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We care
Mega Lifesciences PCLInvestor PresentationSET Thai Corporate Day │26-27 January 2015
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1. Business Overviewi. The journeyii. Business Segments
b) MaxxcareTM distribution businessa) Mega We CareTM branded products business
c) OEM business
2. 9M14 Financial Overview3. Appendix
3We care
The journey so far….
1982
Incorporated
1985-86
1993-94
1995-96
20022012
•Received approval from Thai FDA for Samut Prakarnfacility in Thailand•Began manufacturing nifedipine for Berlin Pharmaceutical Industry Co. Ltd
•Expanded into Vietnam, Myanmar and Cambodia to sell branded products and operate distribution business
•Established manufacturing plant in Australia
•Market leading branded products in key Southeast Asian markets•Leading distributor of pharmaceutical and OTC products •Announced acquisition of Eugica
•Commenced branded products business •Acquired Medicrafts brand
We have evolved from an OEM player into a leading international consumer healthcare and pharmaceutical company
Started as an OEM manufacturer
Entered branded products and distribution business;
geographical expansion
Emerged as a leading branded and distribution company
2013
•Commissioning of new plant in Australia•Planned manufacturing expansion in Thailand• Successful IPO on SET
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MEGA is a leading participant in the health and wellness industry in developingcountries. Our business may be categorized into three segments:1. Mega We CareTM branded products business: We develop, manufacture,
market and sell our own brand of market leading nutraceutical products,prescription pharmaceutical products and OTC products which are sold in 29developing countries
2. MaxxcareTM distribution business: We market, sell and distribute variousbranded prescription pharmaceutical products, OTC and consumer products.We operate our MaxxcareTM distribution business in three countries, namely,Myanmar, Vietnam and Cambodia. Our clients for this business segmentinclude leading domestic and international pharmaceutical and consumergoods companies
3. OEM business: In addition to manufacturing our own branded products, ourmanufacturing facilities in Thailand and Australia accept various productionorders from third-party customers.
Our business segments …..
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Geographical overview of our operations We derive majority of our revenue from Southeast Asia
Thailand, Vietnam and Myanmar are our key geographies which accounted for 75.7% of our operating revenue in FY2013
1.Revenues exclude other income
Philippines
Indonesia
MalaysiaSingapore
Myanmar
Cambodia
VietnamThailand
Azerbaijan
Sri Lanka
Uzbekistan
YemenUnited Arab Emirates
Mongolia
Hong Kong
GhanaKenya
Nigeria
TanzaniaUganda
KazakhstanUkraine
Russia
Belarus
Peru
Denmark
Legend
Countries with sales of our branded products
Countries with manufacturing or product development capabilities
Ausralia
IndiaTrinidad
Rwanda
Kuwait
South East Asia 84.8%
Rest of World 15.2%
Southeast Asia accounts for majority of revenues1
Revenue Breakdown by Region (FY2013)
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Distribution BusinessBranded Products Business
What our business segments contribute…..
OEM Business
Mega Lifesciences PCL
Branded Products Business
Distribution Business
OEM Business
THB 3,428 mn48.8%
THB 3,132 mn44.5%
THB 473 mn
6.7%
Sales ContributionFY2013 Total Sales: THB 7,034 mn
Branded Products Business
Distribution Business
OEM Business
Gross Profit ContributionFY2013 Gross Profit: THB 2,959 mn
THB 2,179 mn73.6%
THB 700 mn23.7%
THB 81 mn2.7%
1 1
1 Revenue reclassified between Mega We Care TM and Maxxcare TM
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The future of our past and present …. 20141994 2018
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 markets
Became leading international distribution company in Myanmar, Vietnam and Cambodia
Expect to double revenue and profits
2013
Expect to double revenue and profits
Nutraceutical, OTC and Prescription products
Pharma and consumer products
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The future of our past and present ….
AchievedCAGR of 19.1% (2010 -13)
Net profit CAGR of 19.2% (2010 -13)
Expect to double CAGR of 15.0% (2014 -18)
Revenue
Profits AchievedCAGR of 19.2% (2010 -13)
Expect to double CAGR of 15.0% (2014 -18)
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Mega We CareTM branded products business:• Products sold in 29 underpenetrated markets with significant growth opportunities.• 212 existing products, 751 product registrations across the world.• Market leading positions in Indochina and the new markets in Africa.• Going by emerging trends in consumer health care, prevention of disease rather than
cure is the way forward ….. a sunrise industry.• Strong pipeline of 85 products under registrations and 84 products under
development.• No major capex planned as manufacturing capacity recently doubled to meet growth
requirements for the next 5 years.• A strong balance sheet.• Fundamental growth drivers are already in place to help deliver the expected growth
organically. Any acquisitions would help further accelerate the growth.
While we expect the revenue and profits to double in 5 years, due to the nature of the industry andthe markets we are in, growth may not be a straight line up but with occasional disruptions that maybe caused by economic, political and other factors.
How to achieve our 5-year target revenue & earnings
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MaxxcareTM distribution business :• Well poised to capture the strong growth potential offered by Myanmar, given MEGA’s
leadership position as a distributor of pharma and consumer products.• Leading multinational and regional companies as its principals.• Other markets are growing with the industry.• MEGA has adequately invested in infrastructure, latest technology and other resources
to meet the growth requirements.
While we expect the revenue and profits to double in 5 years, due to the nature of the industry andthe markets we are in, growth may not be a straight line up but with occasional disruptions that maybe caused by economic, political and other factors.
How to achieve our 5-year target revenue & earnings
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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 Africa,
Middle East, CIS and South America as new frontier markets
Expand margins and profitability• Minimize manufacturing and
distribution cost inefficiencies • Improving yield on
manufacturing processes
Selective acquisitions• Selectively assess complimentary
acquisitions• For e.g. the Eugica acquisition
helped us add a leading brand to our portfolio
The road map ahead…..
Our strategies for the branded and distribution business will drive future growth
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Key investment highlights
Leading distributor of pharmaceutical and OTC products in select frontier markets of Myanmar, Vietnam and Cambodia (Refer to slide 23)
2
Focused on fast growing markets including a unique established and market leading presence in the Myanmar market (Refer to slide 24)
3
High quality products manufactured in world-class manufacturing facilities accredited by international regulatory agencies (Refer to slide 16)
4
Strong product pipeline driven by an efficient and targeted product development strategy (Refer to slide 19)5
Proven track record of delivering growth and profitability (Refer to slide 31)6
Experienced management team instrumental in building the business is significantly invested in the Company (Refer to slide 46)
7
Market leading own consumer health and pharmaceutical brands in fast growing developing markets (Refer to slide 15)1
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1. Business Overviewi. The journeyii. Business Segments
b) MaxxcareTM distribution businessa) Mega We CareTM branded products business
c) OEM business
2. 9M14 Financial Overview3. Appendix
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TM Branded products business
Categories Description Key Brands
Nutraceutical
Products
• 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 nutraceuticals, 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-atheromaNatural
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
#1 Herbal Cough Sedative
Acnotin
#2 Oral Anti-acne Preparation
Ferrovit
#5 Iron Combination Products
Giloba
#4Cerebral and
Peripheral Vascular
NNO
#3 Emollients and Protectives
Our market leading nutraceutical, branded generic and OTC brands
Source: IMS Health Dec 2013, Myanmar estimates based on Myanmar import customs data and Company assumptions
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
Post expansion, combined capacity of both manufacturing facilities in Thailand is 3.8bn soft gel capsules p.a.
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High quality products manufactured in world-class facilities accredited by international regulatory bodies
State of the art quality control laboratoryInternationally 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 12 countries
• Australian TGA approved since 1992• Amongst the few manufacturers globally,
who apply the same standards for the manufacturing of nutraceutical products as with pharmaceutical products
• Team of 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 in Southeast Asia
Internationally accredited facilities Sizeable and dedicated teams monitor quality Significant investment made into infrastructure
We manufacture our nutraceutical products 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
Nutraceuticals
• 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
Active products - key information as at 30 Sep 2014Existing:# Unique formulations 212 # Product registrations 751 Application for registrations:# Unique formulations 85 # Product registrations 429 # Unique formulations under development 84# Product launches (Jan 2008 to Sep 2014) 119
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Growing population (mn) Increasing health expenses per capita (USD)
% of private spending on health• Population in our key markets continue to grow.
• Health expenses per capita in Thailand increased from USD 183 in2010 to USD 215 in 2012 or at a CAGR of 8.4%; 55% of suchspending was from ones’ own pocket.
• Health expenses per capita in Myanmar increased from USD 15 in2010 to USD 20 in 2012 or at a CAGR of 14.1%; 93% of suchspending was from ones’ own pocket.
• Health expenses per capita in Vietnam increased from USD 83 in2010 to USD 102 in 2012 or at a CAGR of 11.3%; 85% of suchspending was from ones own pocket.
Source: IMF, WEO Database, April 2014, World bank development indicators
Healthy outlook for key markets
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The future of our past and present ….Mega We CareTM branded products business
AchievedCAGR of 20.1% (2010 -13)
Expect to double CAGR of 15.0% (2014 -18)
Revenue
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1. Business Overviewi. The journeyii. Business Segments
b) MaxxcareTM distribution businessa) Mega We CareTM branded products business
c) OEM business
2. 9M14 Financial Overview3. Appendix
23We care
Key Distribution Markets Myanmar Vietnam Cambodia
Market Positioning
• Leading international distributor of pharmaceutical and OTC products
• Among top 2 distributors of consumer products
• Leading international distributor of pharmaceutical and OTC products
• Leading international distributor of pharmaceutical and OTC products
Distribution Infrastructure
• 8 warehouses strategically located across Yangon, Mandalay, Mawlamyaing, Naypyidaw, Taungyyi and Lashio
• Distribute to more than 27,204 outlets representing c.85% geographical coverage
• 3 warehouses strategically located in Hanoi, Danang, Ho Chi Minh, with 2 feeder warehouses in Can Tho
• Distribute to more than 12,280 outlets across 48 out of 58 provinces
• 1 warehouse located in Phnom Penh
• Distribute to more than 5,700 outlets
Number of principals (30 June 2014) 33 17 10
% of Distribution Sales (FY2013) 63.0% 31.1% 5.9%
We are a leading distributor of pharmaceutical and OTC products in select frontier markets
Distribution business
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58.9
23.8
6.0
ThailandVietnamMyanmar
Mega is well-positioned to capitalize on this developmentMyanmar is expected to enjoy significant GDP growth
Myanmar GDP at current prices in USD bns
… With a leading position in MyanmarA key market with significant growth potential
53
73
2012E 2016EAnd this is set to benefit its significantly underpenetrated health care market
Myanmar pharma and consumer health market size per capita (USD)
1995
10.3%
85%
8
9
63.0%
Source: IMF, WEO Database, April 2013, ADB Study 2012, Estimates based on Myanmar import customs data and Company assumptions| Note: (1) Suffix ‘E’ represents IMF estimate, (2) as at 31Dec 2013
1 1
Establishment date testament to our long-standing presence in the country
% of 2013 branded revenues (before inter-segment charges) generated in Myanmar
% of 2013 distribution revenues generated in Myanmar
# of our branded products ranked as leading brands in their respective therapeutic category
# of strategically located warehouses
Extensive distribution reach covering 85% of the country
Myanmar significantly lags behind Vietnam
and Thailand in healthcare spend
c.1,4502 # of employees in Myanmar
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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 principalsOverview
• 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
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The future of our past and present ….MaxxcareTM distribution business
AchievedCAGR of 21.1% (2010 -13)
Expect to double CAGR of 15.0% (2014 -18)
Revenue
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1. Business Overviewi. The journeyii. Business Segments
b) MaxxcareTM distribution businessa) Mega We CareTM branded products business
c) OEM business
2. 9M14 Financial Overview3. Appendix
29We care
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 7% and 3% to our operating revenues and gross profits, respectively for FY2013
• We provide contract manufacturing of nutraceuticals, prescription pharmaceuticals and OTC products for third-party customers
• We have 39 customers located in 9 countries• Most are long standing customers of the business• OEM Business provides us productivity and efficiency benefits through the utilization of
unused manufacturing capacity• It also allows us to diversify our revenue sources• The contribution of OEM to overall business of MEGA is expected to remain at current levels
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1. Business Overviewi. The journeyii. Business Segments
b) MaxxcareTM distribution businessa) Mega We CareTM branded products business
c) OEM business
2. 9M14 Financial Overview3. Appendix
31We care
• Revenue and net profit grew at a CAGR of 19.1% and 19.2%, respectively, during 2010-2013. Historically, MEGA hasdoubled our top line and bottom line in less than 5 years and we expect to double the 2013 levels in the ensuing 5years, with growth trajectory expected to be non-linear.
• Despite 9M14 revenue growth of 11.2% YoY, net profits declined by 33.5% YoY to THB 296.9 mn, given lower growthin Mega We CareTM branded products revenue, extra overheads after the capacity expansion, higher planned SGA, andthe net forex loss of THB 21.6 mn.
• With the demand for Mega We CareTM branded products picking up, gross margins remaining steady, and a significantportion of planned SGA already spent in first three quarters, we look for net profits to fare better in 4Q14.
Summarized income statement
Figures inTHB mn 2010 2011 2012 2013 CAGR 9M13 9M14 YoY Gr.
Operating Revenue 4,158.7 4,856.8 5,964.8 7,033.5 19.1% 5,070.6 5,637.6 11.2%Gross profit 2,011.3 2,308.8 2,633.3 2,959.4 13.7% 2,149.8 2,196.1 2.2%Selling and Admin. exp (SGA) 1,461.4 1,755.7 1,980.0 2,235.8 15.2% 1,620.4 1,847.8 14.0%SGA (% to revenue) 35.1% 36.1% 33.2% 31.8% - 32.0% 32.8% -EBITDA 558.3 657.3 799.8 887.6 16.7% 634.7 452.2 (28.7%)EBIT 490.3 588.6 723.4 788.7 17.2% 562.9 354.7 (37.0%)Net Profit 368.0 455.9 577.7 624.0 19.2% 446.8 296.9 (33.5%)Net profit (% to revenue) 8.8% 9.4% 9.7% 8.9% - 8.8% 5.3% -
EPS (in THB) 0.51 0.63 0.79 0.84 18.2% - - -Return on equity 47.4% 41.6% 38.2% 23.1% - - - -Return on assets 15.8% 16.6% 15.2% 11.5% - - - -
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Consolidated revenue (THB mn) Revenue mix (%) across segments
Segment wise revenue4 (THB mn)• Mega We CareTM branded products business and MaxxcareTM
distribution business grew at a healthy CAGR of 20.1% and 21.1%during 2010-2013.
• SEA2 and Indochina3 contributed 86.3% and 81.3%, respectively,of our total operating revenue in 9M14.
• 9M14 operating revenue was THB 5,637.6 mn, up 11.2% YoY,driven by a 23.8% YoY growth in MaxxcareTM distribution revenue.Mega We CareTM branded products revenue saw a moderategrowth of 2.4% YoY. With Thailand picking up, we expect MegaWe CareTM branded products revenue to improve in 4Q14
CAGR 4.3%
Gr: 2.4%
CAGR 21.1%
4,857
5,965
7,034
5,0715,638
CAGR 20.1%
Gr:23.8%
Gr:(9.1%)
Driven by growth of 23.8 % YoY ,in MaxxcareTM
Consolidated revenue1
1.Operating revenue 2. Thailand, Myanmar, Vietnam, Cambodia, Malaysia, Philippines, Indonesia and Singapore. 3. Thailand, Myanmar, Vietnam and Cambodia. 4. Revenue reclassified between Mega We Care TM and Maxxcare TM for FY2013
4,159
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Consolidated Gross Profit (THB mn)
Consolidated Net Profit (THB mn)• Net profit grew at a healthy CAGR of 19.2% during 2010-2013, driven
by stable gross profits and economies of scale as selling andadministration (SGA) expenses declined from 35.1% of operatingrevenue in 2010 to 31.8% in 2013.
• 9M14 net profit was THB 296.9 mn, down 33.5% YoY from THB 446.8mn in 9M13, given a lower growth in Mega We CareTM brandedproducts revenue, additional overheads from the capacity expansion,,spending for Mega We CareTM branded products in certain markets,business expansion activities in Africa, expansion of logistics resourcesin Myanmar, and net forex loss of THB 21.6 mn.
• With the demand for Mega We CareTM branded products picking up,gross margins remaining steady, and a significant portion of plannedSGA already spent in first three quarters, we look for net profits to farebetter in 4Q14.
• Gross profit grew at a healthy CAGR of 13.7% during 2010-2013.
• 9M14 gross profits came in at THB 2,196.1 mn, an increase of THB 46.3mn or 2.2% YoY. Overall gross margin was 39.0%, compared to 42.4% in9M13.
• Decline in overall gross margin was mainly a result of a change inrevenue mix (MaxxcareTM distribution business growing at a higher pacethan Mega We CareTM branded products business) and lower grossmargins reported by Mega We CareTM branded products owing toadditional overheads from capacity expansion.
• We expect improvement in gross profits with the growth for the brandedproducts in 4Q14.
Lower growth in Mega We CareTM
branded products, net forex losses and additional overheads suppressing profits in short run
Change in revenue mix and lower gross margins in Mega We CareTM
impacted growth
Consolidated profits
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Revenue1 (THB mn) Revenue split by geography (THB mn)
Top 15 products contributing around 60 % of revenue • Strong CAGR of 20.1% during 2010-2013, driven by volumes of our existingmarket leading brands and new product launches.
• The low per capita consumption and penetration levels for our products inthese markets vs. developed markets enable us to sustain the good growthrates by expanding the user base.
• SEA and Indochina contributed 79.1% and 68.7% of total Mega We CareTM
branded products revenue in 9M14. Thailand was the largest market,followed by Vietnam and Myanmar.
• Revenue in 9M14 was THB 2,523.7 mn, up by 2.4% YoY. This moderategrowth was a result of flat growth in Thailand in 1H14 coupled with theslowdown in Ukraine and Peru . With Thailand picking up, we expect MegaWe CareTM branded products revenue to improve in 4Q14.
Flat growth in Thailand during 1H14 and continued Slowdown in Ukraine and Peru impacted growth
1. Revenue reclassified between Mega We Care TM and Maxxcare TM for FY2013
Mega We CareTM branded products revenue
2010 2011 2012 2013 CAGR 9M13 9M14 YoY Gr.
SEA 1,547 1,836 2,077 2,676 20.0% 1,884 1,996 5.9%
Africa 163 193 262 330 26.6% 243 290 19.6%
CIS 155 149 218 226 13.5% 168 122 (27.1%)
Others 113 119 144 196 20.2% 169 115 (31.8%)
Total 1,978 2,297 2,700 3,428 20.1% 2,464 2,524 2.4%
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Revenue1 (THB mn) Revenue contribution by geography
• We provide distribution business to third-party principals in Myanmar, Vietnam and Cambodia (The operations in Nigeria wasdiscontinued since 2013.) Pharma is the largest product category, contributing 63.7% of 9M14 MaxxcareTM distribution business revenue.
• CAGR of 21.1% during 2010-2013 included an impact of change in distribution business model in 2012 for one our principals in Myanmar.
• 9M14 revenue was THB 2,798.8 mn, up by 23.8% YoY, driven by Myanmar. Myanmar is the largest market, contributing 67.3% of totalMaxxcareTM distribution business revenue in 9M14, followed by Vietnam (26.9%) and Cambodia (5.8%).
• As at 30 September, 2014, we provided distribution services to 35 principals in Myanmar (including 16 consumer product principals).While we have added 4 new principals in the first three quarters of this year; as reported in our 2Q14 MD&A, we expect an existingprincipal to discontinue from 4Q14 onwards; the impact of which will affect the MaxxcareTM top line in the short to medium term from4Q14 , with limited impact on the bottom line. We provided distribution services to 19 and 13 principals respectively In Vietnam andCambodia as at 30 September, 2014, net addition of 2 and 3 principals respectively from 31 December 2013.
Growth driven by Myanmar
1. Revenue reclassified between Mega We Care TM and Maxxcare TM for FY2013
MaxxcareTM distribution business revenue
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Gross Profits (THB mn)
• Gross profits grew at a healthy CAGR of 19.5% during2010-2013.
• Gross profit in 9M14 was THB 1,557.0 mn, down by 1.6%YoY, driven by lower gross margins .
• Gross margins remained steady over 60% during 2010 –9M14. The YoY decline in 9M14 gross margin was mainlydue to additional overheads from the capacity expansionand the lower revenue growth. We expect these grossmargins to improve along with the demand for thebranded products in 4Q14.
Gross margin (%)
COGS elements % to Mega We Care TM revenue
Raw material is the largest cost element in COGS, remained stable at 24% of revenue
36.1 35.8 36.4 35.838.3
Gross profits – Mega We CareTM branded products
35.5
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• Gross profits are driven by principal/service mix.
• Gross profit CAGR during 2010-2013 was impacted by change in business model for one of our principal in Myanmar.
• Normalized gross margins reflects the gross fee earned by distribution business adjusted for the impact of change in business model for oneof our principal in Myanmar during 2012.
• Gross profits for 9M14 was THB 592.9 mn, up 15.1% YoY, from THB 515.1 mn in 9M13, driven by revenue growth in Myanmar.
Gross Profits (THB mn) Gross margins
CAGR : 4.0%
Gross profits – MaxxcareTM distribution business
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Revenue (THB mn) Revenue mix % by geography
Gross Profits and margins (THB mn))
• Revenue grew at CAGR of 4.3 % during 2010 – 2013. In 9M14, revenuewas THB 315.1 mn, down by 9.1% YoY, driven by a lower order book ofour customers in Thailand.
• Australia is the largest market contributing 58.2% of total OEM revenue in9M14.
• Gross margins slightly declined from 15.1% in 9M13 to 14.7% in 9M14, aresult of lower off-take in Thailand.
• With the added capacity, we continue to be on a lookout for more OEMclients to fill up capacity in the short term while branded products growto take up more capacity.
Decline mainly because of lower order book in Thailand
OEM business
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SGA expense has reduced as a % to operating revenue Administrative expenses (THB mn)
Selling expenses (THB mn) • On overall basis SGA expenses have been declining YoY between 2010 and2013, from 35.1% of operating revenue in 2010 to 31.8% in 2013, or areduction of 3.3 percentage points
• Advertisement is the largest component of selling expense, followed bypersonnel cost, contributing 52.2% and 29.1%, respectively, of the total sellingexpenses in 9M14.
• SGA was THB 1,847.8 mn in 9M14, representing 32.8% of operating revenue,compared to 32.0% in 9M13. Spending in 9M14 was mainly towards marketingfor Mega We CareTM branded products in certain markets, business expansionactivities in Africa, and expanding logistics resources in Myanmar.
• We expect SGA for FY2014 to be in line with FY2013 levels, at around 32% ofoperating revenue.
1,0821,153
1,373
9751,133
674
827 863
645714
SGA benefiting from increased scale
820
641
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Balance sheet and key elements – significant investments to boost capacity incurred already
Note : Balance sheets elements of previous years are based on restated financials
• MEGA commissioned new plant in Australia in 2013 andinvested in the expansion of its manufacturing capacity inThailand during 2012-9M14.
• MEGA’s current manufacturing capacity will be sufficientfor its businesses for the next 3 – 5 years.
• Rise in equities in 2013 was driven by fresh issue ofordinary shares as part of IPO.
Consolidated Balance sheet for the period ending:
Cash cycle saw a marginal improvement from 131 days in2013 to 128 days in 9M14 as the increase in receivabledays was offset by lower inventory days and higherpayable days. Inventory as at 30 September 2014 was 133days, out of which inventory of finished goods and rawmaterial at factory accounted for 32 days. The increase ininventory was in line with business requirements.
All figures in THB mn Dec'10 Dec'11 Dec'12 Dec'13 Sep'14
Cash and cash equivalents 101 330 354 1,540 1,237
Trade accounts receivable 929 1,386 1,288 1,724 1,907
Inventories 688 904 1,442 1,685 1,701
Property, plant and equipment 362 368 733 970 988
Other Assets 141 301 515 617 692
Total Assets 2,221 3,290 4,332 6,536 6,525
Debt 566 738 1,198 997 970
Trade Payables 480 787 769 1,145 1,204
Other Liabilities 289 446 654 702 625
Total Outside Liabilities 1,336 1,972 2,621 2,843 2,799
Shareholder Equity 885 1,318 1,710 3,693 3,726
Total Liabilities 2,221 3,290 4,332 6,536 6,525
Key Balance sheet elements
Net cash/(debt) (THB Mn) (465) (408) (845) 543 267
Capex Spent (THB mn) 30 80 439 352 123
IBD/Equity ( times) 0.64 0.56 0.70 0.27 0.26
2010 2011 2012 2013 9M14Average receivable days 83 86 81 77 87 Average inventory days 124 112 127 138 133 Average payable days 95 90 84 85 92 Cash cycle (days) 112 109 123 131 128
For the period ending
1
1. Capex towards tangible assets
41We care
Cash flowsCash flows from operations, investments and financing activities (THB mn)
336 267342
466
189119
(37) (77)
(626)
(396)
(301)
(149)
(273)
40
304
1,103
107
(271)
26 229
20
1,172
(5)
(301)
Operating cashflow Net cash from (used in) investing activities Net cash from (used in) financing activities Net change in cash
2010 2011 2012 2013 9M13 9M14
THB 119.2 mn cash was generated from operating activities in 9M14, lower than 9M13’s THB 189.1 mn as a result of lower netprofits
In FY2013, net cash used in investing activities was THB 396.2 mm; which mainly included the expansion of production lines at ourmanufacturing facilities in Thailand (THB 256.7 mn) and the expansion of manufacturing facilities in Australia (THB 43.2 mn). In9M14, net cash used in investing activities was THB 149.2 mn. Out of this, an amount of THB 122.6 mn was towards the expansionand maintenance capex and THB 11.6 mn was for improvement in information systems.
In FY2013, net cash generated from financing activities was THB 1.1 bn, which mainly came from IPO issue of 129.79 mn ordinaryshares at THB 17.5 per share, amounting to THB 2.27 bn. Part of IPO proceeds were used for the repayment of term loans andworking capital loans from financial institution amounting to THB 1.14 bn. In 9M14, net cash outflow from financing activities wasTHB 271.0 mn, driven by the payout of dividends amounting to THB 242.5 mn (THB 156.0 mn declared for financial year 2013 andTHB 86.5 mn for 1H14).
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Taxation and BOI privileges
Board of Investment (“BOI”) privileges
• Exemption from corporate income tax on the net profits derived from the promoted activity (Manufacture of Drugs for Human use) in Thailand
• The period of exemption is for 5 years from the date such income is first derived (Aug 2012 to July 2017)
• Exemption from payment of imported duties on machinery as being approved by BOI and the import should be before Jan 2015
• Exemption from import duties on raw and essential materials imported for use in producing to export, for period of one year after the first import
• Exemption from import duties on items which are imported for re-export, period of one year after the first import
• Exemption from tax on dividend distributed from profits of promoted activity for a period of 5 years (Aug 2012 to July 2017)
We have availed an amount of THB 98.5 mn (on cumulative basis) as an exemption from corporate income tax on profits as part of BOI privileges since 2013 till 9M14.
THB mn 2010 2011 2012 2013 9M13 9M14
Profit before tax 462.3 565.7 698.3 757.4 539.4 341.2
Current tax 92.6 107.4 141.2 125.5 87.9 70.8
Deferred tax - - (22.1) 7.9 3.0 (26.5)
Total tax expenses 92.6 107.4 119.1 133.4 90.9 44.3
Effective tax rate 20.0% 19.0% 17.1% 17.6% 16.9% 13.0%
For the period ending
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1. Business Overviewi. The journeyii. Business Segments
b) MaxxcareTM distribution businessa) Mega We CareTM branded products business
c) OEM business
2. 9M14 Financial Overview3. Appendix
44We care
Organization structure
Mega Lifesciences Public Company Limited
(Thailand)
Mega Lifesciences Public Company Limited
(Thailand)
99.99% 99.99% 99.96%
99.99%99.99%
99.99%98.99%99.99%99.96% 99.99% 99.99%
99.99%99.99%99.99%99.99% 99.99% 48.99%
Natural Health Foods Ltd.
(Thailand)
Natural Health Foods Ltd.
(Thailand)
Mega Lifesciences PTY. Ltd.
(Thailand)
Mega Lifesciences PTY. Ltd.
(Thailand)
Mega We Care Ltd.(Thailand)
Mega We Care Ltd.(Thailand)
Mega Lifesciences PTY Peru S.A.C.
(Peru)
Mega Lifesciences PTY Peru S.A.C.
(Peru)
Mega Products (Mauritius) Ltd.
(Mauritius)
Mega Products (Mauritius) Ltd.
(Mauritius)
Mega Lifesciences Sdn. Bhd.
(Malaysia)
Mega Lifesciences Sdn. Bhd.
(Malaysia)
PT Mega Lifesciences(Indonesia)
PT Mega Lifesciences(Indonesia)
Mega Lifesciences PTY Ltd.
(Cambodia)
Mega Lifesciences PTY Ltd.
(Cambodia)
E-Sense Ltd.(Thailand)
E-Sense Ltd.(Thailand)
Mega Lifesciences Ltd.(Myanmar)
Mega Lifesciences Ltd.(Myanmar)
Mega Lifesciences(Vietnam) Ltd.
(Vietnam)
Mega Lifesciences(Vietnam) Ltd.
(Vietnam)
Mega LifesciencesNigeria Ltd.
(Nigeria)
Mega LifesciencesNigeria Ltd.
(Nigeria)
Mega Lifesciences Ghana Ltd.
(Ghana)
Mega Lifesciences Ghana Ltd.
(Ghana)
Mega Lifesciences Pvt.Ltd.
(India)
Mega Lifesciences Pvt.Ltd.
(India)
Mega Lifesciences Pte. Ltd.
(Singapore)
Mega Lifesciences Pte. Ltd.
(Singapore)
Mega Lifesciences(Australia) Pty. Ltd.
(Australia)
Mega Lifesciences(Australia) Pty. Ltd.
(Australia)
Mega Product (Yemen) Ltd.
(Yemen)
Mega Product (Yemen) Ltd.
(Yemen)
Note : As at 30 September 2014
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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 - Director / Independent Director / Chairman of Audit Committee 7. Ms. Sameera Shah – Director
3. Mr. Manu SawangJaeng - Director / Independent Director / Audit Committee / Chairman of Remuneration and Nomination Committee 8 Mr. Shiraz Erach Poonevala – Director
4. Mr. Thor Santhisiri - Director / Independent Director / Audit Committee 9. Mr. Vivek Dhawan – Director / Remuneration and Nomination Committee
5. Mr. Kirit Shah - Director / Remuneration and Nomination Committee 10. Mr. Thomas Abraham – Director
1 2
34
5
67 8
9
46We 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 DhawanChief Executive Officer and Chief coach• Joined Mega in 1986
Thomas AbrahamChief Financial Officer and
Head coach • Joined Mega in 1998
Duangnapa TongsiriPresident and Head coach, Mega We Care , Thailand
(excluding Manufacturing)• Joined Mega in 1993
Girish WadhwaPresident and Head coach,
Mega We Care and Maxxcare, Myanmar
• Joined Mega in 1997
Paramjit SinghPresident 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 100 years working with the Company. As at 30 September 2014, management holds 11.59% of MEGA shares.
John FarleyManaging Director, Australia, 1989
Apichai ChancharusiriDirector Manufacturing, 1985
Pornchai WongpayakDirector Quality Control, 1990
47
Shareholding Structure as at 30 September 2014
ManagementManagementShah FamilyShah Family
34.64% 11.59%50.08% 0.02% 3.67%
Other InvestorsOther Investors UnistretchCompany Ltd.
UnistretchCompany Ltd.
GlobexCorporation Ltd.
GlobexCorporation Ltd.
Mega Lifesciences PCLMega Lifesciences PCL
Shah group 53.77%
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927 1093 1,280 1,361
10931245
1,535 1,803 811
838
947 1,062
1819
23
27
Mega We Care Maxxcare Manufacturing Corporate/Others
Number of employees have increased steadily with growth in the business
Human resources
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 capitalise on their strengths and develop to their full potential
• There have been no major labour disputes in the workforce
3,195
3,7854,253
2010 2011 2012 2013
2,849
49We care
Disclaimer
The presentation contains forward-looking statements which are based onMEGAs’ current expectations, estimates and projections about its industry,management’s beliefs and certain assumptions made by MEGA.These forward-looking statements are subject to various risks anduncertainties. No assurance is given that future events will occur or that ourassumptions are correct. Actual results may differ materially from thoseprojected.
For any further queries please contact:Email : investor@megawecare.comTelephone: +66 27694222 Ext. 4230Fax: +66 27694244
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