Sunzen looking for right strategic partner

PETALING JAYA: Animal health specialist Sunzen Biotech Bhd, which has been listed on the ACE market for more than five years, is looking for a strategic partner in a bid to speed up its growth momentum.
"It's (inviting strategic partner) the fastest way to increase our business turnover with the new partner injects new business," chairman cum managing director Dr Tan Kim Sing (pix) told Sunbiz in an interview.
"Organic growth has been quite slow in the past five years, it's a bit tough, so we plan to invite new partner, who have similar kind of business with us," he said.
Tan said the company was in talks with potential local partners previously, but no agreement was reached, mainly due to pricing issues.
"We hope to find a suitable partner in the next three to five years, otherwise it will be difficult for us to move because turnover is so small," said Tan, adding that Sunzen will also look at acquiring some smaller companies to complement its existing business model.
He acknowledged that livestock is a mature industry in Malaysia, and that overseas markets, which it expects to grow to 40% of total revenue in the next few years from 27% last year, will play a more crucial role in driving the growth.
"The local market is too small and has too many players, while the products segment is more on non-antibiotic feed additives, so overseas markets (will eventually) become the main growth engine," he said.
However, Tan noted that overseas markets' growth pace is still slow, more effort needs to be put in to ensure its robustness and persistent contribution.
"The improvement in overseas markets is there, but has not grown (as fast as we had hoped), such as the Indonesia market which was started two years ago has not seen fantastic performance," Tan said.
For the China market, he said it is one they cannot ignore because of its large population. This is despite the market conditions there being quite complicated.
"Now we have two more dealers to distribute our products, hopefully it (the China market) will improve in the next one to two years," he added.
Tan said should markets like China and Vietnam perform well in the future, the company might consider setting up plants there. Currently it only has two plants in Malaysia.
Besides existing key export markets such as Vietnam, Taiwan, Indonesia and the Philippines, Sunzen is also exploring new markets such as Africa and developing the Middle Eastern region.
Tan said operating businesses abroad has never been easy with different registration procedures in different countries and their dependence on distributors.
Sunzen was listed in October 2008, at the start of the global financial crisis. Since its IPO, its share price has been lingering below listing price of 32 sen.
It recorded a better financial performance last year as compared to the past few years however, thanks to better export sales and companion animal products.
Its net profit surged 153.63% to RM3.59 million, while revenue rose 13.81% to RM37.33 million.
For FY14, Tan expects the company to achieve 10% net profit growth, with higher growth achievable if overseas markets perform better.
One segment which Tan expects to see better growth from, is its companion animal product which could benefit from the increasing trend of people keeping pets. It currently accounts for 20% of total sales.
"We have been changing a bit of the direction to focus more on companion animal products since last year as livestock segment has reached a stagnant level," he added.
The company has a wide range of products which include feed additives, nutritional feed supplement, veterinary pharmaceuticals, animal vaccines and disinfectants.
Tan said, on average, the company could achieve a profit margin ranging from 30% to 40%, which is quite comfortable.
However, same as other industries, the company is also facing issue on price fluctuation in raw materials, mainly in organic acid and phosphoric acid.
"It's not easy for us to pass the cost entirely, therefore cost control is very important," Tan said.
Sunzen currently has RM7 million to RM8 million cash in hand, with a low gearing level. It has proposed to issue up to 49.8 million free warrants, on the basis of one warrant for every three shares held, and to raise another RM4.98 million, when fully converted.