Star Combo Pharma (ASX:S66) Chairman, Richard Allely & CEO, Su Zhang discuss the company’s upcoming IPO, products and growth plans. Rachael Jones: Hello. I'm Rachael Jones from the Finance News Network. Joining me today from soon-to-list Star Combo Pharma, is Chairman Richard Allely, and CEO Su Zhang. Welcome to the Finance News Network.
Richard Allely: Thank you, Rachael.
Su Zhang: Thank you.
Rachael Jones: Su, starting with you, could you give us a brief introduction to your company?
Su Zhang: Star Combo Pharma Limited is an Australian manufacturer of vitamins, supplements, nutritional products, and also skincare products. It develops, manufactures, and also distributes into the local and overseas market. The business was founded in 2004. It's headquarter is based in Sydney, Smithfield, at approximately 15,000 square meters of warehouse and production site. Currently, the daily production output of capsules is half a million capsules, daily.
Rachael Jones: Now to your business in more detail, can you tell me about your products, such as your dietary supplements?
Su Zhang: The unique thing about the Star Combo group is that we are constituted by two subsidiaries. One is Star Combo Australia, and the second business is Costar Pharma Laboratory, which is a TGA licensee holder. Now within Australia, the Costar Pharma TGA license allows it to manufacture tablets, hard capsules, soft gel capsules, granules, and powders. We're one of nine licensed soft gel manufacturing licensees in Australia.
Rachael Jones: What can you tell me about your vitamins?
Su Zhang: There's not a lot of manufacturers in Australia that's able to make such a full scope manufacturing such as us, so our licensee allows us to make not only for our own brand of products, but also for any other branded vitamin products on the market.
The revenue stream of the business at the moment comes from two main sectors. One is our in-house branded segment, which contributes to 30 per cent of the revenue stream. Now, the second part comes from our contract manufacturing part, and this part allows us to do private labeling for any other nutritional or vitamin supplement brands out in the marketplace. At the moment, this sector contributes to 70 per cent of our total revenue.
Rachael Jones: Can you give us more detail about your skincare products?
Su Zhang: Our skincare sector at the moment, is a small sector in the whole business. We are able to make skincare ranges such as lanolin cream, collagen essence serums, and also the very common collagen essence ampules.
Rachael Jones: And Richard, now to you, for your IPO, how much are you looking to raise and how will you raise those funds?
Richard Allely: Rachel, we're looking to raise in the order of $3 million to $7 million dollars. Currently, prior to the IPO, we've got 61 million shares in the business, and we're looking to raise that through to $7 million through the issue of between six million and 14 million new shares.
70 per cent of our revenue comes from our contract manufacturing. In the future, we'd like to actually see that reversed, so that 70 per cent of our earnings is coming from our own branded products. Recently, we signed an arrangement with the Terry White Group, and we acquired, late last year, the Living Healthy brand, so that gives access into 450 Terry White stores around Australia with a new brand that we can manufacture 100 per cent in-house. You know, that'll be a two-pronged attack. We'll be looking at reducing our unit cost of production, whilst at the same time improving the productivity of the facility.
Rachael Jones: And where can investors find out more information?
Richard Allely: Investors can go direct to our Star Combo website, which is www.starcombo.com.au, or by contacting our lead manager, First Guardian Capital.
Rachael Jones: And turning to financials now, can you give us a snapshot of your current position?
Richard Allely: Yeah, look, the current position's best viewed through our latest results at the end of 2017. Our revenue was just short of $10 million, finishing the year with a very strong cashflow position, just over $6 million. The working capital's in great shape.
Rachael Jones: And, Su, back to you. Now for a more general question, what is the size of the Australian vitamin and supplement market, and how do you plan to differentiate your product and grow your market share?
Su Zhang: 2.67 billion, that's the market size of the current industry. The current industry in Australia has experienced a very healthy growth of 6 per cent, and we see that growth because of an increasing awareness in the consumers' general health and awareness conscience, and also demand from our export market for clean and green Australian vitamins.
Star Combo's growth strategy will be based on growing its branded in-house products, and we're going to do that by three key initiatives. The first one will be through the working relationship with TerryWhite Chemmart, and then building that strong portfolio of the Living Healthy brand in our pharmacy channels. The second one is to expand our sales and working with the diagou sales channel as our market entry into China. The third one is leveraging off our strategic investor relationship with Lepu currently, who has 20,000 pharmacies and 8,000 hospitals in China, as an avenue to grow our sales into China's main market.
Rachael Jones: And back to you Richard, last question now. What is the focus for the next 12 months, and longer term?
Richard Allely: We want to build and grow the branded segment, and that's our real focus for the next 12 months. Longer term, we have wonderful opportunity through good cashflow generation to look at strategic acquisitions, to look at joint venture arrangements with other organizations, alliances where our combined synergies can come together to really increase our market participation in a way that benefits not just our organization, but other organizations that we do business with.
Rachael Jones: Su Zhang and Richard Allely, thank you very much for the introduction and good luck with your IPO.
Richard Allely: Thank you, Rachael.
Su Zhang: Thank you, Rachael.
Ends
