Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily, on October 24, 2016.

 

KUALA LUMPUR: Datuk Dr Lee Fang Hsin is excited about Taiwan’s new southbound policy. The policy, which is aimed at improving trade and investment ties with Southeast and South Asian countries, presents opportunities for his company to work with its Taiwanese counterparts.

Lee, the founder, president and group managing director of YSP Southeast Asia Holding Bhd (YSPSAH), said the pharmaceutical, healthcare and veterinary products specialist is in talks with “about three to four” local partners in Taiwan for possible partnerships, including dealerships, distributorships and joint ventures (JVs).

“There are many good [healthcare] products made by Taiwanese manufacturers. I believe we can play a major role to assist them in bringing their products to Southeast Asia, particularly Malaysia, by becoming their sales agent or distributor. We can even jointly set up a manufacturing plant in the future,” the 57-year-old Taiwanese told The Edge Financial Daily in an interview recently.

“In fact, we have already been approached by several Taiwanese firms keen to partner with us due to our long-established presence in this region and extensive network,” he said.

For the current financial year ending Dec 31, 2016 (FY16), YSPSAH hopes to maintain net profit at last year’s level as it expects the market outlook for 2016 to remain challenging with persistent foreign exchange volatility.

The group posted a 75.6% increase in net profit to RM28.97 million in FY15 from RM16.49 million in FY14, while revenue rose 10.2% to RM222.93 million from RM202.23 million the previous year.

However, YSPSAH saw its net profit decline 8.3% to RM11.7 million in the first half of this year (1HFY16), compared with RM12.77 million a year ago. This was despite revenue rising 7.5% to RM118.15 million from RM109.94 million.

The weaker earnings performance was attributed to higher cost of goods sold from its product mix and a reversal in unrealised foreign exchange gains recognised in 1HFY15.

“We will try to maintain our profits this year. Last year, there was [the impact from] the goods and services tax [which led to consumers stocking up on pharmaceutical products], so we did exceptionally well in the first quarter. But we expect the high-base effect from last year to normalise this year,” he said.

Meanwhile, Lee observed that most Taiwanese businessmen typically look to China, Japan and the US when they want to expand into new markets due to strong domestic consumption in the countries.

“But I believe Southeast Asia is an emerging market. Most countries in Asean are not facing an ageing population, so the earlier you enter this market the better,” he said.

And Lee is banking on the new southbound policy, which was put forward by Taiwan’s first female president, Dr Tsai Ing-wen, to lead the way.

Taiwan is the eighth-largest trading partner of Malaysia, with bilateral trade reaching US$13.6 billion last year. In the first seven months of 2016, the bilateral trade volume was US$8.67 billion, up 2.2% year-on-year. Currently, there are 1,700 Taiwanese companies in Malaysia.

Lee, who is also the honorary president of the Taipei Investors’ Association in Malaysia, the Asia Taiwanese Chambers of Commerce and the World Taiwanese Chambers of Commerce, urged Taiwanese companies to see Southeast Asia as Taiwan’s new backyard, believing that Tsai’s new policy “can’t go wrong”.

“We anticipate more Taiwanese investments in Malaysia going forward, making this country a perfect springboard to build their businesses in Southeast Asia,” he said.

Given its 30-year history in Malaysia, Lee opined that YSPSAH is “the best partner” for Taiwanese pharmaceutical firms to explore the Asean market.

“It’s not easy for an outsider to come in here and fight for market share. But unlike them, I’m not an outsider. I’m staying here in Malaysia; this is my base,” he said, referring to his permanent residency in Malaysia.

On its part, YSPSAH has been talking to more than 10 Taiwanese companies about possible JVs or collaborations since the launch of the new southbound policy in May. So far, there’s nothing firm.

“We just got to know each other not too long ago, so we need a little bit more time. Most of them want us to be their sales agent or distributor before considering setting up factories here,” said Lee.

Nevertheless, Lee said YSPSAH is unfazed by new competition from other producers as the potential partnerships will focus on dietary supplements, organic foods, chemical-free products and probiotics — areas where the group isn’t a dominant player.

“Currently, we do sell some of these products, but their share remains quite small in our product mix. Generic drugs still make up 80% of our product portfolio, so there is no concern about market cannibalisation,” he explained.

YSPSAH is one of the country’s top four pharmaceutical companies alongside Pharmaniaga Bhd, CCM Duopharma Biotech Bhd and Apex Healthcare Bhd.

In Malaysia, YSPSAH sells its products to clinics, drugstores, pharmacies, Chinese medical halls and private hospitals. The group also exports to Singapore, Myanmar, Thailand, Cambodia, the Philippines, as well as some Middle Eastern and African countries.

YSPSAH is 38.9%-owned by Taiwan-listed YungShin Global Holding Co Ltd, which is also engaged in the manufacture and distribution of drugs, as well as cosmetics, food products and testing reagents. YungShin Group was founded by Lee’s father more than 60 years ago. The youngest among seven siblings, Lee was the only one who was interested in exploring the Southeast Asian market.

Year to date, YSPSAH’s share price has declined by 8.4% from RM2.39 on Dec 31, 2015 to close at RM2.19 last Friday, giving it a market capitalisation of RM294.9 million. The counter was trading at its 52-week high of RM2.91 on Jan 15.

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