Bonia wants to re-enter China market

KUALA LUMPUR: Bonia Corp, whose share price has gone up by more than twofold in the past one year, is trying to re-enter the complicated China market by securing the right partner.
"China is a big market, (even though we failed the last time), we will still (plan to go back in) by securing the good partner, in view of the 1.3 billion population in China and (increasing) purchasing income," said its managing director Datuk Albert Chiang (pix), adding that the high-end fashion retailer is still exploring the business opportunities but is not in a hurry.
"Everyone is eyeing the China market, but the question is how and when as the culture is so different in China," he told SunBiz.
Chiang explained that the right partner would need to be in the fashion industry there, financially sound, and "believe" in the "Bonia" brand.
"We are talking to some parties in China, but (we have) nothing solid at the moment," he said.
Chiang explained that Bonia's previous presence in China was very small and its exit in 2012, didn't have a significant impact on the group.
He said lessons learnt from its previous experience include the varying trends, different "likes" and "dislikes" in the Chinese and the rather complicated nature of business operations there.
Key markets for Bonia currently are Malaysia, Singapore, Indonesia, Vietnam and the Middle East.
Chiang said over the past few years, the company has been growing steadily and healthily, registering double digit growth.
"We are much stronger in Malaysia, we have been (here for) 40 years, but at the same time, we have been aggressively penetrating the Vietnamese and Indonesian markets since 2011," he said.
According to Chiang, the last three years has shown good results in both its Indonesian and Vietnamese markets.
"Although bottom line contribution from these two markets is still not so promising, it is showing positive contribution now.
That's why for the past few years, we have impaired some investment cost and incurred innovation cost. This led to only (a single-digit growth) in the bottom line," he said.
Bonia was founded in 1974 and listed on Bursa Malaysia in 1994. It has a network of over 1,100 sales outlets and 140 boutique in several markets. Other popular in-house brands are Carlo Rino and Sembonia.
It achieved 10% net profit margin in the first half of current financial year, and it is expected to maintain at the same level for the remaining of the year.
Although profit contribution ratio from the local market will be on a reducing trend, Chiang stressed that the absolute amount will get higher given the growing market size.
"The Malaysian market can get 10% to 12% sales growth, Indonesia and Vietnam have 30% to 40% growth," Chiang said.
On expansion plans, Chiang said Bonia has started the third phase of its plant expansion in Malacca to cater for increasing demand. It is expected to be completed by the third quarter of the year and will add 40% to 50% production capacity.
"We are confident of recording better growth moving forward as (we have been investing in growing the business)," he said.
For the nine-month ended March 31, 2014, Bonia's net profit rose 28.10% to RM46.21 million, thanks to higher sales generated as well as better control of operating expenses.
The company has set a target of achieving RM1 billion turnover by FY2016, compared with RM632.33 million for FY13.
Chiang said as part of its strategy to outperform the market, the company has always budgeted higher advertising and promotion expenditure compared with the competitors.
"In terms of product, the quality of leather for Bonia is different from our competitors, we have been using Italian leather since day one of our operation," he said.
Commenting on the GST which will be implemented beginning April 2015, he said Bonia is not overly concerned on its impact on consumer demand as Chiang sees more promotion work as a way to overcome it.
"We used to give discounts quite often, and we don't have ceiling price for our products, as long as people think is worth and it depends on the perception of the value.
"We don't foresee big challenges ahead, and if you see our clientele, we're not (in the low income segment)," said Chiang, adding that the company can easily pass on the cost to consumers.
On dividend payouts he said, the company is committed to paying out dividends to shareholders even though the quantum is not as high as other companies.
"We need to keep some money for expansion. We don't have a fixed dividend policy as our operation is not only confined to local market.., but we're still paying dividend," he added.
Bonia only paid a 5 sen dividend for the financial year ended June 30, 2013.