Zhulian new plant April 4, 2007

BUSINESS TIMES

Zhulian to spend RM26m on new plant
Wednesday April 4, 2007

The Bayan Lepas factory is part of the direct selling and multi-level marketing firm's expansion plan aimed at increasing its production fourfold.

ZHULIAN Corp Bhd, a direct selling and multi-level marketing company will spend RM26 million to build a third factory in Bayan Lepas, Penang. The money will come from the RM33 million Zhulian raised in its pre-initial public offering (IPO) rights issue. To be completed within the first quarter of 2008, managing director Danny Teoh said the new factory is part of the company's expansion plan aimed at increasing its production by fourfold. Currently about 84 per cent of the company's products are manufactured at the existing plants in Penang. The company produces 1.2 million pieces of costume jewellery and 180 million sachets of nutritional products and food and beverages per annum.

"The new Penang factory is to cater to the production of new nutritional supplements," Teoh said when launching Zhulian's IPO prospectus in Kuala Lumpur yesterday. Zhulian's IPO involves an offer for sale by Teoh Beng Seng, Teoh Meng Keat, Ng Suan Choo, P'ng Swee Guab and the Malaysian Technology Venture Two Sdn Bhd. They are offering for sale 123.34 million shares in the company at RM1.23 per share. Of the shares offered, 87.84 million will be allocated for Bumiputera investors; 17.25 million for eligible directors, employees and business associates and 17.25 million for the public. The offerors will raise about RM150.48 million from the sale. They will also bear all listing expenses including underwriting commission, placement fee and brokerage amounting to RM3.7 million.

Scheduled to be listed on Bursa Malaysia's main board on April 27, Zhulian is set to be the largest listing on the exchange in 2007 so far, based on its offer size. With a total paid-up share capital of 345 million shares, the market capitalisation of Zhulian will be at RM424.4 million upon listing.

Looking at the promising outlook of the direct selling industry, Teoh said the company targets a 10 per cent net profit growth to RM63.87 million for the financial year ending November 2007 from RM57.9 million recorded in its last fiscal year. This will be achieved on the back of a 12 per cent revenue growth to RM253.32 million against RM225.3 million before.

"We are confident of meeting the forecast, where the local market will contribute 67 per cent to revenue, Thailand, 29 per cent and the rest from Indonesia and Singapore," he said. Zhulian is involved mainly in the manufacturing and direct selling of costume jewellery, nutritional products, food and beverages, water purification systems, mattress pads and pillows, and other consumer products. Its products are also exported to Thailand, Indonesia and Singapore. Within the next two to three years, the company targets to penetrate new regional markets in Taiwan and Hong Kong.

Direct growth June 18, 2007

THE STAR

Direct growth
Monday June 18, 2007

The Malay community seems willing and able to buy a lot of health and nutritional products from direct-selling companies.

Hai-O Enterprise Bhd reported on Friday a net profit of RM7.8mil for its fourth quarter ended April 30, 2007, up by almost 200% from the same quarter last year. Much of that surge was attributed to its direct-selling subsidiary in which most of its customers are Malays. It was also attributed to successful launches of new products.

Zhulian Corp Bhd, which distributes its products entirely through direct selling, sprang a surprise through the sheer size of its earnings when it was listed in April. The company has a good five-year track record, with a profit after tax of RM53.9mil last year.

In addition, Zhulian forecast a net profit of RM63.9mil this year, which is exactly the same profit that Amway Holdings Bhd made last year.

The interesting aspect of this is that while their profit levels are comparable, Zhulian's total market value of RM466mil is less than half that of Amway's RM1.1bil. There is, of course, one major difference. Zhulian has been listed just two months, while Amway has a longer track record as a business as well as a listed company.

Zhulian's directors had made an offer for sale of RM1.23 a share. The shares were initially poorly received in the market, trading to a low of RM1.02 last month.

That initial reception could be due to an earlier disappointment with CNI Holdings Bhd, also a direct-selling company, which failed to meet its profit forecast. CNI had forecast it would make a profit after tax of RM48.3mil in 2005 but it delivered a profit after tax of RM29.4mil.

A favourable report on the Penang-based Zhulian by SBB Securities a week ago may have helped lift its share price to RM1.36. There are several reasons to believe there is a certain quality in this company.

Its CEO and major shareholder Teoh Beng Seng seems to think so. He bought more Zhulian shares when the price fell below its initial public offering price, including a block of 25 million shares at RM1.18 each for a total of almost RM30mil last week.

Zhulian may meet its profit forecast. Just prior to its listing, it reported a net profit of RM15.3mil for its first quarter ended Feb 28, 2007. It reported holding net cash of RM102mil on that date, but this would be reduced to about RM70mil after it uses a portion of that to build a new plant.

Being cash-rich and cash generative, the company's board declared an intention to distribute 60% of annual earnings. It forecast earnings per share of 18.5 sen, from which it would pay a net dividend of 11.1 sen a share this year. That works out to a yield of 8.2% at a share price of RM1.36.

Like Hai-O, Zhulian sells its products mainly to the Malays in its domestic market, although it is successfully replicating its marketing model in Thailand which contributed RM202mil to group revenue last year.

There is another similarity between the two companies in that nutritional products also form a large component of Zhulian's revenue. Zhulian produces over 640 products under eight product groups, including gold-plated fashion jewellery.

Although its management has kept a low profile, it is savvy in managing the company to meet investors' expectations. Its track record shows the management's successful efforts in increasing profit margins and return on equity (ROE). Hence, net profit margin stood at 26% while ROE was 29% last year, both of which are very high levels of performance.

Direct selling has shown to be a cash generative business. Berjaya Corp Bhd knew that too. It took private Cosway Corp Bhd, which was de-listed earlier this month. Cosway reported a net profit of RM32mil for the first nine months of its latest financial year.

Zhulian to tap Vietnam, Philippine May 8, 2008

THE EDGE DAILY

Zhulian plans to tap Vietnam, Philippine markets
Wednesday May 8, 2008

PENANG: Zhulian Corporation Bhd, a multi-level marketing company, is planning to spread its wings to Vietnam and the Philippines after having established itself in other major markets of the region.

"We will be moving into the Philippines unofficially soon to test the market with our nutritional, food and beverage products," said group managing director Teoh Meng Keat, adding a market research showed the two markets were very promising.

He said the addition of the two countries would increase the company's market population base to more than 500 million people. The company already has a strong presence in Malaysia, Indonesia, Singapore and Thailand with 366,000 distributors marketing its wide range of products.

With 888 products marketed under 31 brandnames ranging from costume jewellery and nutritional supplements to food and beverage, the company is confident of penetrating the Vietnam and Philippine markets.

"Our plan for next year is to focus on aggressively developing the business in East Malaysia by setting up a warehouse, besides maintaining a strong presence in Thailand, Singapore and Indonesia," he said after the company's AGM yesterday.

Zhulian, which was listed in April last year, began as a gold-plated jewellery business 19 years ago. It has since expanded into health supplements and food and beverage products.

The company is in the midst of adding another manufacturing facility to its two existing plants in Penang. The RM50 million plant in Bayan Lepas which will be completed by the third quarter this year, could double or triple its production capacity over the next two to three years.

Plans are also afoot to start a new line for the production of tablets and capsules for its health supplements and to move into liquid food supplements next year.

In the year ended Nov 30, 2007, the group recorded a lower consolidated turnover of RM220.55 million, compared with RM225.38 million a year earlier, while profit before tax dipped to RM74.35 million from RM76.20 million.

Teoh said the decrease in turnover and profit before tax was mainly due to a decline in the local consumers' purchasing power, intense competition and higher raw material prices.

Costume jewellery contributed 27% of its sales, while nutritional products 20%, food and beverage 16%, while the rest were from its other products.

On competition from other multi-level marketing companies, Teoh said all these years since its inception, Zhulian had had its own niche market.

"We will continue focusing on this and also carry on with our compensation plan for our distributors, which is an important factor to attract them to work with us," he added.