Ornamental fish exporter Qian Hu Corp is diversifying into edible fish farming that involves growing antibiotic-free garoupa in China's Hainan province in a new joint venture.

Qian Hu Aquaculture (Hainan) was set up last December with a share capital of 6 million yuan (S$1.2 million). Qian Hu holds a 51 per cent stake, with Ms Zhang Mei Yu, who develops herbal fish medication, holding the rest.

The fish farm, which is being built on 0.4ha of land, will focus on growing garoupa to a healthy size for sale to other growers in China, rather than selling to the end market.

"If we do it correctly, this business will be bigger than my current business... Ornamental fish is a niche. This is something that we consume, and the turnover is very fast," managing director Kenny Yap said yesterday. "The most critical part is how you get a fry to a certain size where it is healthy. Most people fail at this stage, so we tackle this stage by using our technology."

A pilot project in 2013 using Qian Hu technology and herbal medicine instead of antibiotics has already resulted in garoupa yields that are better than most. In China, yields are less than 50 per cent on average, Mr Yap said.

Under the plan, the new business could reap profit margins that are higher than the group's historical profit margin for ornamental fish, which ranges from 6 per cent to 10 per cent, Mr Yap added.

Qian Hu also announced yesterday that its fourth-quarter net profit came in at $36,000, reversing a net loss of $198,000 in the fourth quarter last year.

This brought earnings per share to 0.03 cent, up from a loss per share of 0.17 cent a year ago.

Net asset value per share was 44.48 cents as at Dec 31, up from 44.31 cents as at Dec 31, 2015.

Revenue in the three months to Dec 31 was $22 million, up 14.4 per cent from a year earlier, but a difference in sales mix and higher operating costs for the ornamental fish business hurt overall profitability.

However, Qian Hu started producing a new species - the albino silver arowana - at the end of last year, after five years of growing the gene pool for the new species to a commercial size. Mr Yap thinks sales of these can turn the dragon fish business around.

Qian Hu posted a net profit of $68,000 for the full year, up from $19,000 in 2015. For the first time, no final dividend was declared. Last year, a dividend of 0.2 cent a share was paid.

Mr Yap said: "We just extended our farm lease for 10 years, and nowadays, you have to pay 10 years in advance. My cashflow is healthy but I need to reserve some of my resources if this edible fish business is growing nicely and I'd like to expand it."

Qian Hu will resume its dividend payout once the new business starts contributing, he added. The Hainan farm will be ready in April and is expected to contribute positively to the group by next year.

The counter last changed hands at 9.9 cents a share on Monday.