn Bhd, XL Farming Sdn Bhd and XL Foods Sdn Bhd — the core activities of the three companies are exploring opportunities in farming fresh fruits and vegetables, rearing livestock and producing edible products such as health and protein foods.

In March, when it completed the acquisition of Ergobumi, XL also entered into an investment agreement to acquire 51% equity interest in Xtra Delivery Sdn Bhd (XDSB) from Chua Hat Zen, Lee Chiaw Huat and Teh Hong Seng for a purchase consideration of RM10 cash, along with the subscription of up to 1.274 million ordinary shares in XDSB, for the total subscription price of up to RM2.5 million.

The company raised RM12.7 million fresh capital from a private placement of 15.9 million shares, equivalent to 20% of its issued share capital in February last year. It then undertook an exercise to offer free warrants to shareholders on the basis of one free warrant for every two shares held. In addition, it implemented a long-term incentive plan of up to 15% of the company’s issued share capital for eligible directors and employees.

In July last year, XL Holdings announced that it would undertake the issuance of redeemable convertible notes (convertible into a maximum of 191 million new shares) with an aggregate principal amount of up to RM200 million.

XL Holdings’ largest shareholder is its executive chairman Ng Min Lin, who has 17.82% equity interest. Ng is also the largest shareholder and executive chairman of MAG Holdings Bhd, with a 29.45% stake in the aquaculture-based food producer.