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Eu Yan Sang Unlocks The Power Of TCM
Corporate Digest | 26 November 2009
By: Xavier Lim
Articles (51) Profile

In 1994, the US Food and Drug Administration (FDA) asserted that herbs are not medicines but food, and classified Chinese herbs as “Dietary Supplements”.

However, in recent years, more Americans are turning to traditional Chinese medicine (TCM) to cure ailments that Western medical practitioners could not treat. The ancient remedies have even begun to garner respect from the FDA. In 2007, the FDA acknowledged TCM as an individual scientific system similar to modern medicine.

Eu Yan Sang International (EYS), the only TCM provider listed in Singapore, has 155 retail outlets in Asia, including 39 in Singapore, 64 in Malaysia, 46 in Hong Kong and the rest in China and Macau. EYS also has 21 TCM clinics, of which 18 are located in Singapore.

Growing Gradually
In 1Q10, EYS registered a 5% revenue increase attributed to higher retail and clinic sales in both Singapore and Hong Kong markets, which drove earnings up by 11%. Gross profit margin was lower at 52.8% as compared to 53.5% mainly due to product sales mix. However, these did not prevent EYS to achieve a strong operation cash flow that was 95.8% higher as compared to the previous corresponding quarter.

Another aspect worth taking note is EYS’ wholesale division whose revenue has soared 22% due to the resumption of export to China. This was despite the fact that there are a lot of established TCM companies such as Yangtze River Pharmaceutical Group and Tong Ren Tang in China, which goes to show that EYS’ products do have a good acceptance within the Chinese population, probably due to its good market positioning strategy.

A Big Vision
“Healthcare in the long run is going to be more integrative,” said Richard Eu, CEO of EYS. Eu believes that integrative healthcare will become more important in future. He defined ‘integrative’ as a combination of East (traditional Chinese) and West (modern) medical treatment.

“We are trying to seek different ways of combining these 2 treatments in order to benefit consumers,” Eu told Shares Investment (Singapore) in an exclusive interview at EYS’ headquarter in South Bridge Road. Eu said that he is concerned of the high medical costs that consumers are paying and the pain a patient is suffering. He hopes that EYS is able to use integrative approach to minimise the pain suffered by a patient and improve the quality of life in the near future. According to Eu, there are many pharmaceutical companies which are only interested in manufacturing pharmaceutical products. Because of this reason, Eu sees that EYS has an important role to play in helping people to stay healthy and to educate people about healthy lifestyle. “Prevention is always better than cure!” explained Eu. He believes that with 130 years knowledge of TCM, EYS is able to seek out ways of combining TCM with any forms of medication or medical treatments that will benefit people. “This is a big vision,” remarked Eu. “We are already working on it. We have a collaboration with KK Hospital where we have an acupunture service in their outpatient clinic,” he elaborated.

Eu highlighted that although EYS does not own any herbs farm like other pharmaceutical companies, EYS has its own system of identifying herbs. They even go to the extent of helping farmers to grow organic herbs. “We only choose the right and best quality, and process the herbs through every stages and all the way to the finished goods,” Eu remarked.

According to Eu, there are quite a number of TCM players that do not have any idea where their raw materials come from, unless they have their own farms. They are only interested in prices and are always looking for the cheapest raw materials. “Our herbs are audited by the Agri-Food & Veterinary Authority of Singapore (AVA). We are the first in the world with certification of chinese herbs,” said Eu with pride.

This indeed gives a lot of assurance and confidence to the consumers and is probably an important reason why EYS is the market leader in Hong Kong, in terms of market share.

With the further opening up of China’s economy, TCM is getting into the main stream of medical services, offering a better care to the people around the world. Therefore, more and more people worldwide are turning their attention to TCM. Investors should take a long-term view on EYS, which looks to be well-positioned to benefit from this trend.

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

Please click here for more information about this author.

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