Update On Ogawa

Posted last Aug 2010: Ogawa World: Investing In Turnaround?

One of the issues in regarding to investing in turnaround is the 'sustainability' of the turnaround.

• Spotting a turnaround, investing in the turnaround and profiting from the turnaround, is exteremly difficult. The biggest stumbling block is usually the sustainability of the turnaround.

Ogawa reported its earnings recently. It suffered some minor losses. Now this could be tricky. The 'turnaround investor' is now left wondering if the current result is a minor blip or if the turnaround simply could not be sustained...

Here's the updated numbers...

And the balance sheet..



Recent news clip on the Edge.

• Ogawa targets Thailand and India, dips into red in 1Q
  Written by Daniel Khoo
  Friday, 26 November 2010 11:32
  
  KUALA LUMPUR: Ogawa World Bhd, which fell into the red with a net loss of RM135,000 in 1QFY11 ended Sept 30, will expand its market to Thailand and India by the end of its current financial year ending June 30, 2011.
  
  “Yes, we are in talks with distributors in those countries. Our style is to appoint one main distributor who will then in turn appoint the sub-distributors,” its executive director Louis Chong tells The Edge Financial Daily.
  
  The company, which mainly sells massage chairs, is aiming to increase its overseas revenue to 60% of total sales in three years from 45% presently.
  
  Ogawa currently sells its products in China, Hong Kong, Australia, Singapore, Indonesia, Vietnam and Saudi Arabia.
  
  “I see very bright prospects in the Middle East because the lifestyle there is such that they do not have massage parlours unlike here in Malaysia. We see the opportunity there,” Chong said.
  
  “Our (massage) chairs are very popular in Saudi Arabia and we are planning to move into Syria, Bahrain, the United Arab Emirates and Kuwait which will be done by the coming year,” he added.
  
  Chong also said that all their overseas investments are profitable to date and are positively contributing to its bottom line.
  
  He said the company is expected to spend more on advertising and promotion for the coming financial year from about 5% of its revenues to about 8% of its total revenues to gain the upper hand in the competition.
  
  Ogawa does not manufacture its products but instead licenses them out to contract manufacturers based overseas such as in China and Vietnam.
  
  In its 1QFY2011 ended Sept 30 results released yesterday, Ogawa reported a net loss of RM135,000 from a net profit of RM84,000 a year ago.
  
  Revenues for the 1QFY2011 however, inched higher to RM38.24 million from RM35.21 million. Basic loss per share was 11 sen versus 7 sen in the same period a year ago.
  
  Net assets per share as at Sept 30 stood at 53 sen.
  
  The group’s last quarter of loss was 3QFY09. For FY09 and FY08, it recorded net losses of RM12.43 million and RM8.37 million respectively. In FY10, it climbed back into the black with net profit of RM8.3 million.
  
  Quarter-on-quarter, revenue fell 19.8% from RM47.7 million in 2Q to RM38.24 million in 3Q. The group registered a profit before tax of RM120,000 compared with RM5.18 million in the immediate preceding quarter as a result of lower sales and lower margin.
  
  The company said the decline in performance was due to higher operating expenses which resulted in lower operating profit.
  
  “Every first financial quarter, we will usually see slowest growth, then it will usually pick up in 2Q and will remain flat in 3Q and our 4Q will usually be the best performing,” Chong said.
  
  He attributed this to the seasonality factor of its products which will usually see good sales during Father’s and Mother’s Day celebrations.
  
  “Some kids who are already well established usually buy our products for their aging parents as well. That is why we usually see good growth in sales during these times”.
  
  In the notes to its financial results, the company said that retail market conditions remain difficult for the time being and that it will be cautious in managing these challenges as it focuses on executing its medium to long-term growth strategies.
  
  
  This article appeared in The Edge Financial Daily, November 26, 2010.