AuMake International (ASX:AU8) selling to China

Interviews

by Jessica Amir

AuMake International Limited (ASX:AU8) Executive Chairman, Keong Chan discusses the company's strategy, its range of branded products, and selling Australian and New Zealand products to Chinese buyers' agents and tourist markets.

Jessica Amir: Thanks for tuning into The Finance News Network, I'm Jessica Amir. Today I'm with AuMake International (ASX:AU8) Executive Chairman, Keong Chan. Keong, welcome to the network.

Keong Chan: Hi. Thanks for having me, Jessica.

Jessica Amir: Thanks for coming.

Keong Chan: Thank you.

Jessica Amir: So for those who aren't familiar, just give us a quick introduction to the company.

Keong Chan: Sure. Yeah, AuMake has 13 retail stores in Sydney, Australia. We are the biggest one in this market. We also have an online store, which is growing. We sell Australian and New Zealand products to our Chinese customers, primarily Daigou and Chinese tourists, and we sell a lot of the popular products, Blackmores (ASX:BKL), a2 milk (ASX:A2M), Bellamy's (ASX:BAL), but we also sell our own products and less well-known products in this market.

Jessica Amir: Thanks, Keong. Now can you tell us about the market for Australian and New Zealand products in China?

Keong Chan: Yeah. Jessica, it's a huge market. There's a handful of brands which dominate the market, A2, Bellamy's, Blackmores, I think most people are familiar with them, but we actually think that the market is far bigger than just a handful of brands and that's what AuMake is here to do, is to effectively incubate new brands and products for the Chinese market.

Jessica Amir: Keong, now to the products and distribution. Just tell us about your products.

Keong Chan: Yes, sure. We sell five main categories of products. There's skincare, there's health supplements, milk formula, honey, and we also sell wool. So it's that which is an interesting product, coming into the Chinese winter. We have our own products within each of those categories except for milk formula, which we're currently working on, and there's significant scope within each of those product categories for new products, which is something that people may not truly understand, is that Chinese consumers are always looking for new things, the next new skincare product, and the next new health supplement, so that's what we do,

Jessica Amir: And now, what can you tell about the sales and distribution?

Keong Chan: Yeah, interestingly with our business, 30 per cent of our sales come through online, and what we mean by that, for us, is through WeChat. Now, for anyone who knows about the Chinese market, WeChat is a really big thing, and the majority of our customers use it. So what we mean by that is they order through WeChat, they pay through WeChat, and they organise delivery through WeChat. So for us, what that means is our customers don't need to come into our stores. They may come once, they may come twice, but in the end, they will keep buying through online, and that's why we're expecting to see a larger percentage of our sales, moving forward, coming through online.

Jessica Amir: Now to the finances and share price. Just start off by telling us where the company is at financially.

Keong Chan: For September quarter, we've done AUD$10 million in sales for the quarter at 17.5 per cent margin. Why that's important is that for financial year 2017, we did 10 million for the whole year, so we've effectively done, in one quarter, what we did in one year. What that's showing is the growth in our business. We expect December, as well, to be really strong for us, and we're approaching break-even around FY19, so we're making huge strides in that respect. We also have a really strong balance sheet. We've got AUD$12 million in current assets at the moment, which we'll use to execute our growth strategies moving forward.

Jessica Amir: Thanks, Keong, and well done. Now can you give us a snapshot of your share price?

Keong Chan: We listed in early October last year, 2017 at 8 cents, so we're currently, depending on market conditions, we trade somewhere between 25 to 35 cents, which values us at between AUD$70 to AUD$100 million in terms of market capitalisation.

We expect our share price to continue to increase as we continue to deliver strong and sustainable financial performance in the coming months. We can see visibility in that respect, so we're anticipating a similar increase.

Jessica Amir: Zooming out, Keong, now can you tell us about your strategy and progress?

Keong Chan: Yeah, we're looking at our interstate growth plans now, so we're looking at Cairns, Gold Coast and Melbourne, Australia and New Zealand, which is a really strong market for us. We believe that the Chinese tourist is actually a big part of what we do. A lot of people focus on Daigou, which, understandably, but Chinese tourists, when it comes to what's influenced and also what's popular in China, they're a really big deal, and particularly those Chinese tour groups. Strategically, we're focusing very much on that area. We're looking at expanding our national footprint, obviously, and as a consequence of that, we believe that the AuMake brand, as it grows in Australia, we can use that back in China, to work with online and offline distributors.

Jessica Amir: And lastly, where would you like to see the company this time next year, Keong?

Keong Chan: Yeah, this time next year, I mean, similar to what we've done in the last 12 months, the business would be significantly different again to what we see today. What we mean by that is both in terms of operational performance and financial performance. We are very fortunate, we are the only ones listed in our market, and we have the opportunity right now to be the biggest and the most well known. I think, when it comes to China, having that position gives us so many options to grow, domestically and also back in the Chinese market.

Jessica Amir: Keong Chan, thank you so much for your time, and thanks for the introduction.

Keong Chan: Thanks, Jessica.


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