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We care
Mega Lifesciences Public Company Limited (MEGA) Investor Presentation – March 2018
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Disclaimer
The presentation contains forward-looking statements which are based on MEGAs’ current expectations, estimates and projections about its industry, management’s beliefs and certain assumptions.
These forward-looking statements are subject to various risks and uncertainties. No assurance is given that future events will occur or that our assumptions are correct. Actual results may differ materially from those projected.
For any further queries please contact:
Email : [email protected]
Telephone: +66 27694222 Ext. 4230
Fax: +66 27694244
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1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
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The journey so far…. Key milestones..
Company
Incorporated
1982
• Commenced branded products business
• Acquired Medicrafts brand
1993-94
• Received approval from Thai FDA for Samut Prakarn facility in Thailand
• Began manufacturing nifedipine for Berlin Pharmaceutical Industry Co. Ltd
1985-86
Expanded into Vietnam, Myanmar and Cambodia to sell branded products and started distribution business
1995-96
Established manufacturing plant in Australia
2002
• Became market leading branded products company in key Southeast Asian markets
• Leading distributor of pharmaceutical and OTC products
• Acquisition of Eugica brand in Vietnam
2012
• Commissioning of new plant in Australia
• Planned manufacturing expansion in Thailand
• Successful IPO on SET
2013
• Acquired Bio-Life Marketing SDN. BHD. Malaysia
• Mega Malee joint venture
• Wellness We Care center established
• Construction of own state-of-art warehouse in Myanmar approved
2016
Started as an OEM player and became largest soft gel
manufacturer in Southeast Asia
Started branded and distribution business
Emerged as a leading branded and international distribution
player in Southeast Asia
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Distribution Business
Branded Products Business
What we do…
OEM Business
Mega Lifesciences PCL business segments
THB 3,428 mn 48.8%
THB 473 mn
6.7%
THB 2,179 mn 73.6%
We develop, manufacture,
market and sell our own brand of
market leading medicinal
supplements, prescription
pharmaceutical products and
OTC products, mainly sold in
developing countries with
market leading presence in
Southeast Asia and growing
presence in Sub-Saharan Africa.
We market, sell and distribute
various branded prescription
pharmaceutical products, OTC
and consumer products in
Myanmar, Vietnam and
Cambodia. Our clients include
leading domestic and
international pharmaceutical and
consumer goods companies.
In addition to manufacturing our
own branded products, our
manufacturing facilities in
Thailand and Australia accept
various production orders from
third-party customers.
Mega We Care and Maxxcare are key
businesses
*
* The information under this segment includes impact from Bio-Life (a newly acquired company in Dec’16 ) and new projects which are in their nascent stage.
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76.1%
21.0%
2.9%
52.9%42.2%
4.9%
Mega We Care contributes maximum to the business…
Mega We Care
Maxxcare
OEM
Revenue by Segments FY2017
THB
4,053mn
THB
5,078mn
THB
466mn
THB
9,597mn
THB
4,320mn
Mega We Care contributed 53% of total revenue and 76% of total gross profits while Maxxcare contributed 42% of total revenue and 21% of total gross profits in 2017
Gross profits by Segments FY2017
THB
907mn
THB
3,289mn
THB
124mn
Mega We Care
Maxxcare
OEM
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We derive majority of our revenue from Southeast Asia while our reach in African continues to widen
Southeast Asia and Indochina contributed 85% and 76% of our operating revenue in FY2017
1.Revenues exclude other income
Philippines
Indonesia
Malaysia
Singapore
Myanmar
Cambodia
Vietnam Thailand
Azerbaijan
Sri Lanka
Uzbekistan
Yemen
United Arab Emirates
Mongolia
Hong Kong
Ghana Kenya
Nigeria
Tanzania
Uganda
Kazakhstan Ukraine
Russia
Belarus
Peru
Legend
Countries with sales of our branded products
Countries with manufacturing or product development capabilities
Ausralia
India Trinidad
Rwanda
Burundi
South East Asia 85%
Rest of World 15%
Southeast Asia accounts for majority of revenues1 Revenue Breakdown by Region (FY2017)
Sudan Ethiopia
Zambia
Nepal
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Key value drivers
Leading distributor of pharmaceutical and OTC products in select frontier markets of Myanmar, Vietnam and Cambodia (Refer to slide 17)
2
Focused on fast growing markets including a unique established and market leading presence in the Myanmar market (Refer to slide 18)
3
High quality products manufactured in world-class manufacturing facilities accredited by international regulatory agencies (Refer to slide 12)
4
Strong product pipeline driven by an efficient and targeted product development strategy (Refer to slide 15) 5
Proven track record of delivering growth and profitability (Refer to slide 24) 6
Experienced management team instrumental in building the business is significantly invested in the Company (Refer to slide 37)
7
Market leading own consumer health and pharmaceutical brands in fast growing developing markets (Refer to slide 11) 1
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1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
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TM Branded products business
Categories Description Key Brands
Medicinal
supplements
• Products which provide health benefits in addition to the basic nutritional value found in normal diet.
• Regulation varies across jurisdictions but generally regulated for their manufacturing, safety, efficacy, labeling and marketing.
• Dermatology , general health/Immunity, gastroenterology, men’s/women health and orthopedics are the key therapeutic categories.
Prescription Products
• Medicines only available for purchase by consumers with a medical prescription
• Strictly regulated by authorities as to their manufacturing, safety, efficacy, labeling and marketing.
• Diabetology, dermatology , gastroenterology and orthopedics are the key therapeutic categories.
OTC
Products
• Medicines sold directly to consumer without a prescription from a healthcare professional.
• Analgesics , gastroenterology and cough and cold are the key therapeutic categories.
We sell medicinal supplements, prescription and OTC products within our branded business
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Own Brand Rank Therapeutic
Category (TC)
Nat C
#1 Vitamin C
Nat B
#1 Vitamin B Complex
Fish oil
#1 Anti-atheroma
Natural
Gofen
#4 Anti-rheumatics Non-
steroidal
Own Brand Rank Therapeutic
Category (TC)
Ferrovit
#1 Haematinics
Enat
#1 Vitamin E
Calcivita
#1 Calcium Supplements
Livolin Forte
#1 Hepatoprotectant
Prenatal
#2 Prenatal
Nutrivita
#2 MVMM
Own Brand Rank Therapeutic
Category (TC)
Enat
#1 Vitamin E
Eugica candy
#2 Pharyngeal preparation
Acnotin
#1 Oral Anti-acne
Preparation
Ferrovit
#4 Iron Combination
Products
Giloba
#2 Cerebral and
Peripheral Vascular
NNO
#3
Emollients and Protectives
Our market leading medicinal supplements, branded generic and OTC brands
Source: Internal assessment and analysis
Thailand Vietnam Myanmar
Acnotin
#1
Oral Anti-acne Preparation
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Thailand Manufacturing Facility 1 – Soi 6, Samutprakarn • Commenced production in 1985
• Manufactures: Soft gels, Hard gels and Sachets
• Approved by German health authorities, the Thai FDA and the Australian TGA
Thailand Manufacturing Facility 2 – Soi 8, Samutprakarn • Commenced production in 2009
• Manufactures: Soft gels, Hard gels, Tablets and Sachets
• Approved by German health authorities, the Thai FDA and the Australian TGA
Australian Manufacturing Facility – Pakenham Facility • Facility replaces the manufacturing facility established in Dandenong, Melbourne
• Commenced production in 2nd quarter 2013
• Manufactures: Hard capsules, Tablets and Powders
• Approved by Australian TGA
World-class manufacturing facilities subordinated to
Mega We CareTM branded products
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High quality products manufactured in world-class facilities accredited by international regulatory bodies
State of the art quality control laboratory Internationally accredited manufacturing facilities
Manufacturing facilities in Australia and Thailand
These facilities are accredited and regularly inspected by:
• German health authorities
• Australian TGA
• Thai FDA
• Additional GMP certifications from other countries
• Australian TGA approved since 1992 • Amongst the few manufacturers globally,
who apply the same standards for the manufacturing of medicinal supplements as with pharmaceutical products
• Team of more than 160 professionals in our Quality Assurance and Quality Control teams to ensure our products comply with the highest quality standards
• State of the art QC laboratory with world class Quality Assurance (“QA”) systems and EU GMP standard manufacturing facilities make us amongst the leading such facility in its category in Thailand and Southeast Asia
Internationally accredited facilities Sizeable and dedicated teams monitor quality Significant investment made into
infrastructure
We manufacture medicinal supplements to pharmaceutical standards
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Science-based sales and marketing approach to build awareness of the safety and efficacy of our brands
“Science-based” sales and educational approach catering to medical customers
Overview
• Customers of branded products business include:
– Pharmacies
– Hospitals
– Clinics
– Health practitioners
– Physicians
• Direct promotion to these channels to strengthen market recognition and build brand loyalty
• Sales representatives and product consultants promote products through
– Educational seminars
– Trade shows
– Product information and promotional material
– Academic trainings
– Informational sessions for medical professionals
• Sales force includes members with a medical background
Sales and product consultants promoting Mega products
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Product development strategy
Efficient and targeted product development strategy drives a strong product pipeline
Medicinal supplements
• Identify new clinically-effective and safe product candidates
• Create line extensions of existing established products
Prescription Pharmaceuticals
• Review effective pharmaceutical compounds which have been successful for major originator companies
• Products with expired or due to expire patents
OTC
• Develop products which offer the following: faster relief, are easy to use, have better formulations for self medication, and will be recommended by pharmacies
Our objective is to develop new products which offer consumers health and wellness benefits
Products - Key information as at 31 Dec 2017
Existing registered unique formulations:
# of unique formulations as at Dec'16 256
# net increase during the period* 73
# of unique formulations as at Dec'17 329
Existing product registrations:
# of product registrations as at Dec'16 873
# net increase during the period* 136
# of product registrations as at Dec'17 1,009
Product pipeline:
Applications pending for registration:
# of unique formulations 67
# of product registrations 361
# of unique product formulations under development 74
* includes products from Bio-Li fe (Malays ia).
We care
1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
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Key Distribution Markets
Myanmar Vietnam Cambodia
Market Positioning • Leading international
distributor of pharmaceutical and OTC products
• Leading international distribution of pharmaceutical and OTC products
• Leading international distributor of pharmaceutical and OTC products
Distribution Infrastructure
• 9 warehouses strategically located across Yangon, Mandalay, Mawlamyaing, Naypyidaw, Taungyyi and Lashio
• Access to around 30,000 outlets representing c.85% geographical coverage
• 3 strategic storage locations
• Access to around 12,000 outlets
• 2 warehouse located in Phnom Penh and Battambang
• Access to around 9,900 outlets
% of Distribution Sales (FY2017)
56% 31% 12%
We are a leading distributor of pharmaceutical and OTC products in select frontier markets
Distribution business
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72
120
2017 2022
8
38
86
Myanmar Vietnam Thailand
Mega is well-positioned to capitalize on this development
… With a leading position in Myanmar A key market with significant growth potential
1995
85%
9
56%
1 Estimates IMF, April 2017, 2 as at 31Dec 2017.
Establishment date testament to our long-standing presence in the country
of FY2017 MaxxcareTM revenues generated in Myanmar
# of strategically located warehouses
Extensive distribution reach covering 85% of the country
Myanmar significantly lags behind Vietnam
and Thailand in healthcare spend
c.1,4432 # of employees in Myanmar
1GDP in USDbn. Expected to growth at healthy rates
Pharma market (USD per capita) Significant head room in Myanmar for future growth
11% Of consolidated Mega We CareTM revenue in FY2017 with market leading products in select categories
• Economy likely to grow at a healthy rate of 10.7% in 2017 -’22
• Existing Pharma market size at 1/10 of Thailand, offers tremendous future growth opportunities
• Required infrastructure to capitalize growth opportunity already in place
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Our value-added distribution business models for pharmaceutical and consumer products
Conventional distribution services (CDS)
• Our integrated approach lends enhanced efficiency and quality control of our products at every stage of our operations from procurement to delivery to our end consumers
• We purchase products from our principals, subject them to a quality control inspection, then warehouse the products in a climate-controlled environment until receipt of end customer orders. We arrange for logistics services and ensure the timely delivery of products
1
2
3
Sales and conventional distribution services (SCDS)
• In addition to our conventional distribution services, we also provide sales support to our principals
• Our sales channels include pharmacies, hospitals and clinics for pharmaceutical products and supermarkets, department stores, key accounts, wholesalers and dealers for consumer products
Marketing, sales and conventional distribution services (MSCDS)
• Our pharmaceutical and consumer products teams provide a complete package of marketing, sales and distribution services tailored to our principals and their products
• The teams market directly and engage in marketing activities through available channels
Principals can choose from any of our three service models to help meet their distribution needs
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Advanced information technology systems provide valuable business intelligence for our principals Overview
• Our advanced IT systems allow us to collect, analyze and derive business intelligence across each of our distribution markets
• We offer a broad range of value-added services, including: – Inventory tracking systems – Inventory management systems – Access to valuable market data – Real-time information sharing
• Our principals can leverage on the array of value-added services we offer in order to: – Increase operational efficiency – Reduce inventory cost, fulfillment cost and operational
expenses – Tailor their marketing activities to target their
customers – Improve overall efficiency of their businesses
• We believe this is a key competitive advantage and it strengthens the existing principal and customer relationships
Through our advanced IT systems we can provide value-added services to help our principals increase operational efficiency, reduce inventory cost, fulfillment cost and operational expenses, and tailor their marketing activities
Our teams collecting real time data on the field
We capture all aspects of our relationship
with customers,
providing us with current
market insights which
we use for effective sales & marketing
We care
1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
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OEM Business
In addition to manufacturing our own branded products, our manufacturing facilities in Thailand and Australia accept production orders from third-party customers
• OEM business contributed 4.9% and 2.9% to our overall operating revenues and overall gross profits for FY2017.
• We provide contract manufacturing of nutraceuticals, prescription pharmaceuticals and OTC products for third-party customers.
• Most are long standing customers of the business.
• OEM business provides us productivity and efficiency benefits through the utilization of available manufacturing capacity.
• The contribution of OEM to overall business of MEGA is expected to remain around current levels.
We care
1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
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1
Figures inTHB mn 2012 2013 2014 2015 2016 2017 CAGR
Operating Revenue 5,965 7,034 7,730 7,945 8,810 9,597 10.0%
Gross profit 2,633 2,959 3,105 3,406 3,687 4,320 10.4%
Selling and Admin. exp (SGA) 1,980 2,236 2,471 2,660 2,674 2,965 8.4%
SGA (% to revenue) 33.2% 31.8% 32.0% 33.5% 30.4% 30.9% na
EBITDA 800 888 787 986 1,107 1,479 13.1%
EBITDA (% optg.revenue) 13.4% 12.6% 10.2% 12.4% 12.6% 15.4% na
EBIT 723 789 655 841 955 1,324 12.9%
Net Profit 578 624 548 696 795 1,113 14.0%
Net profit (% optg.revenue) 9.7% 8.9% 7.1% 8.8% 9.0% 11.6% na
EPS (in THB) 0.79 0.84 0.63 0.80 0.92 1.29 na
Return on equity 38.2% 23.1% 14.3% 16.7% 17.6% 22.4% na
Net cash from operations 342 466 614 609 1,250 927 na
• Given, MEGA’s market position, strategy and future potential in its markets, we expect to double 2014 business in 5 years ; growth trajectory expected to be non-linear.
• Net profit CAGR 2012-‘17 of 14%. Net profit decline in 2014 was mainly a result of lower growth in Mega We CareTM revenue, additional overheads from the capacity expansion, and spending towards business expansion activities in Africa and Myanmar.
• Net profits in FY17 of THB 1,112.8mn (including THB 41mn from Bio-Life), up 40% YoY. Increase in net profits was mainly a result of growth in Mega We CareTM revenue, better gross profits and steady SGA expenses. New projects caused a net outflow of THB 25.9mn.
• Board of Directors proposed final dividend of 40 satang per share taking FY17 dividends to 70 satang per share representing 54.4% of FY17 net profits and growth of 48.9% YoY in FY17.
Steady earnings and healthy cash flows ….
2
1. THB 57.7 million attributable to forex loss in 2015 has been classified as selling expenses in audited financials per TFRS guidance; given the charge being a forex loss, the amount has been adjusted from forex
gain/loss for the year. 2. EPS in 2013 is calculated on weighted average number of shares totaling to 746.8mn shares compared to actual outstanding shares of 865.2mn as 31 December’13 ,given the requirement
of TFRS. EPS for 2013 based on 865.2mn shares would have been THB 0.72 per share.
• 2017 revenue grew by
8.9% YoY,
• net profits were up by
40% YoY, and
• dividends for 2017 at 70
satang per share, 54.4%
of profits, up 48.9% YoY
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498 473 424 480 399 467
2,767 3,132 3,694 3,558 4,160 4,053
2,700
3,428 3,612 3,907
4,251 5,078
2012 2013 2014 2015 2016 2017
Key business continues to grow with significant head room for future growth…
1. Thailand, Myanmar, Vietnam, Cambodia, Malaysia, Philippines, Indonesia and Singapore. 2. Thailand, Myanmar, Vietnam and Cambodia.
Mega We Care
Maxxcare
OEM
Operating revenues (THBmn)
CAGR 13.5%
CAGR 7.9%
CAGR (1.3%)
Revenue mix (%) across segments
Mega We Care
Maxxcare
OEM
• Overall operating revenue CAGR of 10% in 2012-’17, driven by Mega We
Care (+13.5%) and Maxxcare (+7.9%).
• Overall operating revenue in FY17 grew by 8.9% YoY driven by Mega We
Care growth of 19.4% YoY. Mega We Care growth excluding Bio-Life (the
newly acquired company in Dec’16) was 9.5% YoY in FY17.
• SEA1 and Indochina2 contributed 84.8% and 76.4% of overall operating
revenues in FY17.
5,965
7,034
7,730 7,945
8,810
9,597
8 7 5 6 5 5
46 45 48 45 47 42
45 49 47 49 48 53
2012 2013 2014 2015 2016 2017
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2012 2013 2014 2015 2016 2017
• Net profits grew at healthy CAGR of 14% between 2012-‘17.
• Net profit in FY17 was up by 40% YoY. Increase in net profits was mainly a result of growth in Mega We Care revenue, better segmental gross margins and steady SG&A expenses.
• Decline in FY14 net profit was mainly a result of lower growth in Mega We CareTM revenue (slow down in Thailand and Ukraine), additional overheads from the manufacturing capacity expansion, and spending towards business expansion activities in Africa and Myanmar.
• Key segmental gross margins remained steady over years.
• Improvement in overall gross margins in FY17 was mainly led by growth in Mega We CareTM revenue resulting in better revenue mix and higher segmental gross margins.
Steady segmental gross margins and growing net profits
Gross margins
Net profits (THBmn)
Overall gross margins are influenced by segmental gross
margins and revenue mix.
578 624
548
696
1,113
795
44.1% 42.1% 40.2% 42.9% 41.8% 45.0%
64.2% 63.6% 62.1% 64.8% 63.9% 64.8%
28.2% 22.4% 21.5% 21.0% 21.5% 22.4%
23.8%17.0% 16.2%
26.1%
19.5%
26.5%
2012 2013 2014 2015 2016 2017
Overall
Mega We Care
Maxxcare
OEM
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362 422
325 280
380 424
2012 2013 2014 2015 2016 2017
2,077
2,676 2,898 3,182
3,399
4,064
2012 2013 2014 2015 2016 2017
262 330
388 445
472
589
2012 2013 2014 2015 2016 2017
Mega We CareTM revenue mainly driven out of Southeast Asia complimented well by Africa
Revenue by geography (THBmn)
Southeast Asia (THBmn) Africa (THBmn)
Top 15 products contributing over 55% of revenue Market leading position in key markets, growing reach in Africa
and new product launches to lead future growth underpinned
by under-penetration and low per capita consumption of
medicinal supplements in our key markets compared to
developed countries.
• Mega We Care revenue CAGR 2012-’17 of 13.5%, driven by SEA
CAGR of 14.4% and a CAGR of 17.6% in Africa.
• SEA contributed 80% and Africa 11.6% of Mega We Care
revenues in FY17.
• Mega We Care revenue in FY17 grew by 19.4% mainly driven by
SEA growth of 19.6% YoY.
Others (THBmn)
34.0% 33.2% 31.7% 30.2% 29.6% 29.9%
51.6% 49.9% 47.7% 46.4% 46.0% 45.9%
64.7% 62.6% 60.1% 57.9% 56.7% 56.9%
2012 2013 2014 2015 2016 2017
Top 5 products
Top 10 products
Top 15 products
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2%7%
6% 6% 10% 10% 12%
36%31% 28%
31% 30% 31%
55%63% 66%
59% 60% 56%
2012 2013 2014 2015 2016 2017
MaxxcareTM revenue growth driven by Myanmar…
Revenue mix (%) across geographies
Myanmar
Vietnam
Cambodia
Nigeria
Myanmar
• largest market with significant historic growth and
future opportunities …
• Pharma market size at 1/10 of Thailand
• Infrastructure and capabilities in place to support
future growth in business
• We provide distribution business to third party principals in Myanmar, Vietnam and Cambodia (The operations for third parties in Nigeria was discontinued since 2013).
• Revenue CAGR of 7.9% during 2012-’17; mainly driven by Myanmar with CAGR of 8.5% during the same period.
• MaxxcareTM revenue in FY17 was down by 2.6% YoY. Decline in FY17 was mainly a result of loss of a principal in Myanmar; newly joined principals are expected to offset this decline in due course. Maxxcare business is expected to fair better in FY18.
CAGR 7.9%
Revenue
THBmn 2,767 3,132 3,694 3,558 4,160 4,053
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Mega We CareTM and MaxxcareTM gross margins remain steady ….
• Maxxcare gross margins have remained steady over years.
• Higher gross margin in 2012 was mainly a result of change in business model for one of our principal in 2012.
• Gross margins are mainly influenced by change in principal and service mix amongst other factors.
Mega We Care gross margins
Maxxcare gross margins
• Mega We Care gross margins have remained steady over years.
• Slight variation in the margins are mainly a result of product mix and country mix amongst other factors.
64.2% 63.6%62.1%
64.8%63.9%
64.8%
2012 2013 2014 2015 2016 2017
25.4%22.4% 21.5% 21.0% 21.5% 22.4%
0%
10%
20%
30%
2012 2013 2014 2015 2016 2017
Reported gross margin Normalized gross margin
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17% 19% 25%34%
23% 31%
31% 29% 16% 7%
5%4%
52% 53% 59% 60%72% 65%
2012 2013 2014 2015 2016 2017
OEM business
Revenue mix (%) across geographies
Australia
Thailand
Others
Revenue
THBmn 498 473 424 480 399 CAGR
(1.3%)
Gross margins
• Revenue CAGR has seen a decline of 1.3% over 2012-’17. Revenue growth of 16.9% YoY in FY17 was mainly driven by demand from overseas customers.
• Gross margins are driven by revenue growth and customer mix amongst other factors.
OEM business contributed 4.9% of total operating
revenue and 2.9% of total gross profits in FY17.
466
23.8%
17.0% 16.2%
26.1%
19.5%
26.5%
2012 2013 2014 2015 2016 2017
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596 631 670 732 737 790
653 833 910 932 863 922
731 771
891 996 1,074
1,252
2012 2013 2014 2015 2016 2017
13.9% 12.3% 11.7% 12.6% 11.8% 11.6%
19.3% 19.5% 20.2% 20.9%18.5% 19.3%
33.2% 31.8% 32.0% 33.5%30.4% 30.9%
2012 2013 2014 2015 2016 2017
Admin expense Selling expense Overall SGA expense
• SG&A expense was 30.9% of operating revenue in FY17 as compared to 30.4% in FY16. In absolute terms SG&A expense in FY17 increased by 10.9% YoY. Apart from relatively higher spending in FY17; Bio-life inclusion also contributed to increase in SG&A expenses.
• Advertisement and personnel cost constituted 42% and 31% of total SG&A expenses in FY17.
SGA benefiting from increased scale
SG&A as a percentage to revenue
Advertisement and personnel cost are key elements of SG&A (THBmn)
Personnel
Advertisements
Others
1,980 2,236
2,471 2,660 2,674
CAGR 8.4%
SG&A as a percentage to revenue has reduced over
years from 33% in 2012 to 31% in recent years.
2,965
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Strong balance sheet and stable cash cycle..
Note : Balance sheets elements of previous years are based on reclassifications of audited financials.
1. Cash and bank balances as at balance sheet dates includes non-restricted term deposits with banks. 2.Capex towards tangible assets and acquisitions.
Key balance sheet elements (THBmn) 1
Net cash position of THB 662mn and net debt to equity
of (0.13) times as at Dec’17
• Increase in equities in 2013 was driven by issue of ordinary shares as part of IPO.
• Cash cycle days of 120 to 130 days; remained steady at 123 days in Dec’17 compared to 121 days in Dec’16.
• Capex spending during 2012-2014 includes, commissioning of new plant in Australia, expansion of manufacturing capacity in Thailand to double the softgel capacity and acquisition of Eugica brand for THB 185mn.
• Capex spending in 2016 mainly includes THB 592mn towards acquisition of Bio-Life (outflow, net of pre-existing cash in transferee company). THB 167mn towards new land near manufacturing plant in Thailand as part of future expansion plan and THB 151mn towards acquisition of leasehold rights of land in Myanmar for construction of state-of-art warehouse.
• Capex spending of THB 270mn spent in FY17, mainly towards construction of state-of-art warehouse and office space in Myanmar and towards construction of warehouse at manufacturing plant in Thailand.
Dec'12 Dec'13 Dec'14 Dec'15 Dec'16 Dec'17
Assets 4,332 6,551 6,732 7,610 7,941 8,720
Outside liabilities 2,621 2,858 2,754 3,275 3,261 3,475
Equity 1,710 3,693 3,978 4,335 4,680 5,244
Net cash/(debt) (845) 543 714 748 547 662
Capex spent2 624 352 160 181 1,016 270
Net debt/Equity (times) 0.49 (0.15) (0.18) (0.17) (0.12) (0.13)
Receivables 1,288 1,747 2,024 2,263 2,233 2,520
Days 81 78 88 97 92 89
Inventories 1,442 1,685 1,649 2,067 1,889 2,219
Days 127 138 130 147 139 140
Trade payables (769) (1,168) (1,306) (1,603) (1,519) (1,598)
Days (84) (86) (96) (115) (110) (106)
Cash cycle days 123 130 121 129 121 123
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Healthy cash flows1 ….
1. Cash and bank balances includes cash and cash equivalents and unrestricted term deposits with banks ; hence redemption and investment in term deposits with bank has not been considered as investing activities.
Cash flows (THBmn)
Inflow from operating activities Inflow/(Outflow) – financing activities Outflow from investing activities
• Healthy operating cash flows over years. Improvement in 2016, driven by higher profits and improvement in working capital. Operating cash in FY17 came in at THB 927mn driven by higher profits and investment in working capital.
• Capex spending is mainly towards capacity expansion, improvements and acquisitions. Capex spending in 2016 mainly includes THB 592mn towards acquisition of Bio-Life (outflow, net of pre-existing cash in transferee company). THB 167mn towards new land near our manufacturing plant in Thailand as part of future expansion plan and THB 151mn towards acquisition of leasehold rights of land in Myanmar for construction of state-of-art warehouse. Capex spending in FY17 was mainly towards construction of state-of-art warehouse and office space in Myanmar and towards construction of warehouse at our manufacturing plant in Thailand.
• Cash flows from financing activity primarily includes movements in loan and dividend payouts. In FY17, net cash outflow from financing activities was THB625mn, mainly arising from dividend payouts during the year and reduction in working capital loans.
342 466
614 609
1,250
927
2012 2013 2014 2015 2016 2017
626
396
202 174
1,006
307
2012 2013 2014 2015 2016 2017
304
1,103
(671)
(247)(473)
(625)
2012 2013 2014 2015 2016 2017
We care
1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
35 We care
Our organization structure
Mega Lifesciences Public Company Limited ( MEGA)
(Thailand)
99.99% 99.99%
98.99% 99.99% 99.96% 99.99% 99.99%
99.99% 99.99% 99.99% 99.99% 99.99% 49.00%
99.99%
Natural Health Foods Ltd. (Thailand)
99.99%
Mega Lifesciences PTY. Ltd.
(Thailand)
99.96%
Mega We Care Ltd. (Thailand)
Mega Lifesciences PTY Peru S.A.C.
(Peru)
Mega Products (Mauritius) Ltd.
(Mauritius)
97.87%
Mega Lifesciences Sdn. Bhd. (Malaysia)
PT Mega Lifesciences (Indonesia)
Mega Lifesciences PTY Ltd.
(Cambodia)
E-Sense Ltd. (Thailand)
Mega Lifesciences Ltd. (Myanmar)
Mega Lifesciences (Vietnam) Ltd.
(Vietnam)
Mega Lifesciences Nigeria Ltd.
(Nigeria)
Mega Lifesciences Ghana Ltd.
(Ghana)
Mega Lifesciences Pvt. Ltd.
(India)
Mega Lifesciences Pte. Ltd.
(Singapore)
Mega Lifesciences (Australia) Pty. Ltd.
(Australia)
Mega Product (Yemen) Ltd.
(Yemen)
Note: As at 31 December 2017
Mega Lifesciences Limited (Ukraine)
100.00%
Bio-life Marketing Sdn.Bhd (Malaysia)
100.00%
MEGA MALEE LTD (THAILAND)
51.00%
Direct subsidiary of MEGA
Subsidiary of subsidiary
Joint venture
Associate of subsidiary
Maxxcare Limited (Myanmar)
100.00%
Pranaa Food For Life
Company Ltd. (Thailand)
30.00%
36 We care
Our Board of Directors
10
1. Mr. Mechai Viravaidya ‐ Chairman of the Board of Directors & Independent Director
6. Mr. Ishaan Shah – Director
2. Mr. Alan Kam ‐ Independent Director / Chairman of Audit Committee 7. Ms. Sameera Shah – Director
3. Mr. Manu SawangJaeng ‐ Independent Director / Chairman of Remuneration and Nomination Committee
8 Mr. Shiraz Erach Poonevala – Director
4. Mr. Thor Santhisiri ‐ Independent Director / Audit Committee 9. Mr. Vivek Dhawan – Director and CEO / Remuneration and Nomination Committee, Chief Coach
5. Mr. Kirit Shah ‐ Director / Remuneration and Nomination Committee 10. Mr. Thomas Abraham – Director , CFO and Head Coach
1
2
3 4
5
6 7 8
9
37 We care
Management ably supported by other experienced in-country personnel and teams
Management team instrumental in building the business is significantly invested in the Company
Vivek Dhawan Chief Executive Officer and Chief coach
• Joined Mega in 1986
Thomas Abraham Chief Financial Officer and
Head coach
• Joined Mega in 1998
Duangnapa Tongsiri President and Head coach, Mega We Care , Thailand
(excluding Manufacturing)
• Joined Mega in 1993
Girish Wadhwa President and Head coach,
Mega We Care and Maxxcare, Myanmar
• Joined Mega in 1997
Paramjit Singh President International and
Head coach , Mega We Care and Maxxcare
(excluding Thailand , Myanmar and Manufacturing) Joined Mega in 1993
Management team has a collective history of over 180 years working with the Company. As at 31 Dec 2017, management including their family members held 11.4% of MEGA shares.
Apichai Chancharusiri Manufacturing, 1985
Pornchai Wongpayak Quality Control, 1990
38 We care
Our shareholding structure as at 31 December 2017
Management Shah Family
38.12% 11.36% 50.08% 0.44%
Other Investors Unistretch Company Ltd.
Mega Lifesciences Public Company Limited ( MEGA)
Shah group 50.52%
Foreign inst. 50.3%
Thai retail 12.6%
Thai inst. 25.8%
Others 11.3%
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23 27 25 28 26 28
947 1,062 985 1,058 1,014 1,062
1,467 1,720 1,744 1,769 1,778 1,614
1,348
1,444 1,540 1,512 1,574 1,665
2012 2013 2014 2015 2016 2017
Steady growth in our peoples strength
MEGA’s core assets – its people…
Overview
• Mega prides on its ‘people-first’ culture which focuses on the development of human capital.
• We focus on educating and developing skills of managers and employees.
• Seek to help all employees capitalize on their strengths and develop to their full potential.
• There have been no major labour disputes in the workforce.
Mega We Care
Maxxcare
Manufacturing
3,785
4,253 4,294 4,367 4,392
Corporate/ others
4,369
We care
1. Business Overview
The journey
Business Segments
• OEM business
• Mega We CareTM branded products business
• MaxxcareTM distribution business
2. Financial Overview
3. Leadership and Shareholders
4. Future outlook
41 We care
Future Outlook... The future of our past and present ….
2014 1994
Became the largest OEM supplier of soft gel caps out of Southeast Asia
Mega We CareTM Branded Products Business
MaxxcareTM Distribution Business
1985
OEM Business
Achieved leadership position in Indochina
Became leading international distribution company in Myanmar, Vietnam and Cambodia
Expect to double business
Nutraceutical, OTC and prescription products
Pharma and consumer products
Expect to double business
2019
42 We care
Continue OEM
• Helps service our long standing customers and helps improve the productivity and efficiency of our manufacturing processes
Grow our market leading brands
• Leverage brand strength and recognition to increase demand
• Expand specialized sales and marketing team to increase our coverage of the market
Launch new branded products
• Launch new products and line extensions
• Leverage on speed to market competitive advantage
Expand distribution business
• Strengthen relations with existing principals, add new principals and invest in infrastructure
Enter new markets
• Selectively enter new markets where we can compete effectively
• Identified new markets in Middle East and South America
Expand margins and profitability
• Minimize manufacturing and distribution cost inefficiencies
• Improving yield in manufacturing processes
Selective acquisitions and new ideas
• Lookout for acquisition opportunity and foster path into new business ideas to be ahead in human wellness space
The road map pursued and moving ahead…..
Our strategies for the branded and distribution business will drive future growth
43 We care
Future Outlook... Mega We CareTM branded products business •Emerging trends in consumer health care, disease prevention than
struggling for cure is the way forward ….. a sunrise industry.
•Market leading positions in Southeast Asia and growing presence in Sub-Saharan Africa.
•Products sold in developing countries which are underpenetrated markets with significant growth opportunities.
•329 unique products and 1,009 product registrations across the world. Strong pipeline of 67 new products under registrations and 74 new products under development.
•Manufacturing capacity adequate to meet growth requirements of ensuing 3-5 years.
•A strong balance sheet with net cash position and business generating healthy cash flows.
•Fundamental growth drivers in place to help deliver the expected growth.
MEGA expects to grow by expansion of customer base
in its existing underpenetrated
developing markets, launching
new products, strengthening
product categories and entering new countries. Create
significance in SEA and Sub-Saharan
Africa.
MEGA is constructing a warehouse for storing raw material and finished goods and plans to rebuild its product development and quality control center on the newly acquired land in Thailand near our current manufacturing plant causing an estimated future capex of THB 330mn. Improvement and maintenance capex to be incurred in addition to aforementioned capex.
Notwithstanding tremendous future opportunity. Due to the nature of the industry and the markets we are in, growth may not be a straight line up but with occasional disruptions that may be caused by economic, political and other factors.
44 We care
Future Outlook... MaxxcareTM distribution business
MEGA expects to capture the strong growth
potential offered by Myanmar,
given MEGA’s leadership
position as a distributor of pharma and consumer products.
As part of MEGA’s plan to construct its own state-of-art warehouse and office space on leased land in Myanmar on which work has already started; an approximate future outlay of THB 350mn may be spent.
Notwithstanding tremendous future opportunity. Due to the nature of the industry and the markets we are in, growth may not be a straight line up but with occasional disruptions that may be caused by economic, political and other factors.
MYANMAR • Largest market with significant historic growth and future opportunities … • Pharma market size at 1/10 of Thailand. • Leading multinational and regional companies as its principals. • Infrastructure and capabilities in place to support future growth in business:
• Coverage to more than 85% of geographical area.
• Access to more than 30,000 outlets.
• More than 1400 employees.
• Robust information system and market intelligence in place.
VIETNAM AND CAMBODIA TO GROW WITH INDUSTRY.
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Q&A