ESTHETICS INTERNATIONAL GROUP BHD
ESTHETICS International Group (EIG) (Fundamental: 2.2/3, Valuation: 1.4/3) is a turnaround story in the making, which we like for its strategy, recovering earnings, strong balance sheet and growth prospects.  

EIG distributes a wide range of cosmetics, skin care and haircare products; produces its own brand of products and operates a large chain of wellness centres.  The key brand distributed is Dermalogica, while others include Davines, Averine, and Tisserand. These are distributed via Aster Spring wellness centres as well as professional salons. Its own brand, Clinelle, is sold in leading pharmaceutical stores. Future growth will be driven by growth in Aster Spring outlets across Asia, greater brands acceptance of Clinelle as well as expanding its distributorships.  EIG aims to replicate its business model in Malaysia to other countries in the region. 

Back in FY2010, declining profits saw the Chieng family take over EIG from its founders. Their effort paid off when the company turned a profit in just 2 years, and its performance has since been on an upward trajectory. 

Revenue rose from RM132 million to RM 143 million from FY2012 to FY2014, while profit rose 8.8 times to RM 15.4 milllion. Return on equity grew from 1.8% to 12.68% with zero gearing. 

Moving forward, EIG plans to increase the number of Aster Spring outlets from 75 to 100 in the next 3 years. Each outlet takes only a year to turn cash flow positive. Indonesia, Thailand and the Phillipines are on the expansion list.

EIG is also looking forward to a 5 year extension of its distributorship license for Dermalogica, which expires end 2015. In recent months, it also secured 3 new distributorship brands — Physicians Formula, Young Blood and Evo. EIG is trading at a trailing 12-month P/E of 13.7 times and 1.4 times book. Trailing 12 month dividend yield stood at 2.65% with a payout ratio of 36%.

This article first appeared in The Edge Financial Daily, on May 11, 2015.