Australian Healthcare Becomes New "Favorite" for Investors - Star Combo Pharma Ltd (S66 Pharmaceuticals)
Published: at 6:18 on March 3, 2018 Author: Editor
Original Source: https://www.aocai.com.au/articles#content/115886
Australia has an excellent natural environment, being one of the areas with least air pollution in the world, together with Australia’s stringent drug control standards and strictly regulated health care products system, Australia-made health products has built a global strong reputation. One of Australia's major shopping features is an all-encompassing drugstore that looks like a warehouse. Australia's health products are also favored by relatives and elders in the country (China). Each time a Chinese returns from Australia to China, it is almost certain that they would have to bring back a bunch of health supplements.
It is understood that the Australian Therapeutic Goods Administration (TGA) has a strict management system for pharmacy products, and has been the world leader in regulating health care products in a legislated system similar to restricted drugs. In other words, health care products manufactured in Australia, like other drugs, are required to be trialed repeatedly before able to be released into market, ensuring the quality of health care products sold in pharmacies.
This has built a unique phenomenon only seen in Australia: pharmacies are sometimes more crowded than supermarkets.
According to the 2016 Census data released by the Australian Bureau of Statistics (ABS), the total population of Australia has increased by 8.8% from the previous census in 2011 to 24.4 million. The census also found that the population of Australian-Chinese population has increased rapidly and the number of Chinese-Australian residents in Australia was as many as 1.12 million, accounting for 3.9% of the total population, an increase of more than 40% from 2011, when Chinese-Australian residents accounted for only 3.1% of Australia's total population.
As the number of wealthy Chinese living in Australia increases, the impact of the population’s purchasing power on the Australian has been obvious, for example, the recent boom in the housing market, where it is not unusual to hear a Chinese tyrant’s daughter purchasing a luxury waterfront mansion. The influence of the Chinese purchasing power has been gradually emerging in other Australian industries.
Australia's high-quality, healthy and natural agricultural products has always been favoured by Chinese consumers. As a big global producer of high-quality dairy products and health products, and also a major gathering place for overseas Chinese, Australia has naturally become a major location of purchasing such items.
In addition, China undoubtedly has the largest consumer market in the world. With an increasingly aging society, and a growing population of middle class, Chinese has demonstrated an increased attention and demand for health care products. According to the "2018-2023 China's health products industry, market outlook and investment planning points analysis report" released by the Prospective Industry Research Institute, it is predicted that by 2020, China's health care products market will reach 235 billion Yuan.
Among them, the Australian health care products has a Chinese market share of over 40%, and with the development of free trade between China and Australia, the next 5 years, the Chinese demand for Australian health products in Asia is likely to explode.
1. An influential purchasing power of China on Australia’s health care industry - Fueled by an increased awareness of health, aging, income
From the experience of multiple countries, the main impetus’ to the health supplement industry are sustained economic development, increased the disposable income of residents, and the aging population.
According to Roland Berger's report, China's annual per capita consumption of health foods is 24 U.S. dollars, which is 1/5, 1/7 and 1/8 of the average per capita consumption in Japan, Australia and the United States. However, as more people have higher incomes, young people that have strong health awareness are able to afford and purchase health products for elders. In particular, the overseas health products have become a trend as gifts and the potential for a further development of the health supplement industry has also been expanded.
According to the Australian Financial Review, China has a very strong purchasing power because of its large population. Especially in recent years, Chinese consumers' interest in foreign goods can be said to be increasing daily. At this moment, some Australian businessmen have seized the opportunity to distribute large quantities of healthcare goods into China through the “DaiGou” channel.
From these “DaiGou” channels, Chinese tourists are one of the main channels in selling Australian healthcare products to China. According to the 2017 Australasia Travel Industry Outlook 2017 report, in 2016-17, Australia hosted 8.6 million foreign tourists, with a total spending of 39.8 billion Australian dollars. Chinese tourists have contributed to 24.6% of these spendings, close to 10 billion Australian dollars. This number is expected to grow to A $ 13 billion by 2020. The average spending of Chinese tourists on a single visit to Australia is almost $ 8,000, the highest among tourists from all over the world.
Chinese students in Australia are another main purchasing channel. Australia's education industry is one of the largest export industries with annual revenues of about A$ 20 billion. Chinese students account for about one third of Australia's 450,000 foreign students, and the figure is still on the rise.
The New York Times once reported that, in every 10 Chinese students, 8 have engaged in “DaiGou” purchasing. Of course, most students only occasionally participate in small purchases to earn some living expenses. But some have been capable to grow their business into large export companies. There are numerous examples of these successes.
But no matter what, “DaiGou” purchasing has become a new business trend, and it is inseparable with the development of e-commerce. The rapid development of the “DaiGou” purchasing industry has added new impetus and new energy to the bilateral trade between China and Australia.
It is foreseeable that the Australian health care industry will continue to develop.
2. Australia's healthcare industry has become an investor's "new favorite" - In recent years, in health care products M & A circles, Australian health care products companies have become the "hot money" for Chinese investors
So, why are Australian health care products companies so favored by the Chinese capital?
According to the latest joint research report released by KPMG and the University of Sydney, this is mainly due to the signing and implementation of the free trade agreement between China and Australia as well as preferential policies such as Australia's pharmaceutical R & D mechanism and national innovation incentives.
The report notes that as the middle-income group in China continues to expand, the demand for clean, greener and healthier food in Australia is on the rise in the Chinese market. As the aging of society in China further aggravates, Australia's sound pension system, advanced medical insurance concepts and services, will receive the great attention from Chinese investors.
And Chinese consumers trust Australian health products. According to statistics, unlike most countries in the world, the Australian TGA is the first to list health products as pharmaceuticals products, and is strictly controlled through legislation. The Administration will conduct random checks on health products and manufacturing companies to verify whether the quality of the products complies with the label description and verifies whether the company conducts strict product quality tests. If the company has a good historical record, it is usually checked every two years, or else, more frequent inspections. If a company fails the TGA checks, the TGA would revoke the approval of the relevant products.
TGA has clear specification and requirements for Australian health care products, from the procurement of raw materials, testing, production processes and processes, to the finished product packaging and testing, and other aspects of drug requirements. Australian health care products must be produced strictly in accordance with the two standards: Australian TGA and the World Health Organization GMP. Coupled with the diversity of Australian health products and affordable prices, Australian health products have a good reputation among Chinese consumers.
According to the latest joint research report released by KPMG and the University of Sydney, China has been passionately investing in the healthcare industry in Australia over the past three years, reaching record highs. Last year, a total of 16 mergers and acquisitions or joint ventures were concluded, with a total cumulative investment reaching 5.5 billion Australian dollars.
The report pointed out that China started implementing the "2030 National Health Plan," and it is estimated that the medical expenditure will increase by 8.1% every year in the next five years, which is a tremendous opportunity for the Australian healthcare industry, while the demand for investment in Australian healthcare will also increase dramatically.
In September 2015, BIOSTIME Hong Kong acquired 83% of Swisse, an Australian health care company, for a total investment of nearly 1.386 billion Australian dollars through two acquisitions;
In July 2016, BIOSTIME acquired the remaining equity interest of A $ 311 million, gaining full control of Swisse;
In August 2016, Shanghai Pharmaceutical, Chunhua Capital spent 1.565 billion Yuan, for 100% acquisition of Vitaco, of 15 times price-earnings ratio;
In August 2016, New Hope Group acquired Australian Natural Care, an Australian health brand, and officially entered the field of nutrition and health industry;
In August 2016, Ausnutria Dairy spent 160 million Yuan to acquire Nutrition Care, a high-end Australian nutrition and nutraceutical company.
By the end of January 2018, By-Health, a Chinese health products giant, bought Life-Space Group, a Melbourne-based probiotic producer, for nearly $ 700 million.
Increasing Chinese capital will be injected into the Australian market, and the huge potential of the Chinese market will become the battleground of many large enterprises in Australia. Exporting into China and absorbing the funds of Chinese enterprises, on the one hand, could support stronger R & D and marketing capabilities, on the other hand, it can also have a deeper understanding of the Chinese market and carry out resource docking.
3. Investors focus on - Star Combo Pharma Ltd (S66)
Founded in 2004, Star Combo Pharma Ltd is an Australian nutrition company that develops, manufactures and sells a range of branded vitamins, dietary supplements and skin care products to serve the growing domestic and overseas markets. The company is one of nine TGA soft-gel production license holders in Australia. It provides OEM production for other vitamin companies and includes brands such as Costar, Amax, J & K and Living Healthy. The company's mission is to provide domestic and international markets with high-quality, healthy products made from natural, local ingredients.
The operational advantages of Star Combo Pharma Ltd (hereinafter referred to as Star Combo) include the following 5 points:
1. TGA Manufacturing License
Star Combo is a TGA permit that allows the company to produce a wide range of health care products such as powders, tablets, hard and soft capsule products. The license also awards Star Combo to produce for its own brand and other companies in the industry brand processing production.
2. Good Reputation
Star Combo produces a wide range of premium health products at a reasonable price. As a result, the company enjoys a good reputation among its clients through word-of-mouth recommendations.
3. Strong production capacity
Star Combo has significantly expanded its production and warehousing facilities to increase its production capacity and to meet future rising production needs with minimal cost. This will help the company maintain a superior profit margin.
4. Quality assurance
All Star Combo products are manufactured in their own Australian factory, under strict quality control and are all made from natural, premium ingredients.
5. Good customer base
The company has a solid customer base, and does not rely on a small number of centralized orders: no single customer accounts for more than 10% of turnover. This controls the risk of a company's earnings volatility from the changes of a single customer.
Original Equipment Manufacturing (OEM) + own-brand dual-pipe business model:
The company's revenue comes from the following two aspects:
1. OEM- Star Combo's TGA permit allows the company to manufacture for other brands’ health products. This accounts for 70% of the company's source of income.
2. Own-branded products - 30% of the company's revenue comes from four of its own brands: Costar, Amax, J & K and Living Healthy.
Its products range includes up to 209 different sizes of packaging, including skin care products (38 items) and health food (171 items), to meet the different needs of customers. These include 29 kinds of health food products, such as fish oil, propolis; 12 kinds of skin care products, such as day cream, essence, facial cleanser.
Star Combo Group distributes its products mainly through three channels: local exporters include purchasing sales channels and international online sales platform, souvenir shops and convenience stores and pharmacies.
It is worth mentioning that, since the establishment of the company, it has seized the domestic and international by a two-step sales strategy. In 2004, Costar-branded products have been exported to China. In addition, the company has different international marketing plans specified for sales in China, Vietnam, Hong Kong, Malaysia, Singapore and Thailand
Long history, brilliant achievements:
We can review the company's history with the following timeline:
In 2004, Star Combo Australia Ltd. was established and the Costar brand was established. Launched and sold through gift shops domestically and are exported to China.
In 2005, the company launched the AMAX skincare line.
In 2009, the company entered a period of rapid growth with the acquisition of other brands, including Kainan, Green Health Foods and J & K.
In 2011, OEM revenue increased by more than three digits.
In 2012, appointed exclusive supplier and export agency Vietnam's, defining its solid growth in Southeast Asia.
In 2013, the company signed a milk powder production facility to meet the growing needs of China's exports.
In 2014, relocated to a new facility in Smithfield, NSW, with five fully automated packaging lines.
In 2015, the company increased the manufacturing capacity and capacity of tablet manufacturing, hard-shell and soft gelatin packaging.
In 2016, the company purchased and installed large-scale automation machinery and equipment to increase the daily output of soft gel capsules to 3 to 5 million capsules.
In 2017, Star Combo planned to enter the mainstream pharmacy in Australia and reached an agreement with Terry White Chemmart (Terry White) to claim ownership of the "Living Healthy" brand and any intellectual property rights associated with the brand.
Through this acquisition, Star Combo and Terry White reached a strategic mutual agreement: Terry White will promote and market Living Healthy through its network of more than 430 pharmacies in Australia and will ensure significant sales advantage for Living Healthy products at each pharmacy. This will allow the company to further enhance the Living Healthy brand and image and enter the mainstream by establishing key distribution channels.
With the acquisition of the "Living Healthy" brand, management said it will conduct a full review and integration of all Star Combo’s product line. Star Combo also recently signed a Memorandum of Understanding with the famous Australian university - University of Technology, Sydney, on scientific research and innovation.
In 2018, Star Combo will take more stringent control over food safety and strictly regulate the production, processing, distribution, sales and supervision. The company will be the main food safety management, a clear call for the establishment and improvement of food safety monitoring system.
Star Combo understands that food safety is of utmost importance to people's health. To this end, every step of the manufacturing process, from raw material procurement to the release of the finished product, has an implementation of stringent quality control. Demonstrating a consistent responsibility for food safety, and constantly provide consumers with high-quality nutritional and healthy products.
4.Star Combo Pharma Ltd (ASX: S66) IPO Overview
Currently, Star Combo Pharma Ltd (S66) is seeking additional funding to help them expand their business models in Australia and overseas, particularly in China. The company also hopes to increase the marketing and sales of its own brand name products. Revenue contribution of the Branded Products division will increase to 50% in the next two years and to 75% in the next five years. By then, the company's overall profit margin will also be significantly boosted.
It is reported that LePu Medical Technology Group, a medical device company, has supply and marketing channels in China. They invested A$ 5 million in the proposed IPO to acquire more than 10% stake in Star Combo Pharma Ltd (Star Combo) whose board of directors is nominated by Lepu Medical Technologies. It is reported that LePu Medical Technology Group has invest 5 million Australian dollars to 7 million Australian dollars in the proposed IPO phase and will help Star Combo become its strategic partner in support of the company's development.
The initial public offering of share in Star Combo will be issuing a minimum of 662 million shares, and a maximum of 14.62 million shares, with issue price of A$0.50 per share (offer price). Pursuant to the Prospectus, the shares proposed will represent approximately 30% of the shares issued upon the Listing. Upon the completion of the Offer, the total number of issued shares will be 75,620,000 shares, and all shares, once issued, will be equal to each other.
Offer open date: February 27, 2018
Offer close: April 27, 2018
Star Combo reserves the right to open and close offers on any other date and time without prior notice.
How to apply?
▪ Application for Shares must be made using the application form accompanying the prospectus.
▪ Application of Shares must be for a minimum of 4,000 shares, and thereafter in multiples of 1,000 Shares. Payment for the Shares must be made in full at the offer price of A$0.50 per Share.
▪ There is no maximum value of Shares that may be applied for under the Offer.
▪The Offer is open to Applicants resident in Australia only. All Applicants under the Offer must have an eligible residential or, in the case of a corporate Applicant, registered office address in Australia.
Completed Application Forms and accompanying payment must be lodged by 5.00 pm AEST on Closing.
By mail to:
Star Combo Pharma Ltd
C/- Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
By hand delivery to:
Star Combo Pharma Ltd
C/- Link Market Services Limited
1A Homebush Bay Drive
Rhodes NSW 2138
(Please do not use this address for mailing purposes)
Cheques must be in Australian currency and drawn on an Australian branch of a financial institution. Cheques should be made payable to “Star Combo Pharma Limited” and crossed “Not Negotiable”. Applicants should ensure that sufficient funds are held in the relevant account(s) to cover your cheque(s). If the amount of your cheque(s) or bank draft(s) is insufficient to pay for the Shares you have applied for in your Application Form, you may be taken to have applied for such lower number of Shares as your cleared Application Amount will pay for (and to have specified that number of Shares in your Application Form) or your Application may be rejected.
Alternatively you may also apply online at www.starcombo.com.au and pay your Application Monies via Bpay before the Offer closes. If applying online, please follow the instructions set out on the online portal. Your application must for a minimum of 4,000 Shares and thereafter in multiples of 1,000 Shares at A$0.50 per Share.
1. Australian Bureau of Statistics http://www.abs.gov.au
2. Prospect Industry Research Institute "2018-2023 Health Care Industry Market Outlook and Investment Planning Analysis Report"
3. Roland Berger Consumption Research Report https://www.rolandberger.com/en/Publications/pub_global_logistics_markets.html
4. KPMG and University of Sydney joint research report "Chinese investment in health care industry in Australia Report" https://home.kpmg.com/au/en/home/insights/2018/01/demystifying-chinese-investmentin-australian-healthcare.html
Tel: +61 2 9756 6555
Add: 171 - 177 Woodpark Rd, Smithfield NSW 2164