Eu Yan Sang

Jollene Han

Kenny Ong

Disclaimer and Declaration

The objective of the presentation is for educational

purposes. The full content of the presentation is for

illustration purposes only and should not be used as

investment recommendations. AB Maximus and its

presenters are not responsible for all investment

activities conducted by the participants and cannot

be held liable for any investment loss.

The company and presenters may have personal

interest in the particular shares presented.

Agenda

Company Background

Financial Highlights

Valuation

Risk Factors

Conclusion

Q & A

Company Background

Eu Yan Sang International Ltd (EYS) is a Singapore-

based healthcare company. It is involved in:

Sourcing, manufacturing, wholesale and retail

sales of Traditional Chinese Medicine (TCM)

products

Provision of traditional Chinese medical

consultation, treatment and integrative medicinal

services through its Clinics

Provision of rental of premises, sale of food and

beverages (Others)

Turnover by business activities

Retail

83%

Whole

sale

10%

Clinics

6% Others

1%

Retail

81%

Whole

sale

13%

Clinics

6% Others

0%

FY2010 FY2011

Retail outlets in geographical

locations

Number of Outlets FY 10 FY 11

China 3 4

Hong Kong 46 51

Macau 2 2

Malaysia 71 79

Singapore 40 49

Total 162 185

Turnover by geographical

location ($m) Singapore,

$67.70

27%

Malaysia,

$77.40

31%

Hongkong,

$106.80

42%

Financial Highlights

Retail revenue increased by 11% to S$219.8m

Remained largest biggest segment contributing to 82.5% of total revenue

Top selling products continue to demonstrate steady growth

Bottled Bird’s Nest

Bo Ying Compound

Bak Foong Pills

Lingzhi Cracked Spores Capsules

Essence of Chicken

Introduce about 10 products every year to diversify and increase revenue

Financial Highlights

Wholesale revenue decreased by 10% to

S$28 million in FY2011

Mainly due to slower stock replenishment

by wholesalers.

Financial Highlights

Clinic revenue improved 11% to S$15.9

million

The group added four clinics to bring the

total number of clinics and integrated

medical centres to 25 as at 30 June 2011

No plans in the Annual Report that points

that EYS wants to further expand its

clinical segment

Financial Highlights

Business segment Change in revenue

Retail 11%

Wholesale 10%

Clinic 11%

Industry Analysis

TCM is a form of Traditional,

Complementary and Alternative

Medicine (TCAM)

Although the World Health Organization

states that usage of TCAM is inversely

correlated with wealth, trends indicate

that TCM is here to stay

Industry Analysis

Developments

1. Proper regulation of materials,

practitioners and researchers

2. Garnered interests of firms

3. Adopted into medical treatments

4. High Usage

5. Increase in number of extracts obtained

from herbs. However, extracts may not be

able to substitute herbal remedies

Source: Evidence-Based Complementary and Alternative Medicine

Industry Analysis

Source: The Straits Times, Singapore Medical Journal, IBM, WSJ

Industry Analysis

Most TCM products are sold as over-the-

counter pharmaceuticals

TCM sales make up about one-third of

Asia Pacific OTC pharmaceuticals market

Grew at a compounded annual growth

rate (CAGR) of 4.4% from 2006-2010

Expected to decelerate and grow at a

rate of 4.2% from 2010

Source: Datamonitor 360

Industry Analysis

TCM accounted for about half of

Singapore OTC pharmaceuticals sales

EYS is the leading player and has a

market share of 12%, before Johnson &

Johnson (8.6%) and Bayer AG (8.2%)

Grew at a CAGR of 6.3% from 2006-2010

Expected to decelerate and grow at a

rate of 4.9% from 2010

Source: Datamonitor 360

Industry Analysis

Retail sales index of medical goods &

toiletries in Singapore (2010 = 100)

2007 2008 2009 2010 2011

Index 77.7 84.6 90.2 100.2 109.9

0

20

40

60

80

100

120

Source: Statistics Singapore

Industry Analysis Value of retail sales of Chinese herbs and

drugs in Hong Kong

Expected CAGR of Chinese market is 6.3%

2007 2008 2009 2010 2011

YOY change 4% 1% 10% 14%

HK$ million 3687 3822 3856 4253 4850

0

1,000

2,000

3,000

4,000

5,000

6,000

Source: Census and statistics department, Hong Kong

Industry Analysis

In 2010, the Malaysian pharmaceutical

industry was estimated to be worth RM5

billion

This industry is expected to experience a

Compounded Annual Growth Rate

(CAGR) of 9.5% for the period 2009-2014

By the end, it should be worth RM5.4

billion

Source: PhaMA Industry Fact Book 2012

Valuation $M 2009 2010 2011 2012F 2013F 2014F 2015F

Retailing

Bottled Bird’s Nest 21.80 24.60 26.90 29.89 33.20 36.89 40.98

Bo Ying Compound 25.40 23.10 25.00 25.00 25.00 25.00 25.00

Bak Foong Pills 14.70 13.30 15.10 15.00 15.00 15.00 15.00

Lingzhi Cracked Spore Capsules 8.80 9.00 9.70 10.19 10.70 11.24 11.80

Essence of Chicken 6.10 8.60 9.20 9.84 10.53 11.26 12.05

Others 97.30 119.00 133.90 157.21 184.59 216.73 254.46

Total 174.10 197.60 219.80 247.13 279.02 316.11 359.29

Wholesale 32.60 31.10 28.00 25.96 24.07 22.32 20.69

Clinic 14.30 14.30 15.90 15.90 15.90 15.90 15.90

Others 1.50 1.70 2.60 1.50 1.50 1.50 1.50

Revenue 222.47 244.72 266.33 290.49 320.49 355.83 397.38

Profit After Tax 13.07 19.29 24.94 22.39 24.70 27.42 30.63

Net Profit Margin 5.9% 7.9% 9.4% 7.7% 7.7% 7.7% 7.7%

Valuation Based on FCFF method

Under Retailing Based on trends

If no trend present, based on average sales

Sale of Essence of Chicken excluded the exception

Under wholesale, constant decrease due to cannibalism of distributors by opening more stores

Under Clinic, based on assumption that no new clinics will be opened

Under Others, negligible

Trading Data

52 Weeks Trading Range $0.60 - $0.83

Avg Volume (3mths) 110,279

Market Cap $289.28mil

WACC

Real Risk Free Rate 1.7%

Equities Market Return 10.7%

Beta of stock 0.69

Cost of Equity 7.9%

Cost of Debt 2.3%

WACC 5.1%

Valuation

2012F 2013F 2014F 2015F

FCFF $22 $25 $27 $31

Terminal Value

(FCFF2015/r-g) $395

FCFF $22 $25 $422

TV =

31

5.05+3.00( ) - (0.03)

FCFF

WACC+ AdditionalPremium( ) - (Growth)

=

Valuation NPV ($m) $407

Debt ($m) ($120)

Cash ($m) $39

FCFF Due to Share Holders ($m) $326

No. of Shares (mil) 438.882

Fair Value per Share $0.74

Valuation (P/E

Comparison) Company P/E

Eu Yan Sang 15.77x

Tianjin Zhongxin Pharmaceutical Group Co 27.41x

Luye Pharma Group Ltd 17.28x

Haw Par Corporation Limited 15.2x

Beijing Tongrentang Co Ltd 40.83x

Mayinglong Pharmaceutical Group Co Ltd 35.5x

Pharmesis International Ltd N.A.

Average P/E (without Eu Yan Sang) 27.24x

Estimated EPS 0.0503

Fair value of EYS 1.37

Source: Reuters

Valuation (P/E

Comparison)

Most of the companies are listed in China

Extremely high PE ratios and ranges from

15 to 400

Use FCFF instead

Valuation

Fair Value Using FCFF $0.74

Fair Value Using P/E $1.37

Current Price $0.66

Risk Factors

Upside risks:

Approval to enter into the vast China Market

Approved in the Netherlands, entered into the Western market

Downside risks:

Lemon Law

Foreign currency translation losses

Q and A?