Saturday, March 27, 2010

Cosway: Don't You Love The Fact That It's No Longer Listed?

Posted Oct 2009: The Cosway Story Continued..

Let me paste what I wrote back then:

Blogged previously: Singer Malaysia And Seven Eleven Proposed Listing

Oct 2006.

  • Cosway minority shareholders prefer sale
    By Chong Jin Hun

    MINORITY shareholders of Cosway Corp Bhd want the direct-selling firm to be put up for sale rather than let its parent Berjaya Corp Bhd (BCorp) take it private.

    "It is a bad idea to take Cosway private as it is a good and profit-making company with a bright future. Investors like to invest in companies with good dividends and bonus issues," proxy holder William Woon told reporters after Cosway's annual general meeting in Kuala Lumpur yesterday.

    He said it would be better to put the company up for sale as competitive bidding can produce higher sale prices.

    Woon was commenting on BCorp's recent announcement that it is considering a proposal to buy the remaining shares it does not own in Cosway. BCorp currently owns 74.4 per cent in Cosway....

They argued against the privatisation.

Worst still was the pricing of the offer.

Cosway had 344,434,000 shares. At an offer of 1.20, Cosway was effectively valued at 413 million.

On today's Star Business. Berjaya to inject Cosway into Hong Kong-listed unit

  • Wednesday October 14, 2009
    Berjaya to inject Cosway into Hong Kong-listed unit

    PETALING JAYA: Cosway Corp Bhd and Biofield Sdn Bhd have proposed to sell their combined 90% stake in Cosway (M) Sdn Bhd (Cosway M) to Berjaya Holdings (HK) Ltd (BHK)
    for RM900mil.

    Cosway, Biofield and BHK are indirect subsidiaries of Berjaya Corp Bhd (BCorp). Madison County LLC, which owns the remaining 10% of Cosway M, is also selling its stake in a separate deal.

    BCorp said the proposed disposal of Cosway M was part of an internal re-organisation within the group that would put the company under BHK, which was listed on the Hong Kong Stock Exchange.

    In a filing to Bursa Malaysia, BCorp said the acquisition would be paid via the issuance of 741.2 million new BHK shares and irredeemable convertible unsecured loan stocks (ICULS) worth about HK$1.7bil and cash of RM44.7mil.
    The RM900mil, representing a premium of about 367% over the consolidated net assets of Cosway M of some RM214mil, was derived based on, among others, the past profitable earnings record and future earnings potential, proven track record, large distribution network, strong presence and the established brand name of Cosway. Cosway Corp will use the proceeds of RM44.7mil as working capital.

    BCorp also said its subsidiary, Berjaya Group (Cayman) Ltd (BGCL), had formed a loan capitalisation agreement with BHK, of which 180 million new BHK shares would be issued to BGCL as full and final settlement of the HK$36mil loan taken in 2001.

    As of Oct 13, the total debt amounted to HK$36.4mil, of which HK$36mil would be settled via the proposal loan capitalisation and the remaining to be repaid by BHK upon receipt of written demand of repayment.

    Meanwhile, Berjaya Hills Bhd, Prime Credit Leasing Sdn Bhd, Inter-Pacific Securities Sdn Bhd and Berjaya Sompo Insurance Bhd, all indirect subsidiaries of BCorp, together with Tan Sri Vincent Tan Chee Yioun and Rayvin Tan Yeong Sheik have proposed to sell their collective 40% stake in eCosway for RM107.6mil, also to be satisfied via the issuance of new BHK shares and ICULS.

    “This is expected to increase the profile of Cosway M in line with its global outlook and expansion plans,” it said, adding that the sale of eCosway was also part of the streamlining and allowed BHK to have full control.

    The proposed loan capitalisation, meanwhile, will enable the BHK’s repayment without incurring any cash flow.

I wonder how would Mr.William Woon feel today.



Cosway the company grows and grows... really feel sad for Mr. William Woon. The gem he had, was privatised. Gone. Today, it just grows and grows...

Who's speaking out for the minority shareholders, huh?

Who's really looking out for their interest?

Isn't the minority shareholders also the owners of the company?

On today's Star Business: Cosway’s global ambition

  • Saturday March 27, 2010
    Cosway’s global ambition

    THE Berjaya group’s Cosway Corp Ltd is on track to realise its global ambition by establishing presence in two of the world’s largest economies – the United States and Japan – in the next few months as well as Europe later this year.

    Already a major player in Asia Pacific, Cosway will begin operations in the US and Japan by end-May and August respectively. Its venture into Europe will kick off in Britain in the fourth quarter of the year and subsequently in Germany early next year.

    Founder and CEO Al Chuah is confident that Cosway’s entry into major developed economies will catapult the multi-level marketing company into the global top three over the next one to two years. At present, it is among the 20 largest direct-selling companies in the world.

    To facilitate its aggressive overseas expansion, Chuah says the company has allocated RM47mil as capital expenditure (capex) for its financial year ending April 30, 2010 (FY10).

    It will increase capex to between RM70mil and RM100mil in FY11. Chuah says the capex will be financed by internally generated funds.

    High growth

    Setting up presence in China is the next breakthrough that Cosway is eyeing.

    “We are still in the registration process and we expect to get the licence to operate in China by the second half of next year,” says Chuah. Although Cosway does not have physical stores in China yet, it has already built a brand presence in the world’s most populous country – thanks to the Internet.

    Consumers in mainland China have been buying Cosway products through eCosway – its global online shopping portal – with their orders being fulfilled by the Hong Kong operations.

    Cosway is somewhat considered a latecomer in the Chinese market, compared with other international direct-selling companies such as Amway.

    But Chuah believes Cosway will catch up and gain a large share of the China market once it obtains a licence to operate there.

    “Our unique business model, which is very hard for our competitors or potential competitors to replicate, is the formula that will help us succeed,” explains Chuah, who founded Cosway in 1979.

    Cosway Corp Bhd was listed in the Malaysian stock exchange after Chuah sold the company to the Berjaya group in the mid-1990s.

    However, Cosway Corp was taken private in 2007 as the management felt that the stock was not accorded a fair valuation although the business was growing fast.

    The market value was around RM400mil prior to the delisting. This compares with Cosway’s current market value of more than RM1bil as a listed company in Hong Kong. Cosway was floated on the Hong Kong Stock Exchange last November via a reverse takeover of Berjaya Holdings (HK) Ltd.

    Cosway’s turnover recorded a compounded annual growth rate (CAGR) of 27% from RM382.22mil in FY06 to RM773.94mil in FY09. Its net profit, on the other hand, recorded a CAGR of 45% from RM19.79mil in FY06 to RM60.72mil in FY09.

    For the six months ended Oct 31, 2009, Cosway posted a turnover of RM493.3mil and a net profit of RM53.53mil. Currently, about half of Cosway’s turnover comes from its Malaysian operations. Overseas contribution is expected to grow significantly as the company makes inroads into major economies.

    “The success or failure of multi-level marketing is tied to the success of the products. So, the lifecycle of the products will implicate the lifecycle of the company,” Chuah says.

    That explains why Cosway keeps coming up with new products every other month. For FY09, Cosway had in its stable around 1,750 consumer products – ranging from household, skincare and cosmetics categories, to health supplements, food, apparel and lingerie – compared with around 1,150 in FY04.

    “The wide range of products in our stable reduces our risk of over-dependence on any one product, and this is one of the key strengths that differentiates us from our competitors, most of which are highly dependent on just several key products to grow,” explains Chuah.

    Besides the wide range of products, he says Cosway’s success is also due to its pricing strategy. “The basic principle is to ensure all our products are priced competitively,” he says, adding that this is possible thanks to cost savings resulting from its economies of scale.

    Cosway’s products are sourced mainly from established manufacturers within the region. This OEM (original equipment manufacturer) sourcing strategy, according to Chuah, has enabled Cosway to take advantage of external resources and expertise for product research and development (R&D).

    In that sense, it’s a win-win solution: Cosway can save on R&D investment and focus its resources on expanding market share, while for the manufacturers, “it’s like striking gold” as Chuah puts it. “Winning a contract to be a Cosway product supplier will secure them a stable flow of income,” he says.

    Although Cosway prices its products comparatively lower in the market, the company is still able to maintain a healthy margin. Gross profit margin, for instance, has consistently stayed around 40% over the last five years.

    “It is important to have a low-price strategy because we are not merely competing against other multi-level marketing companies, but we are also positioning ourselves to compete against all the hypermarkets, discount stores and pharmacies in town,” Chuah says, adding that Cosway has managed to raise the stakes of the game with aggressive sales promotion throughout the year.

    Sending catalogues for promotional products bi-monthly to its members is Cosway’s direct marketing strategy. In addition, the group’s redemption and reward programme has been effective in helping the company retain customers and generate increased repeat sales.

    Expanding base

    Cosway currently has a global member base of more than 650,000 people. The group claims that the base is growing rapidly with its active recruitment drive to build a diverse and expansive marketing force.

    Another key to its success is its extensive distribution and retail network that provides consumers with convenient access to its products in all countries that it operates.

    In Malaysia, for instance, Cosway’s outlets are now commonly found not only in residential and housing areas but also in hypermarkets, shopping malls and other commercial areas.

    This new business model of moving away from the traditional direct-selling concept, with stockists acting as the distributor chain, to a “free-store” concept was introduced in 2008.

    Chuah says the concept has been a key contributor to Cosway’s total turnover as it has enabled the company to broaden its sales coverage. In addition, the concept has also enabled the group to manage its costs better. For instance, the group pays a commission of 10% to traditional stockists compared with 5% for store operators.

    In total, Cosway currently has more than 1,500 stores, with about half of them based in Malaysia, and the remainder in other major cities such as Australia, Brunei, Hong Kong, Taiwan, South Korea, Indonesia, Singapore and Thailand. It plans to increase the number of stores to around 2,500 by end-2011.

Quote from the article...

  • Cosway’s turnover recorded a compounded annual growth rate (CAGR) of 27% from RM382.22mil in FY06 to RM773.94mil in FY09. Its net profit, on the other hand, recorded a CAGR of 45% from RM19.79mil in FY06 to RM60.72mil in FY09. For the six months ended Oct 31, 2009, Cosway posted a turnover of RM493.3mil and a net profit of RM53.53mil.

Don't you just love all these listing the listing and delisting of a company?


ronnie said...

Can majority shareholders who take listed companies at low prices be relied upon to act in the best interests of minority shareholders when the same business entity is listed ?

Moolah said...

That sadly is the case.

Look at the bigger picture.

What exactly are the majority shareholders saying here?

Aren't the majority shareholders threatening the market to keep their shares at high prices or else they will privatise it? Well, aren't they saying that there should be no risk when they list their shares?

Yeah, keep my shares at a high prices or else....

Well... doesn't it ridicule the market?

Take market crashes. It happens yes? You buy a stock and unfortunately the market crashes. You decided to hold because you know the market will recover. So the stock you bought plunges. And before the stock price could recover, the majority shareholders privatises it citing low prices. How would you feel? By taking it private, the majority shareholder never allowed you to recover your cost of investment. Is that fair?

solomon said...

It is our attitude towards life that result the situation now...we let the rich businessmen set the rules and we follow....

If we could not breakthrough this paradigm of thinking, we could just end blogging here....honestly, we need a platform to set the right path....something like activist funds