YSP 'trying hard' to expand overseas presence

PETALING JAYA: Generic drug firm YSP Southeast Asia Holding Bhd is banking on expanding into the overseas market to contend with unfavourable market conditions at home.
"We're trying hard to strengthen our overseas presence, we see a lot potential out there," president and group managing director Datuk Dr Lee Fang Hsin told SunBiz in a recent interview.
About 70% of the company's products are for the local market, with the remaining 30% going overseas.
"That doesn't mean there is no growth in the domestic market, just that the expansion rate in the overseas market is much faster," Lee said, noting that its main overseas markets are Vietnam, Singapore and Indonesia.
YSP has no immediate plans to expand beyond the Southeast Asia region.
"When these two markets (Indonesia and Vietnam) are mature like the Malaysian market, then only we'll think about expanding to other regions," he said.
Lee said the volatility of the ringgit has impacted the company's business operations as its raw materials are 100% imported. "It's not a matter of what level the ringgit should be at, but, as a business, we definitely want a stable currency."
While a weaker ringgit does benefit the company's exports, he added, the positive impact has not been significant as its overseas customers have asked for a rebate for its products.
For the financial year ended Dec 31, 2015, YSP posted a 75.65% jump in net profit to RM28.97 million against RM16.49 million a year ago, underpinned by higher revenue recorded, lower cost margins for product mix sold and favourable unrealised foreign exchange gain.
Prescription drugs, which fetch higher margins, are more defensive in the pharmaceutical space, according to Lee.
"However, for over-the-counter (OTC) drugs like vitamins, when you don't have money, you may consume less, so OTC is much dependent on the economic conditions," he explained. OTC accounts for 10% of the company's total revenue.
Lee believes YSP will be able to register stable growth this year amid the challenging economic environment.
Currently, the company has two plants, in Bangi and Vietnam, with a plant in Indonesia under construction. The new plant, which costs RM10 million, is expected to be operational by early next year.
Lee expects the company to see slightly compressed margins this year due to the challenging market conditions. "Nevertheless, we strive to maintain our margin levels through cost efficiency measures and marketing activities as well as strengthening our exports."
Lee opined that mergers and acquisitions (M&As) could help the company to grow faster, but cautioned that it has to be done prudently. "In my opinion, M&As are quite risky in Southeast Asia, unlike other developed countries where their rules and regulations are more comprehensive and transparent."
Last February, YSP announced the acquisition of a 40% stake in China's Globecare Trading (Shanghai) Co Ltd (GCT) for asum of US$1 million. YSP's major shareholder Yung Shin China Holding Co Ltd holds the remaining 60% interest in GCT.
GCT is involved in trading of cosmeceuticals, food supplements and healthcare products. The acquisition will allow YSP to collaborate with GCT to jointly promote healthcare products for the Malaysian and Chinese markets.