Wednesday April 18, 2007

Ogawa opens 40% higher at RM1.40

Ogawa World Bhd made its debut on the Main Board on April 18 at RM1.40, or 40 sen above its offer price of RM1 each.

At the opening bell, there were 2.42 million shares done. Within the first half-hour, there were 13.16 million shares transacted at prices ranging from RM1.29 to RM1.40.

Its public offer of six million shares of 50 sen each at RM1 apiece was oversubscribed 33.42 times.

The homegrown retailer of health and wellness equipment raised about RM31.9 million in gross proceeds from the listing exercise.

---

Source: The Edge Daily

Wednesday April 18, 2007

Malaysia's Ogawa plans aggressive overseas expansion after strong market debut

KUALA LUMPUR, Malaysia: Malaysian health equipment maker Ogawa World unveiled plans to expand aggressively in the Mideast and Asian region after making a strong debut Wednesday on the local stock market.

Ogawa hit a high of 1.40 ringgit (US$0.4, €0.33) at the opening bell, before easing to close at 1.23 ringgit (US$0.35, €0.3), up 23 percent from its initial price offer of 1 ringgit (US$0.29, €0.24).

Its executive director Louis Chong was quoted as saying national news agency Bernama that Ogawa aims to double revenue from export sales to 40 percent in the next three years, from 21 percent now.

The company currently has 149 outlets, 85 of which are based abroad.

Ogawa, which already has 30 outlets in China and 15 in Vietnam, will open another 11 branches in the two countries, Chong said in the report.

It will also launch its first outlet in Dubai by year-end and is exploring franchise opportunities and sole distributorships in either Chennai or Bombay in India, and Bangkok in Thailand, he added.

Chong and other Ogawa officials could not be reached for comments.

Ogawa designs, makes and distributes health care equipment such as relaxation and massage chairs, slimming belts, foot massagers, threadmill and cardio equipment.

In a recent report, Kenanga Research said Ogawa controls about 45 percent of the Malaysian market that is estimated to be worth over 300 million ringgit (US$85.7 million, €71.4 million) in 2006.

However, it said Ogawa faces stiff competition from Singapore-based retailer OSIM and other players and imitation products present a growing threat to its business.

---

Source: The Associated Press, International Herald Tribune

Saturday April 14, 2007

Ogawa World aims for double-digit growth

By DARSHINI M. NATHAN

A GROWING middle class, rising disposable incomes and increasingly sophisticated lifestyles, which emphasise health and exercise, are just some of the factors that have contributed to Ogawa World Bhd's growth in the domestic market in recent years. 

That these aforementioned trends are gaining importance in other markets around the region is spurring the health and wellness equipment retailer to replicate its success abroad. 

The group, scheduled to list on Bursa Malaysia's main board next month, has now charted a growth path that mainly involves looking for opportunities in high growth markets like Thailand, India and the Middle East and expanding its footprint in countries like China and Vietnam. The group is also looking at franchising opportunities in Europe and Pakistan. 

“We are hoping to achieve double-digit growth over the next few years. To accomplish that, we will open more stores, introduce new products and expand overseas,” says Ogawa World executive director Louis Chong. 

Chong: The group hopes to grow its exports so that it makes up 25% of group revenue

The group is targeting to grow its exports sales so that it accounts for 40% of group revenue within the next three years, from 21% in financial year (FY) ended June 2006. For FY07, Chong says the group hopes to grow its exports so that it makes up 25% of group revenue.  

At the moment, he says China and Vietnam are showing the most potential. It has been 18 months since Ogawa World set up shop in China but sales in that market already account for one-tenth of group revenue.  

Likewise, its operations in Vietnam kicked off just last year but the Ogawa brand has already achieved international brand status. 

Thus it is not surprising that the group's overseas store expansion plan will be focused mostly on these two markets. Ogawa World intends to set aside RM5.5mil of the listing proceeds to expand overseas and locally. 

At present, it has 108 retail outlets in Malaysia, Singapore, China and Hong Kong. Appointed sole distributors in Indonesia, Australia and Vietnam operate another 33 outlets. 

Ogawa, which started out in the healthcare equipment market selling foot massagers, has seen its product range grow over the years so that it now has 29 products that are grouped under five categories: relaxation, therapeutic, fitness, diagnostic and hygiene products. 

But its best-selling product thus far is the massage chair, which was introduced in 2000. It now accounts for close to 70% of group revenue.  

The retail price of the massage chairs ranges from RM3,000 to RM21,000.  

Even overseas, the product has proven to be the most popular in Ogawa's portfolio of offerings.  

Clear market leader 

Aggressive advertising and promotion activities over the years as well as a strong emphasis on product design and development has propelled Ogawa to the number one spot in the domestic healthcare equipment market. 

The company's origins can be traced back to 1986 when its founders started trading household and electrical products such as water purifiers as well as kitchen and cooking appliances. In 1996, the company ventured into the health and wellness equipment business. 

Ogawa World now controls about 45% of the domestic market that is said to be worth over RM300mil currently. That value is expected to more than double in five years' time. (Its closest competitor is Singapore's Osim International, which commands just over 32% of the market.) 

To maintain its lead locally, Ogawa World has come up with a few strategies to make its products accessible and affordable to a wider segment of the population.  

It has tied up with banks and credit card companies to provide flexible payment schemes. It is also ramping up efforts to promote its affordable range under the brand name Deki. 

The group will widen Deki's product range and increase the number of outlets distributing the range to 12 outlets this year, from five outlets currently. 

Chong says the group is considering offering Deki's range of products in overseas markets in a few years to come.  

Ogawa World takes pride in the fact that it is the only local player that undertakes product design and development. Yet, it does not manufacture its own products. By outsourcing this function to original equipment manufacturers in China, Taiwan, Japan and South Korea the group is able to focus on other value-added functions such as product design and development and after-sale service. 

In fact, the group has allocated RM3.8mil from the listing's total proceeds to boost its product design and development capabilities. 

Copycats on the rise 

Competition in the market though has increased in recent years not least of all because of the proliferation of copycat products.  

In fact, Hwang-DBS Research points out that Osim International saw sales from the North Asia segment fall in the second half of 2006 because of competition from imitation products. 

“While it can be argued that product reliability/quality and market acceptance arising from brand building activities can mitigate this risk, the emergence of copycat products at competitive prices will likely pose a key threat to the growth potential of mainstream healthcare equipment retailers like Ogawa World,” the house says. 

From Ogawa World's standpoint, competition is just part and parcel of the business.  

Says Chong: “Competition is not something new for us. Besides, customers tend to be more cautious when purchasing health and wellness equipment because there is the fear that imitations could pose a risk to their health. Imitation products have been around for some time but our brand management activities have made customers more aware about Ogawa products.” 

He says the company has also invested in its after-sales service. “We offer a two-year warranty for our products and customers have the assurance that the company will be around in the event they require after-sales service.” 

Ogawa World expects to raise total gross proceeds of about RM32mil from the rights issue and public issue of 17.2 million 50 sen shares, of which six million shares will be made available to the public. In addition, the group will make an offer for sale of 36 million shares to approved bumiputra investors.  

---

© 1995-2005 Star Publications (Malaysia) Bhd (Co No 10894-D)

Saturday March 31, 2007

The great growth potential

Vietnam is fast becoming the new China with political stability, low labour cost and improving regulatory environment

IT used to be China that dominated the news with sexy headlines of growth and development. That distinction is now being shared more and more with Vietnam. Truth is, Vietnam is fast becoming the new China. 

Its economy grew by more than 8% last year. Since 2001, the country's economy has enjoyed annual growth of more than 7% while its per capita income has doubled to about US$540 in the past decade.  

Unsurprisingly, Vietnam's World Trade Organisation membership, which took effect on Jan 11 this year, is a big talking point among foreign investors. The membership is expected to boost the country's exports and draw more foreign investments into Vietnam.  

As it is, Vietnam's foreign direct investment as a percentage of gross domestic product at 4% is higher than that of any other country in the region, including China. 

Says an analyst with a local brokerage, “Vietnam now has political stability, low labour cost and a young work force with relatively good work ethics. In addition, foreign investors are encouraged by the continuous improvements they see taking place in the regulatory environment for foreign direct investments”. 

Apart from streamlining some regulations to entice foreign investments, the government is giving more freedom to the private sector to function as one of the main engines of growth. In addition, privatisation is a buzzword that is fast gaining strength in this latest of Asian tiger economies.  

In other words, Vietnam, which is still in the early stages of development, is providing limitless opportunities for the hoards of foreign companies that have ventured there in recent years. Some Malaysian companies too have taken steps to ensure that they get to enjoy a piece of the action there. 

Exploiting growth further north  

Indeed, there has been a steady flow of news in recent times about local companies scouting for growth prospects much further north. 

A recent example is Tan Sri Vincent Tan's Berjaya Corp Bhd which entered into a memorandum of understanding with Ho Chi Minh City's Transport and Urban Public Works Department to undertake a feasibility study on the viability of operating, constructing and financing a monorail system in the city. 

Prior to that, another Berjaya unit, Berjaya Land Bhd, obtained an investment certificate to develop 31ha in Hanoi City for a residential and commercial project. The project has a gross development value of US$350mil. 

To be sure, the country's need for basic infrastructure has proved alluring for local construction companies like IJM Corp Bhd and Gamuda Bhd. 

In the former's case, it partnered with another local listed company Salcon Engineering Bhd to undertake a water treatment plant project in Ho Chi Minh City several years ago. They each have a 40% stake in the Binh An water treatment plant which comes with a 20-year concession.  

Gamuda Bhd is another construction player that has been actively looking for opportunities in Vietnam in recent years to ride out the tough operating conditions at home.  

In late January this year, its unit Gamuda Land Sdn Bhd, secured a contract to build an integrated commercial development on an 800-acre site in Hanoi. The project is valued at about US$1bil. 

The group is said to be eyeing another mixed development project and could also be in the running for a RM2bil road project in Vietnam. 

“The property sector alone in Vietnam offers immense potential for Malaysian companies to export their expertise. Rising trends like urbanisation will create a growing demand for companies that have expertise in areas like township development. The country's growing middle class also means that condominium living and gated and guarded housing will become increasingly popular,” says an official from a property company with business in Vietnam.  

Vietnam's young big spender  

A local analyst points out that, initially, it was Vietnam's cheap labour that attracted the interest of Malaysian manufacturing companies like Furniweb Industrial Products Bhd, APL Industries Bhd and Latitude Tree Holdings Bhd. 

For Furniweb, the diversification strategy proved to be a sound one as its operations in Vietnam currently contribute more to its bottomline than its Malaysian operations.  

In fact, to expand further in the country, the company is seeking to list its subsidiary in Vietnam. 

Rubberwood furniture maker Latitude Tree has invested another RM40mil in a third plant in Vietnam to support two existing ones that are running at full capacity. There are also measures underway to consolidate its Malaysian factories to improve the group's overall margins.  

But Vietnam's growing domestic demand and increasing spending power is attracting other types of investors in a big way to the country.  

The bulk of its 84-million odd population is made up of adults in their 20's. As their purchasing power increases as more and more progress sweeps through Vietnam, this large segment of the population will be hankering to buy higher quality goods to complement their newly attained higher quality of life.  

It is this need that local companies like Haisan Resources Bhd and Ogawa World Bhd are gearing up to meet. 

Haisan's recent move to sell its 50% equity in a Filipino company could be taken as a sign that the temperature-controlled logistics specialist now intends to concentrate on growing its operations in Vietnam and China. 

On March 14, the company announced the proposed disposal of its interest in Integrated Global Low Temperature Operations Phils Inc to Horizons Realty Inc for RM12.5mil cash.  

Last year, Haisan acquired a plot of land in Vietnam and plans to invest RM13mil to set up a temperature-controlled logistics facility there.  

Its group president and chief executive officer Ong Chin Yet said at the time that the company was gearing up to meet Vietnam's increasing demand for high-quality food, particularly in the perishable food segment. In time, he said the demand for such facilities would extend to other sectors like pharmaceuticals and industrial products.  

Likewise, main-board bound Ogawa has identified Vietnam as one of the main growth markets it intends to focus on. It is targeting to open 11 outlets by the middle of this year. Most of its new stores will be located in China and Vietnam. 

The Vietnam bug has proved to be too infectious even for large local companies like Malayan Banking Bhd (Maybank) and Telekom Malaysia Bhd (TM). 

At present, Maybank has two branches in Vietnam but has applied for another licence to bring this up to three.  

Given that there are still many restrictions on what foreign banks can do in Vietnam, Maybank's willingness to invest more in the country's fledgling banking industry must mean that there is tremendous growth potential there and the bank is pretty certain that the investment will pay off. 

Plans to liberalise the country's telecommunication sector will be a boon to TM, which has made no secret about its interest in gaining a foothold in Vietnam, which has a low mobile penetration rate. 

---

© 1995-2005 Star Publications (Malaysia) Bhd (Co No 10894-D)

Thursday March 29, 2007

Ogawa sees 37% jump in net profit

By Loong Tse Min

KUALA LUMPUR: Main board-bound Ogawa World Bhd expects a 37% rise in net profit for financial year 2007 on strong contribution from the high growth markets of Vietnam and China along with steady expansion in the domestic health and wellness market. 

Net profit for financial year (FY) ended June 30, 2007 is expected to jump to RM16mil from RM11.7mil in FY2006. Revenue is also expected to grow 19% to RM162.4mil for FY2007. 

Speaking at the launch of the company’s prospectus yesterday, executive director Louis Chong said: “With growing affluence, rising disposable income and an increasingly health conscious society, we are optimistic on the prospects of the health and wellness industry.” 

The company expected a 20% growth in the sector regionally for calendar year 2007, Chong said. 

Ogawa is targeting revenue contribution from its overseas operations to double to 40% in the next three years. In the shorter-term, overseas sales were expected to account for 25% of total revenue for FY2007 from 20% in 2006, Chong said. 

The company is aiming to open 11 new outlets, mainly in China and Vietnam, to achieve a total 160 outlets by June 2007. 

From left: Executive chairman Richard Wong, Public Investment Bank CEO Teoh Cheng Soon and Louis Chong

Of its 149 outlets, 114 come directly under the group and are located in Malaysia, Singapore, China and Hong Kong. The balance 35 are operated through exclusive distributorships in Indonesia, Australia and Vietnam. 

Ogawa plans to open its first outlet in the Middle East - in Dubai - by year-end. It is also exploring the market in India and Thailand. 

Scheduled for listing in April, Ogawa is offering 17.2 million new 50 sen shares, of which six million will be allocated for the public at an issue price of RM1 each.  

It is also offering 36 million shares to approved bumiputra investors. 

The exercise is expected to raise RM31.9mil, of which RM15mil has been earmarked for land and building acquisition within 24 months. 

“We are looking at somewhere nearer to port, maybe in Kota Kemuning (Shah Alam),” Chong said, adding that the move was expected to double Ogawa’s warehousing space to two acres. 

The company also plans to use RM1.2mil to double its fleet of delivery trucks to 40 within two years. 

“We are aiming to cut delivery time to three days from seven days currently,” Chong said. 

---

© 1995-2005 Star Publications (Malaysia) Bhd (Co No 10894-D)

Monday March 19, 2007

Ogawa planting its flag in more export markets

By YVONNE TAN

HEALTH and wellness equipment retailer Ogawa World Bhd wants to penetrate the Middle East, Indian and Thai markets over the next three years. 

Executive director Louis Chong said it would start by establishing an office in each of these countries. 

“We think the Middle East is a good choice because of the people’s purchasing power. We like India and Thailand for their huge population and existing traditional massage culture, respectively,” he told StarBiz.  

“We have been researching these countries for the past two years and understand the buying patterns of its consumers.”  

Executive directors Louis Chong and Lim Mee Ling with some of Ogawa’s massage chairs.

Ogawa is a health and wellness retail chain store that over the years has become a household name in Malaysia. It designs, develops and retails its products such as massage chairs, slimming equipment, blood pressure monitors and air purifiers under its brands Ogawa and Deki. 

The company is slated for a listing on the main board of Bursa Malaysia early next month.  

“Ogawa started out being involved in the trading of household and electrical products in 1986 and 10 years later, ventured into the health wellness equipment industry,” Chong said. 

He said the company's products were now divided into five main categories – relaxation, therapeutic, fitness, diagnostic and hygiene.  

“Our main revenue generator are the products under the relaxation category, which include massage chairs and pillows,” he added. 

Currently, almost 80% of the group's revenue comes from its local operations while the remainder is from overseas markets. 

“We intend to increase the overseas contribution to at least 40% within the next three years,” Chong said.  

Ogawa has a total of 107 sales and distribution outlets in Malaysia, Singapore, China and Hong Kong. It also has 29 outlets through exclusive sole distributors in Indonesia, Australia and Vietnam.  

“Our immediate market expansion plans are focused on Vietnam and China,” Chong said, adding that these countries had a lot of potential due to their high populations.  

The company already has three offices in China, one each in Beijing, Shanghai and Shenzen.  

As part of its expansion plans, Ogawa will come up with at least five new products this year. “About 8% to 10% of our revenue is spent on the development of new products yearly,” Chong said. 

The company also pays a lot of attention to customer relationship management. “We emphasise after-sales service as we want customers to keep coming back to us,” he said. 

Chong said the name Ogawa meant “stream” in Japanese. “And that is how we like to think of our business – starting from a river source and slowly flowing and evolving into the mighty ocean,” he said. 

For the financial year ended June 30, 2006, Ogawa posted an after-tax profit of RM11.69mil on revenue of RM136.06mil. 

The company's initial public offering (IPO) involves the offer for sale of 36 million shares to bumiputra investors and the issue of 17.2 million new shares to the public, directors, employees, persons who have contributed to the group's success as well as for private placement. 

The par value would be 50 sen and the offer price RM1. It aims to raise some RM32mil from the IPO.  

“The company will use the proceeds for, among other things, market expansion, research and development, as well as land acquisition,” said Chong.  

“We are confident on the prospects of our stock. We believe the current volatility in the market is temporary and that we should do well.”  

Chong is optimistic that the health and wellness sector will continue to experience growth.  

According to him, the local industry was valued at about RM300mil last year, up from RM130mil in 2002. “This figure is expected to double over the next five years,” he said. 

Ogawa has appointed Public Investment Bank Bhd as adviser, managing underwriter, and placement agent for the IPO, while MIMB Investment Bank Bhd is the underwriter for the exercise.  

---

© 1995-2005 Star Publications (Malaysia) Bhd (Co No 10894-D)

Friday January 18, 2008

More than just a massage chair

OGAWA, which recently launched the Smart Mate massage chair, will be giving away the new Mercedes-Benz CClass worth RM250,000 to lucky winners of Ogawa’s C the New Luxury Contest.

Customers with purchases of RM1,000 and above in a single receipt are eligible to participate in this contest. The more they purchase, the more lucky draw chances they get.

Luxurious prize: Eric Cheah, Ogawa World Berhad executive director (right) and Daniel Tan, Cycle & Carriage Bintang Berhad general manager (sales and marketing) at the launch of Ogawa’s C the New Luxury Contest.

The chosen ones will then attend the prize giveaway event at 1 Utama Shopping Centre on March 30 to draw a lucky key that could unlock the luxurious new Mercedes-Benz C-Class. 

On top of that, Ogawa will also be giving away two new Smart Mate massage chairs and other consolation prizes worth more than RM25,000.  

---

Copyright © 1995-2007 Star Publications (Malaysia) Bhd (Co No 10894-D)

Monday February 4, 2008

Ogawa to spend RM2mil on IT

IF you're a fan of healthcare and wellness equipment, you can expect to see more targeted campaigns from Ogawa World Berhad in the latter part of the year to cater to your specific needs.

At the signing of the partnership are (from left) IBM Malaysia's general manager, general business Chiam Yat Seng, Ogawa's cheif financial officer Chew Eng Loke, Chong, Lim and SL Information's Pronto division manager Ho Wai Chun.

The Bursa Malaysia main board-listed company plans to spend RM2 million to implement an enterprise management system that will enable it to increase efficiency in making store-level forecasting replenishment and merchandise planning.

"We have appointed SL Information System Sdn Bhd to implement the Pronto Xi Retail solution that will be powered by IBM's System p550 server. This partnership will enable Ogawa to further the standards of our customer service and store process productivity by seamlessly integrating core operations from the store-front to the corporate back-office. This is key to drive continued business growth," said Ogawa's executive director Louis Chong in Petaling Jaya last week.

The nine-month project, which kicked off this month, also will see new point-of-sales systems being deployed in all of its 70 stores in the country as well as laptops to be specifically used for roadshows.

With the system in place, Ogawa will be able to optimise back-end operations and keep up with daily transaction volumes and workload peaks while ensuring uninterrupted service to meet customers' demands. The company also will be able to receive precise and timely information on customer buying behaviour to make better strategic decisions.

In addition, inventory harmonisation measures and customer relations programmes can be developed more dynamically according to business needs.

Once the project is completed, the system will then be rolled out to other 100-odd Ogawa stores around the world. 'The Pronto Xi Retail solution will enable Ogawa to better manage point-of-sales data, procurement processes and back-office functions, which will allow the company to further expand from 172 stores to a projected 350 stores over the next five years," Chong said.

Meanwhile, SL Information's general manager Jimmy Lim said the company is confident of growing its business by about 20 per cent this year. "Like Ogawa, 90 per cent of the retailers in Malaysia are mid-sized enterprises that require tailored solutions to drive customer and operational excellence for the retail industry. The retail industry has come of age in Malaysia, and we see bright prospects in the market."

---

Copyright © Tech & U. New Straits Times Press (Malaysia) Berhad.

Monday February 25, 2008

Ogawa enters Myanmar market

SUBANG JAYA: Health and wellness equipment retailer Ogawa World Bhd has established a foothold in Myanmar and is close to naming a distributor for the Indian market, said its executive director Louis Chong.

He said a distributorship agreement for Myanmar was signed in January and Ogawa’s products would hit the market soon. “We hope to start our business in Yangon in one or two months and in Mandalay around June,” he told The Edge Financial Daily .

Ogawa would market its full range of products there as luxury items targeting the “cream” of consumers. In Malaysia, Ogawa has positioned its products for the middle and upper segments of the consumer market with an emphasis on lifestyle.

“We are very confident of the Myanmar market as the people there are becoming more affluent. We are going to have aggressive road shows, outlet expansions,” Chong said.

He said Ogawa also expected to finalise its choice of distributor for India in three to four months and begin sales in Mumbai.

He said the company would leverage on its international brand status in competing with local companies.

Chong said Ogawa was also looking for potential partners in the Middle East. “Hopefully we will decide on a partner this year,” he said.

He anticipated a slowdown in the global economy in the next two years, but believed Ogawa would pull through. “Health is a compulsory thing. If you use the right strategy on the right audience, they will still invest in health.”

He said Ogawa already has strategies in place, such as more affordable products like its Smart mate massage chair launched last month.

He said the Smart mate, which retails at RM4,899, would appeal to younger people who wanted the health benefits but had tighter budgets.

Chong also said the company would allocate 10% to 20% of its revenue for advertising and promotion, and maintain its practice of launching five to eight products annually.

---

Copyright © The Edge Daily.

Tuesday December 02, 2008

Leveraging on wellness trend

Branding has always been integral to Ogawa, a focus that is reflected in its organisational structure. "Although we design and own the patents for our products, we prefer to outsource their production. This ensures that our team is primarily focused on brand — building and customer service," says Louis Chong, executive director of Ogawa World Bhd.

For Ogawa World, customer service and brand-building must go hand-in-hand, with customers at the heart of their every decision. "We want to give them what we want, not what we'd like to sell," says Chong. To provide the best experience for consumers, the company invests heavily in staff training. "Our strongest advantage over our competitors is our people. They are passionate about the pursuit of excellence, and they are the spirit behind the brand."

The company started out in 1996 under the name of Healthy & Nice. It was established by Richard Wong, executive chairman, and Lim Poh Khian, deputy executive chairperson, of Ogawa World, to market Ogawa-branded products. "It seemed like a good time as the economy was booming and Malaysians were enjoying a higher standard of living. They were also getting more health-conscious, so we marketed our products in that direction," explains Chong.

Unfortunately, the company was immediately put to the test when the Asian financial crisis hit in 1997 and the Malaysian economy went into recession. Undaunted, Wong and Lim viewed it as the perfect time to expand and acquire better shop locations and recruit strong talent. They also shifted their focus from premium goods to more affordable items, such as a hand-held massager that sold for RM150. "At times of crisis, people need to de-stress for their health, more than ever!" says Chong.

Ogawa weathered the storm and emerged stronger, and began to market the brand even more aggressively between 1999 and 2001. "In that year, we established 20 outlets," says Chong. A friendly face was put on the brand when they appointed former 988 Radio DJ Chan Fung in 1999 and Datuk Jalaluddin Hassan in 2001 as brand ambassadors. In 2000, the company held up to 10 road shows a month.

As a result of their brand-building activities, Healthy World Sdn Bhd (incorporated from Healthy & Nice in 2001) was awarded the Asia-Pacific Entrepreneur Excellence Award, Branding Category in 2003. This was followed by Best Brands Award (Best International Brands Category) in 2004; Ogawa was named a Malaysian Superbrand in 2005.

By then, Ogawa was making its foray into China. And according to a TNS survey, in the electrical massage products category, it enjoyed 69% brand preference among Malaysians. "This was the beginning of the brand fulfilling the name, Ogawa. It's the Japanese word for stream, and for us it embodies the concept of starting small in Malaysia and emerging as a mighty ocean in the international arena," says Chong.

When the company was listed on Bursa Malaysia last year, it changed its name from Healthy World to Ogawa World. By then it had established distribution in Vietnam and Hong Kong. "It was a fresh start for us; we launched ourselves as an international brand. To personify our new status, we appointed a regional brand ambassador, Emil Chau Wakin, a Chinese singer who is famous in the Asia-Pacific region, particularly in Malaysia, Hong Kong and China. We also adopted the slogan 'Close to You' to symbolise our desire to bring the products closer to the people," explains Chong.

According to Chong, Ogawa has spent about RM25 million in advertising over the last two years within the Southeast Asian region. "Overall, we stick to the industry average of 10% to 12% of profit for brand-building and advertising activities," says Chong. Ogawa World's profit before tax for the financial year ending June 30, 2007 was about RM22 million.

Ogawa continues to maintain the goal of a "healthier lifestyle" as its brand promise. Its range of products is marketed under five categories with "health-targeted" goals. The categories are: relaxation — to combat stress; therapeutic — using reflexology and other means as therapy; fitness — products to help you exercise; diagnostic — blood pressure monitors and thermometers; and finally, hygiene — filters for air and water. "Our users tend to be results-oriented and practical. They are more likely to buy our products if they have a good reason for using them. A luxury-oriented message wouldn't be enough," says Chong.

At present, 70% of Ogawa's total revenue is from the SEA region. "We aim to replicate it through to the rest of the world," says Chong. The company has taken its first steps in the Middle East, having just signed an agreement with a distributor there. The first outlet is scheduled to open in Dubai in January next year. Ogawa World is also attempting to break into the Mumbai market, but this is still in the process of negotiation.

"Our goal is to bring this Malaysian brand to an international platform. We believe we are part of a sunrise industry as people get increasingly affluent and desire healthier, happier lifestyles. The current financial crisis does not change these aims, in the long term it's still the right direction to head. We are merely more cautious in moving forward with our expansion plans. Rather than cut our ad spend, we will spend it more wisely," says Chong.

Although it will be a challenge, he is confident Ogawa World will weather the current economic situation and its effects on consumer spending, just as it has done before. "We are in a good position, and even at times like this, people still need to enjoy and de-stress. Also our brand has never been stronger — consumers recognise our brand name first, before any product," says Chong. "Everyone, from children to senior citizens, can sing our 'Ogawa' theme."

---

Copyright © The Edge Daily.

Monday March 3, 2008

Ogawa downgraded on poor margins concerns

OGAWA World Bhd, whose first half results came in below Inter-Pacific Research’s expectations, has been downgraded to underperform from outperform as the research house is concerned about its pressured margins.

Ogawa posted a net profit of RM435,000 on the back of RM64.75 million in revenue for the six months ended Dec 31, 2007 (1HFY08). Inter-Pacific Research said Ogawa’s 1H revenue was 13.3% below its forecast of RM74.6 million.

It said the company’s pre-tax profit and net profit experienced “severe plunge” due to pressured margins following rising overhead costs in view of aggressive outlet expansion plans, coupled with its inability to transfer cost to consumers.

Earnings before interest and tax (EBIT) margin rose only 1.15% in 1HFY08, it added.

Quarter-on-quarter, Ogawa’s second quarter (2Q) revenue rose 13.4% to RM34.41 million, while pre-tax profit increased 296% to RM1.14 million due to lower base, despite operating under tough conditions, the research house said.

The improvement saw Ogawa turning around from a loss of RM192,000 in 1Q to a profit of RM627,000 in 2Q.

However, Inter-Pacific Research was concerned whether Ogawa would be able to maintain their traditional strong growth in the upcoming 4Q.

“Historically, Ogawa’s 4Q tends to be the strongest, benefiting from occasions like Father’s Day and Mother’s Day. For instance, we found their 4QFY07 revenue, PBT and PAT accounted for 35.2%, 43.3% and 43.9% of their full-year earnings.

“But looking at the current trend, we doubt that this feat could be maintained given their high overhead costs,” it said.

The research house expected Ogawa to continue experiencing strong margin pressures, at least until the end of the current calendar year.

It, however, noted that current expansion plans could contribute more positively to Ogawa’s bottom line in FY09 if the operating environment becomes more stable and witnesses less margin pressure.

“Hence, we have downgraded our recommendation from outperform to underperform, with the fair value pegged at 57 sen based on forward EPS (earnings per share) of 5.21 sen for FY09 that translates into a PER (price-earnings ratio) of 11 times,” it said.

Ogawa closed one sen lower at 74 sen last Friday with 100,000 shares traded.

---

Copyright © The Edge Daily.