Harimau Capital

Zhulian 3 Years Investment Return 170% (2010 - 2012)


 

Zhulian was listed on Main Board of Bursa Malaysia on 27 April 2007 with Syariah status. The group is involved in multi-level marketing (MLM), and has diversified interests in the manufacturing and trading of costume and fine jewelry, consumer products and printing. The group had 273 agencies functioning as distribution centers and > 480K distributors in Malaysia, Thailand, Indonesia and Singapore.


From a small local costume jewelry company to a regional MLM company. Zhulian’s journey began in 1989 with founder Mr. Teoh Beng Seng’s idea of bringing the concept of gold plated jewelry back to his homeland from Europe. Within a mere 4 years after inception and due to the overwhelming demand, the group commenced the construction of its first plant at Bayan Lepas Industrial Estate, Penang.

In 1996, in order to reduce its dependence on its core products, gold plated jewelry, the group started to diversify its product portfolio, switching from a single-product strategy to a multiple-product strategy. Since then, Zhulian has grown into a group of companies with widely diversified manufacturing facilities. At the same time, the group also began to venture abroad by establishing Zhulian Thailand and Indonesia through the appointment of a master agent. In 2003, Zhulian set up its Singapore Regional Office.

In May 2009, the group took a strategic move by acquiring a 60% stake of Zhulian Indonesia with the aim of improving its operation in that country and increasing its market share.


Expertise in costume and fine jewellery manufacturing. The group’s founder, Mr Teoh Beng Seng, has more than 25 years’ experience in fine jewelry production and has successfully turned Zhulian into a leading manufacturer of costume jewelry in Malaysia. Given its expertise in this area, these products have been the group’s core product until 1996 when it diversified its product range in recognition of cyclical nature of the jewelry business.

Wide product range. 
As a result of product diversification, Zhulian now offers a varied range of products including jewelry, nutrition products, food & beverages and water filters, with each accounting for approximately 20%of the sales pie. Hence, as opposed to some MLM players who rely heavily on certain products, Zhulian’s risks are spread out across a mixed range of elastic and inelastic goods which act as an earnings buffer during an economic downturn.


Vertical integration. 
Zhulian manufactures > 80% of its products in-house at its 4 manufacturing facilities in Bayan Lepas, Penang. Only the production of personal care, home care, skin care and cosmetic products are outsourced to third parties, mainly through a trading subsidiary, Master Square SB. The group will then market its products via its own direct selling channel. This vertical integration enables the group to increase its margins through economies of scale, close monitoring of product quality, ensure timely delivery of products to distribution centres and control of product supply. Compared to its peers, which outsource most of their products, the group has achieved superior average EBITDA margins of 25% over the past 3 years  compared with its peers’ <20%.


Early expansion to new market helps stave off competition. 
The group has spread its wings to Thailand, Indonesia and Singapore with the setting up of 49% owned Zhulian Thailand Ltd in 1996, PT. Zhulian Indonesia via the appointment of master agent in 1997 and Zhulian Singapore Pte Ltd (100% owned), which commenced business in 2004. These companies were established under Zhulian Management SB, which was set up to support the group’s overseas operations.

While the local market still has ample room to grow given that the group targets mainly Bumiputra, it is among the first to expand overseas as Zhulian recognizes that early expansion into foreign markets is necessary to fence off future competition by strengthening its brand earlier than its competitors. This opens up new growth opportunities and serves to complement organic growth in the Malaysian market. Although the group is present in 4 countries, the “Zhulian” trademark is registered in Malaysia, Thailand, Indonesia, Philippines, Singapore, PR China, Taiwan, Hong Kong, Japan, Australia and New Zealand, which makes it easier for the group to set up its operation in these countries in future. The current plan is to expand its operation to Indochina.


Malaysia and Thailand are the main contributors.
Both Malaysia and Thailand contributed >90% of group revenue.























2012 Updates





FINANCIAL OVERVIEW
Despite the prevailing situation of global uncertainty, such as financial crisis in Europe, rising costs due to surging prices of petrol and raw materials, especially food, the Malaysia’s economy showed positive recovering signs during 2011 with a GDP growth of 5%.

As for ZHULIAN Group, our domestic and export market demand remained resilient with a positive growth in the year under review where we took the Group’s revenue up a notch to RM357.5 million, which is equivalent to 11% growth from previous year’s revenue of RM322.6 million, a remarkable increase as compared to growth of only 2% in 2010. That also means ZHULIAN Group was able to sustain the uptrend for five consecutive years, a remarkable track record that serves as a testimony of the Group’s resilience in steering through the growing competition and great challenges in the MLM industry. Thanks to its prudent management and dedicated Distributors who always have strong faith in the business, also driven by the innovative and proactive strategic initiatives taken in shaping the Group’s future.

ZHULIAN Group has gone through a year of enormous strategic change in order to position itself to compete effectively in the market and march into the new stage of growth. Initiatives were taken to expand market share, increase product mix, refine business model, improve infrastructure to boost efficiency in
coping with increasing business volume. The positive momentum augured well for the Company’s long-term growth prospects.

The Group did not start up the year on a positive note as there was a drop in its first quarter’s net profit compared to 2010 first quarter’s Profit After Tax. That was mainly due to the drop in gross profit margin as a result of the strengthening of the Ringgit Malaysia against the US Dollar. However, the Group recovered strongly later on in the 2nd and 3rd quarter, backed by an increase in the number and productivity of Distributors, better sales performance and higher demand for our products in the regional markets.

During the last quarter of 2011 when coping with the trials and tribulations of the flood disaster in Thailand, the Group managed to come up with contingency plans to overcome the logistical challenge in flood area promptly without disrupting our supply chain. Such effective remedial action enables the Group to sustain the uptrend momentum till the final quarter to conclude the year with a 11% increase in revenue to RM357.5 million for the year under review, compared to RM322.6 million for year 2010. Profit Before Tax increased to RM115.1 million against the previous year’s RM105.9 million while Profit After Tax (PAT) increased
to RM95.3 million in year 2011, an increase of 10% from last year’s PAT of RM86.7 million.




BUSINESS NETWORK

The Group’s overall business network in the region has shown strong growth of 6% of which its core distributor Force reached 573,883 in year 2011 from a total of 540,583 Distributors in the previous financial year. Meanwhile, up till the closing of the financial year under review, its agency network that span across Malaysia, Thailand, Indonesia and Singapore also expanded from 293 to 315 authorised agencies.


INCREASING PRODUCT MIX
The Group continues to innovate in order to capture new market opportunity and meet the needs of the constantly changing market. In 2011, the Group added BEYOND FOOD JUNCTION DETOXIFYING UNIT and also SMARTSEAL FOOD STORAGE CONTAINERS to its home technology product range. Meanwhile, BEYOND MICROPLASMA AIR PURIFIER with added improved features was also re-launched as the upgraded model. Recognising the varied taste and demand of the health-conscious market segment, a new range of Traditional Herbal Supplements under the brand name of GREENLEX which includes GREENLEX I-COMPLEX, GREENLEX MEMO COMPLEX and GREENLEX ORGANIC SPIRULINA was strategically introduced to the market to attract a new group of Distributors and consumers. In additions, the Group had also launched jewellery products to meet the seasonal demands of Hari Raya Aidilfitri as it used to every year as the jewellery product range has successfully carved a niche in Malay market. The new launches managed to create excitements among our Distributors and generate considerable amount of sales revenue for the Group.


ENHANCING BRAND POSITIONING
In 2011, the Group made use the power of media to reach and engage the community. The Group has placed a total of 153 Billboards featuring a slogan which says “Bersama Menyambut Ulang Tahun ke-50 di Tahun 2039” (meaning “Together We Celebrate the 50th Anniversary in Year 2039”) along the North-South Highways, East Coast Region and Klang Valley in Peninsular Malaysia. The billboard campaign is part of the Group’s effort in increasing the public awareness about ZHULIAN Group and it’s brand. The slogan is used to signify the foresight or vision of the Group that always places importance in sustaining the business


GAINING STRONGER POSITION IN THAILAND MARKET
In the year under review, exports to Thailand, Indonesia and Singapore contributed 52% of the Group’s total revenue. The Group managed to gain its competitive edge in Thailand Market in year 2011 whereby the Group’s export to ZHULIAN (THAILAND) LTD. leaped 12% from RM149.2 million to RM167.2 million. Our products, particularly nutritional beverages, health supplements, jewellery, water treatment system and bedding products, continued to maintain strong demand which were not impacted by the flood disaster that happened last year, thanks to the strategic marketing programmes initiated by the Company.

The strong performance also stemmed from our proven business model as well as solid supports from Zhulian International Headquarters based in Malaysia with reliable and efficient supply of quality products marketed under household brand name of “ZHULIAN”.

KUALA LUMPUR (April 12): Zhulian Corpoartion Bhd net profit for the first quarter ended Feb 29, 2012 rose 29.2% to RM28.39 million from RM21.98 million a year earlier, due mainly to the increase in revenue and share of profit of oversea operation.

It said on Thursday that its revenue for the quarter rose 30% to RM111.88 million from RM86.22 million in 2011, as overall, the export sales increased by 42%, due mainly to Thailand whilst the local sales increased by 18%, mainly contributed by high demand for the food & beverage and nutritional products.

Earnings per share was 6.17 sen while net assets per share was 85. 29 sen.

Background
Corporate profile
Penang-based Zhulian Corporation Bhd (Zhulian) and its group of companies are in the Multi-Level Marketing (MLM) business. The Group manufactures and distributes a wide range from products ranging from gold-plated fashion jewellery to health drinks and personal care products. Zhulian was listed on the Main Market (then known as the Main Board) of Bursa Malaysia on 27
April 2007.
Zhulian was founded in 1989 by Teoh Beng Seng, who believed there is a strong market for gold-plated fashion jewellery and brought the concept back to Malaysia from Europe. He chose direct selling as the distribution channel.
Business flourished and the Group started to manufacture its own fashion jewellery at its plant in Penang. In 1996, Zhulian began to diversify its offerings into other categories such as food and beverages (F&B), home care, personal care, health drinks etc. It has also successfully ventured abroad and currently has a strong presence in Thailand, Singapore and Indonesia.

Business
From fashion jewellery alone, Zhulian’s product offerings have since grown and it now offers a diversified range of consumer products as follows:-

Category Description
1. Fashion Jewellery
Over 2,000 designs of gold-plated, rhodium-plated and twotone jewellery items such as rings, pendants, brooches,earrings, anklets, bangles, bracelets etc, under the brand

2. Food & Beverage (F&B)
Premix coffee, cereal drink, juice concentrate and premix cocoa.

3. Nutritional Health
Nutritional supplements and drinks under brands such as Dr. Africana’s, Royalmix, B’Young, Vegi-Vera, Zhubee, Origrow, SS Solution, ISO.5, ISO.3, and ISO.7.Sugar substitutes under the brand Homsweet.

4.Home Care
Laundry, dishwashing and multi-purpose detergents as well as floor cleaner under the brand XTRA; and various air fresheners under the brand JUNGLE FRESH.

5. Personal Care
Personal hygiene products such as hair shampoo,conditioner, body shampoo, toothpaste, talcum powder,and foot care under the brands Smileon, Dolphin, Laviteen,Baby Cinta, Assaho, Hinokoshiwa and Eltina. Also, sanitary napkin under the brand Wanisa.

6.Beauty Care
Skin whitening, anti-ageing and body-shaping products under the brand Shishen. Lipsticks under the brand Nadra.

7. Home Tech
Water purification system known as Beyond Water. Air purifier system known as Beyond Microplasma Air Purifier.

8. Therapeutic
Bio-ion Therapeutic Mattress Pad, Scientific Pillow and Bolster under the brand of Contiago. Bio-magnetic therapeutic belt under the brand M-Belt.

Zhulian’s top three revenue generators – fashion jewellery, F&B and nutritional health – each contributed approximately 20% to Group revenue in FY10. Fashion jewellery had always been the anchor revenue contributor. Nevertheless, the F&B and nutritional health segments have been growing swiftly and by FY10, revenues from the respective F&B and nutritional health category overtook fashion jewellery.

As a MLM company, Zhulian’s products are distributed through its vast network of independent distributors and agencies located in Malaysia, Thailand, Indonesia and Singapore. Its distributor force in these four countries has grown from 365,000 in 2008 to approximately 540,000 presently. Its largest distributors force is in Thailand (~439,000), followed by Malaysia (~88,000), Indonesia (~12,000) and Singapore (~1,000). Thailand appears to be the fastest growing market for Zhulian, with the number of distributors rising from 250,000 in 2008 to the current 439,000. Meanwhile, we believe Malaysia is a mature market for the Group with a relatively steady force of distributors. Zhulian manufactures over 80% of its products in-house, and has three manufacturing plants in Penang Malaysia. In December 2009, the Group’s manufacturing facility that produces F&B and nutritional products achieved the Good Manufacturing Practice (GMP) certification, which provides customers further assurance that Zhulian’s products are manufactured in a hygienic manner and in accordance to the best practices in manufacturing. We understand the Group’s current production capacity is sufficient to support the expected growth over the next three years. Meanwhile, across the borders, Zhulian also has offices in Thailand, Indonesia and Singapore.
In terms of competition, the MLM landscape in Malaysia is competitive. According to the Ministry of Domestic Trade, Co-operatives and Consumerism website, there are 427 licensed MLM companies in Malaysia as at December 2008, being the latest available statistics. Nevertheless, wellknown and active MLM companies are a much smaller number. Publicly-listed MLM companies include Amway Holdings, DXN Holdings, Hai-O Enterprise, CNI Holdings, INS Bioscience and Caely Holdings while the better known privately-held MLM companies include Cosway, Elken, Neways Worldwide and Nu Skin (Malaysia) to name just a few. We note that most of the product offerings by these MLM companies revolve around F&B, nutritional, personal care, healthcare and household products.
While Zhulian also sells these items, its fashion jewellery offerings remain a differentiation factor from its competitors. The Group further differentiates itself by focusing on the Malay female segment, which makes up 90% of its customer base in Malaysia.

二零零八年十一月十二日 晚上十一时十五分
专访冷眼－－张弓
金融海啸，全球肆虐，股市和金融，同属一个范畴，当然劫数难逃。
我国股市，由1500多点，降到今天800多点，可以说是凄风苦雨，惨不忍睹。
许多股友都在问股市还有前景吗？此时此刻，可以下场吗？
原名冯时能的冷眼，研究股票投资，已超过30年，即使股市大落，也能屹立不倒，到底有什么秘诀？
“要想在股市赚钱，不能只听贴士，一定要认真研究！”冷眼开门见山说：“尤其股市像现在，忽起忽落，只听贴士，往往会输到倾家荡产，不只是血本无归。”
从不听信股票贴士
冷眼从不听信贴士。
他早年特辟一个书房，专收股票报告书，天天认真研究，对我国上市公司每一间股票公司，了如指掌，问他任何细节，对答如流。
他的收藏，是马来西亚记录的缔造者。
如今，冷眼用电脑，也是天天认真研究。
在回答记者问题之前，冷眼先谈这次令人不寒而栗的金融海啸。
他说，这次海啸中心是美国，其次欧洲。
再其次是南美洲、阿根廷、冰岛。
“亚洲可以说最轻微，主要是包括我国在内的亚洲国家，比较落后，这次海啸是由衍生产品引爆。”他说。
冷眼举例说明衍生产品，譬如一个人向银行贷款100万买屋，订下合约，银行又把合约转实，卖给像这次渡不过难关的雷曼兄弟，这类像雷曼兄弟的公司，100万往往可赚37倍。
庆幸贷款制度谨慎
冷眼庆幸，我国贷款制度谨慎，不够资格不能获得贷款。
而且，贷款直接，一张合约，不会卖来卖去，要乱搞也不容易。
银行不能乱借钱，有一元的资本，最多只能借出十二元，逾越就成了违法。
也因此，不会陷入泡沫的地步。
话题一转，冷眼又举美国股票为例。
他说美国有5千个单位信托公司。
美国有56%的人民购买单位信托。
行情看落，个个要拿回钱。
单位信托公司那来现款？只有毫无选择性，拼命卖股票，股票能不落吗？
曾出版：“30年股票投资心得”一书，销售超过一万本，11次上榜，成为大马华文畅销书排名榜的冷眼，又是如何看待当前的海啸？
冷眼非常肯定，那些说经济没前途，股市没前途的人，是盲人模象。
他说：“海啸一定能过！”
他说一定能过时，语气坚定。
最主要原因，是全球政府倾全力打救。
当然救得了。
只是时间问题。
多长时间？冷眼保守推测，是三到五年时间。
冷眼特别指出，这次海啸和1929年的经济大萧条完全不同。
当时，是各家自扫门前雪。
这次，是全球一条心。
冷眼因此作出结论，这次金融海啸，会导致经济衰退，这是无可否认的事实。但是，绝对不会大萧条。
选择最好底子股票
明白了这次海啸的来龙去脉，冷眼才回过头，详细剖析我国股市。
冷眼以他纵横股市30年的经验告诉股友。此刻是：“进场的最好时机！”
但是，一定要作长期投资的准备。
长期，最少三年。
冷眼指出股票是公司股份。
公司是做生意。
现在，如果某人要做生意，要招股或者自己注入资金，要付出多几倍的钱，如果要从事地产，为什么不买产业股？要种棕油，为什么不买棕油股？
冷眼说：“现在买股，比你直接投资便宜几倍！”
“当然，不能闭上眼睛乱买，那真的会血本无归。你一定要在这最好时机，选择最好底子的股票，尤其重要，是最好股息的股票。”冷眼说。
收购省时又省事
说到这里，冷眼又提出他的看法，认为除了投资是最好的时机。收购，也是最好的时机。
在记者要求之下，冷眼举出CSC钢铁控股为例。
这只股，今年最高，1令吉6角9分，现在8角。
冷眼说：“这只股共3亿8千万股，每股8角，是3亿令吉左右。如果自己成立一家有规模的公司，要耗资7到8亿令吉，再加上制造业要经过漫长的五年才有规模，现在只要收购，既省时，又省事，更能早获利，你说，这是不是收购的最好时机?”
记者希望冷眼介绍几只可作总期投资，而且股息偏高的股。
冷眼不假思索说“PLENITUDE。”
这只股，没有中文名，是属产业股。
今年最高价3令吉4分，现在是1令吉7角。
冷眼说这间公司，在吉打、首都、尤其柔佛都有庞大的地库，资产值6令吉，当然买得过。
接着，冷眼提出一只属于消费股的ZHULIAN作说明，并强调“这是我的最爱”，这只股上市价是1.23令吉。
上市是2007年。
现在90仙左右。
去年每股赚18分。
今年赚20分。
难得是，去年派息15分半。
资本1亿7千200万。
竟然有现金1亿令吉。
这是一家直销公司，产品超过800样。是以假首饰和保健品为主。
产品85％是自家生产，远销至泰国和印尼，在我国主要对象是马来人。
冷眼说：“许多人对直销生意怕怕，才造成这只股不热门！”
此外，冷眼还透露，这只股的老板为人务实，很低调，知道的人不多。
这老板还有一个可取之处，不愿接见分析师。
冷眼的结论是这只股最近斥资4千多万建新厂，而且资产价值和赢利都属优质，当然是可以考虑了。
选择高派息股票
冷眼继续给喜欢买股票的人，提出以下的忠告。
要选什么股，最保守的答案，是有没有钱好分？
一定要重视股息，也就是有分红。
分红多少才理想？
答案很简单，比银行定期存款至少高一倍。
如果1000令吉存银行，一年可获35令吉，买股则至少要有70令吉。理由是买股风险高。
很多进入股市的人，忽略了股息，只希望股价节节上升，从股票赚钱，因此股市上升，股票交易所门庭如市，跟风的人挤破头，听“贴士”的人也挤破头，股市一落，都成了笼中困兽。
冷眼看到，那些天天在股市流连的人，是赚不到钱的。
因此冷眼给股友的另一个忠告，是劝大家进入股市，要量力而为，然后抱着储蓄的心理。
“尤其年纪大的人，经不起打击。期待股价上升而赚钱，往往会赔了棺材本而欲哭无泪，为何不重视股息？股息持续发出，便等于有固定收入了。”冷眼说。
在记者的整个访谈中，知道了冷眼这位报馆前总编辑，是用30年时间，倾全力研究股票后，有了自己的心得，他进入股市，最相信的人，只有一个，是自己。研究之后，他用逆向思考，人弃我取。因为他对每一只股票，能如数家珍，像这次股市大滑落，别人输得焦头烂额，痛不欲生，他呢，当然也有一些折损，但是，他手中握有许多派高股息的优质股，仍然可以安坐家中，等待领取股息。