Cerebos


By susan tam

PETALING JAYA: Cerebos Pacific Ltd plans to boost its low penetration rates in the Malaysian Muslim market through the launch of its latest product, Brand’s InnerShine Prune Essence.

Executive vice-president and chief executive officer Dr Lackana Leelayouthayotin said while the presence of its Brand’s products was established more than 40 years ago here, the penetration rate in this particular market was low, at below 20%.

“We feel that there is a lot of potential for growth in this target group. This non-animal-based product will go down well with Muslims. Its taste is also sweet and will appeal to consumers,” she said in an interview recently.

The product, which was launched in Malaysia in mid-April, has been popular, with 96% take-up rate after sampling was conducted, she said. She also said this product was aimed at consumers aged 20 to 39.

Lackana said while the market share for Brand’s Essence of Chicken was high at 80% in Malaysia, the company was embarking on efforts to increase its market share in the Muslim market here.

“This is why we are introducing this product as an alternative for Muslim consumers as well as start educational programmes next year to promote its health benefits,” she said. Lackana said the initial expenditure for advertising and promotion for Brand’s InnerShine Prune Essence was RM1mil, but would be increased based on the good response received in the past two months.

Initially developed for the Thailand market some five years ago, this product would be introduced in Singapore before year-end as Cerebos was confident it would receive similar response among health-conscious consumers, she added.

She said the product was developed after studying feedback from a consumer survey done by AC Nielsen several years ago. “The survey showed that consumers are getting more health-conscious and want a product that was convenient to consume during their busy lifestyles,” she said.

The company emphasised good quality research with S$4mil spent on research alone to date, she said. “This was important to understand the market and ensure that the product really works for our consumers,” she added.

Lackana added that Cerebos would use Malaysia as a launch pad to enter other Muslim markets such as Indonesia and the Middle East.

Last year, group sales totalled some S$600mil.

Lackana also said the company would want to boost Malaysia’s contribution to group sales through this new product.

Currently, Brand’s InnerShine Prune Essence is produced in Cerebos’ Thailand factories but will shift its operations to Malaysian facilities once demand picks up here. Cerebos is listed on the Stock Exchange of Singapore, with a 40% stake held by Perbadanan Nasional Bhd. Its subsidiary, Cerebos (M) Sdn Bhd, owns Brand’s.

from the taipei times

By Jackie Lin
STAFF REPORTER
Thursday, Jun 15, 2006,Page 12

Advertising Advertising

Cerebos (Taiwan) Ltd (台灣食益補), which distributes Brand’s essence of chicken in the local market, yesterday announced it planned to tap into another burgeoning sector — essence of clam — and vowed to corner the market.Its participation in this new segment is expected to shake up the industry, considering its strong brand name and flexible marketing tactics, company executives said.

“Some have speculated that our entry into the essence of clam market is a result of difficulties encountered in expanding our sales of essence of chicken. I’d say [revenues of] our trademark product are still growing and the decision was made purely to meet consumer demand and sharpen our competitiveness,” said Andy Feng (馮南陽), Cerebos’ senior vice president and chief executive officer, during a product launch.

Believing that essence of clam has great potential as public awareness of the health benefits of such supplements has increased, the company dedicated three years to research and development and has every confidence it will secure a significant market share.

“We’ll invest NT$50 million [US$1.5 million] during the first year, and aim to grow the market and rake in sales of NT$100 million after 12 months,” said Janice Leu (呂艷芳), the company’s marketing director.

According to the company’s own market survey, some people shy away from essence of clam because of its offensive smell.

“It was very difficult to achieve the technological breakthrough, but I’m proud to say that we’ve made it by adding wild ginger and garlic to make it palatable,” Feng said.

Feng also claimed that their product was 37 percent more concentrated than competitors’. He didn’t name the competition, although Taiwan Sugar Corp (Taisugar, 台糖) has dominated the clam business for years.

Taisugar yesterday welcomed its new competitor’s entry into the market but shrugged off Cerebos’ self-praise.

“They might have a stronger brand but all products must be put to the test and the figures will tell the story. I believe consumers will still find our product better to drink,” the state-run firm’s public relations official said on condition of anonymity.

Taisugar debuted its product four years ago.

The state-run company reported nearly NT$300 million in sales last year with a market share of over 97 percent, he said. The company expects NT$500 million in revenue from the product this year, he added.

To strengthen the impression on the health-conscious, Cerebos has decided to market the drink under a new sub-brand, XuPei (旭沛), as Brand’s is so closely connected to essence of chicken.

According to Cerebos’ survey, Taiwan’s health-drink market started to show rapid expansion in 2003 when SARS hit. The industry has grown by NT$1 billion annually since then to record sales of NT$5.4 billion last year.

While essence of chicken accounts for 40 percent with growth slowing down, essence of clam has become a new favorite with sales jumping annually by 39 percent and 58 percent, respectively, during 2004 and last year.

I have added cerebos pacific to my stock holdings. I will be providing info on cerebos as best as i can.

  • Stable company with a strong set of products, backed by its flagship product Brands chicken essence
  • Strong past earnings and sales. Operating profit has been positive for past 15 years. only 1 year out of those 15 years has it gone into net profit loss.
  • PE 13.5 times
  • Market to book ratio 2.28 times
  • latest div yield 9.06%
  • latest payout 122% of net profit
  • free cashflow yield 8.75%
  • free cashflow /Enterprise value 7.71%
  • Cash dividend coverage 1.18 times
  • Net profit margin 9.26%
  • ROE 16.92%
  • Cash coverage 12.63 times

Past div record(cents)

1993 – 8.4
1994 – 10.4
1995 – 12.6
1996 – 14.7
1997 – 16.3
1998 – 13
1999 – 8
2000 – 8
2001 – 10
2002 – 18.46
2003 – 12.9
2004 – 16
2005 – 25
2006 – 26.88

Note:

  1. latest payout looks irresponsible at 122%.however, on examination of operating cashflow -capital expenditure shows that the fcf yield is close to the div yield. I believe fcf is a better gauge of whether cerebos can payout such div in the future.
  2. investors should be expecting yield to decrease. latest sales is at an all time high. Management is finding the operating environment increasing challenging to grow more sales. Still, its consistent payout makes cerebos attractive. a long term yield of 5.5% at 16cents div looks a more realistic target.