Bioalpha Holdings Bhd is banking on its export markets in Indonesia and China to boost the group’s top line growth in the next two years.
The firm, which produces halal-certified herbal and non-herbal based health supplement products, said that to date, Indonesia was its core market and expected sales from the region to grow by 50% in the next two years.
At present, Indonesia sales made up more than 48%, or RM14mil, to the group’s turnover in financial year 2015 (FY15).
“Indonesia’s market is still growing and in the last five years it has a compounded annual growth rate of about 37%,” managing director William Hon Tian Kok told recently.
Hon said Bioalpha had gone into Indonesia after it recognised the huge potential in the market to offer its halal-certified products.
“The risk in Indonesia is also lower because we have existed in the market since 2007 via our first sales office there,” noted Hon.
But Hon has bigger plans for Indonesia, saying that the company aimed to turn its repackaging facility in the Riau province to a fully-fledged manufacturing plant in the long term.
In May, Bioalpha’s unit Bioalpha International Sdn Bhd had entered into 60:40 joint venture with Mutia Restiana, a well-connected Indonesian to set up PT Herbal Malindo Makmur, for US$250,000.
This was funded via internally generated funds.
Hon said the PT Herbal’s acquisition not only solved product registration issues in Indonesia, but also enabled the group to repackage their semi-finished products in a 4,000 sq ft repackaging facility in Indonesia to be ready this August.
Inevitably, the acquisition will also widen Bioalpa’s market share via small and medium enterprises and multinational corporations in Indonesia, and enable its existing clients in Malaysia to offer their products there, according to Hon.
The group intends to double the number of product launches to 20 products in Indonesia by the end of 2017.
Bioalpha’s second largest export market is China and it made up about 28% of the group’s revenue or RM8.3mil in FY15.
While Bioalpha was backed by its strong research and development centre, Hon said the demand from China was a result of aggressive advertising and promotional activities that started in 2014.
“We have about five original design manufacturers in Beijing.
“And our focus will be the Muslim populated areas like Lanzhou, Xi’an, Xinjiang and Qinghai and we have identified four distributors in these provinces,” he said, adding that Bioalpla already has presence in the southern and central part of China.
On the local front, Hon revealed that it was on the lookout to expand its retail chain of pharmacies via merger and acquisitions, with the idea of franchising them in the near term.
Bioalpha now owns 13 retail pharmacies under the brandname Constant, mainly in the Klang Valley.
Hon said Bioalpha bought Mediconstant Holding Sdn Bhd for RM5mil last year from Ng See Hein and Loh Peng Yeow in December last year with the aim to expand its housebrand supplements.
“This not only reduce marketing costs but enable us to reach out to customers via new formulations,” he said. adding that domestic sales is expected to grow by 40% in the next two years.
The company also has a 70:30 joint venture with MyAngkasa Holdings Sdn Bhd, the country’s largest cooperative organisation.
MyAngkasa is a subsidiary of Angkatan Koperasi Kebanngsaan Malaysia Bhd that has 10,000 cooperatives under its umbrella and eight million members.
“The earnings potential from this JV is also huge considering that the members can purchase our products on a special discount from our retail pharmacies,” he added.
Bioalpha has its own organic herbal farms in Desaru in Johor and Pasir Raja in Trengganu.
More than 20 types of herbs are being harvested at its 300-acre land in Desaru, Kota Tinggi.
The other is a 1,000-acre farm in Pasir Raja, of which 123 acres are harvested, while the remaining 877 acres are currently being cleared.
Hon said the company expected to produce about 400 metric tonnes of herbal medicines by 2020.
The group is also known for its inhouse liquid fermentation process that is able to produce medicinal mushrooms strains.
One of its bestsellers include tiger milk mushrooms, traditionally used to cure respiratory problems.
Noteworthy is Bioalpha’s market capitalisation, which has more than doubled to about RM200mil now, compared to when it was first listed in the Ace Market in April, last year.
The company has dividend policy of 30% of profit after tax and has recently proposed for a bonus issue of 166,666,666 new ordinary shares of RM0.05 each in the company on the basis of one bonus share for every three existing Bioalpha shares held at an entitlement date to be determined later.
Hon is currently the major shareholder with a 17% stake, followed by Malaysian Technology Development Corp 16.1% interest and Perbadanan Nasional Bhd 10.3%.
Shares of Bioalpha closed unchanged at 38 sen on Friday, arriving at a market capitalisation of RM190mil.
