The Tongkat Ali business is growing and with demands from Middle East
and North Africa and in South-east Asia it is set to be the industry
of the future.
KUALA LUMPUR: Power Root Bhd,
which makes Tongkat Ali drinks,
has more than doubled its
after-tax profits this year
to RM35 million with increasing
exports to the Middle East
and North Africa.
Its shares have jumped more
than 60% this year, outperforming
the 9% rise in the broader
Kuala Lumpur Stock Exchange.
Still, alongside the maker of
Tolak Angin – ‘Repel the Wind’ in Indonesian – firms in the
region including Singapore’s Eu Yan Sang International Ltd and
Power Root are drawing the attention of investors.
Shares in Eu Yan Sang and Power Root trade at 18.75 and 15.05 times
their latest earnings, respectively. That is far below the average
of 76.38 times for a group of eight listed Chinese traditional
medicine makers, according to data from Thomson Reuters StarMine.
Power Root Bhd said stronger exports to markets like the Middle
East and North Africa boosted earnings and it plans to expand in
Southeast Asia.
At Singapore’s Eu Yan Sang, Hong Kong accounted for 47% of
revenue in the three months ended September. Singapore contributed 22%,
while the rest came from Malaysia and Australia.
The company’s flagship products, derived from traditional Chinese
medicine formulas, include Bak Foong pills for treatment of menstrual
pain and Bo Ying compound, designed to help children with a poor
appetite and other illnesses.
South-east Asian traditional medicine firms have with big plans
to grow amid strong investor interest.
Global pharmaceutical companies from Pfizer Inc to Roche Holding
AG have long pinpointed Asia as a source of future growth.
The traditional medicine market of South-east Asia is also coiled
to leap as an increasingly health-conscious middle-class rises in
the region.
Stacked with products that claim to cure anything from rheumatism
to sexual dysfunction, the market for traditional medicine in
South-east Asia is projected to grow to US$3.9 billion by 2017,
nearly 50% more than this year, according to research firm Euromonitor International.
While the ingredients in traditional medicines may be advertised
as natural and enjoy historical acceptance in Asia, they don’t
meet with universal approval.
Health regulators in places like Britain have warned of high
concentrations of elements like mercury in some products, and
conservation groups say some use ingredients taken from endangered animals.
On rainy days in Jakarta, a canny street merchant like Emi can
sell two dozen sachets of herbal cold cure Tolak Angin to
office workers and labourers by her roadside stall.
“Herbal medicine is good for the body because it’s natural,”
says Emi, who goes by only one name.
Laced with ginger, cloves and mint leaves, the traditional remedy
Emi sells for 25 cents apiece is also good for business:
The company that makes Tolak Angin went public this week and is
worth around US$850 million.
Shares in PT Industri Jamu dan Farmasi Sido Muncul Tbk jumped
as much as 24% when it became the first herbal medicine company
to list in Jakarta on Dec 18.
With Chinese peers now trading at premium prices, Sido Muncul is
just the latest in a crop of Southeast Asian traditional medicine
firms with big plans to grow amid strong investor interest.
Sido Muncul’s bright yellow Tolak Angin sachets are a staple of
Indonesian TV advertising campaigns featuring beaming local celebrities.
They’re sold at hundreds of thousands of street stalls across
Indonesia like Emi’s, known as ‘warung’, as well as supermarkets and pharmacies.
The company, whose name means ‘Realized Dream’, began life in
1940 as a tiny business operated by Rahmat Sulistio and her
three assistants in Yogyakarta, a city in the central Java region.
Over 70 years later, the company’s IPO was 11.4 times over-subscribed.
At its latest trading price, its market valuation was
around $850 million.
Sido Muncul has posted annual sales growth of around 10% on
average in the last few years and aims to launch new herbal drinks,
Irwan Hidayat, the grandson of Sulistio and head of the company,
told Reuters. It plans to use IPO proceeds of around 870 billion rupiah
(US$72 million) to develop new products and increase
manufacturing capacity.
“This is the industry of the future, a sunrise industry.
If we talk about health, there will always be demand,”
Hidayat said in an interview. “This country also has
extraordinary natural resources, so the supply of raw materials is not a problem.”
Patrick Walujo, co-founder of Singapore-based private equity
firm Northstar Group, said he favours consumer-driven businesses
in Indonesia. “Herbal medicine products may have to be adjusted
for exports, but the sector is attractive,” he said.
Some traditional medicine makers already have significant exposure
to overseas markets.
– AFP
