mega lifesciences pcl - listed...

We care

Mega Lifesciences PCL Investor Presentation

Version V (2nd September 2015)

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1. Business Overview

i. The journey ii. Business Segments

b) MaxxcareTM distribution business

a) Mega We CareTM branded products business

c) OEM business

2. Financial Overview

3. Appendix

3 We care

The journey so far….

1982

Incorporated

1985-86

1993-94

1995-96

2002

2012

•Received approval from Thai FDA for Samut Prakarn facility in Thailand

•Began manufacturing nifedipine for Berlin Pharmaceutical Industry Co. Ltd

•Expanded into Vietnam, Myanmar and Cambodia to sell branded products and operate distribution business

•Established manufacturing plant in Australia

•Market leading branded products in key Southeast Asian markets

•Leading distributor of pharmaceutical and OTC products

•Announced acquisition of Eugica

•Commenced branded products business

•Acquired Medicrafts brand

We have evolved from an OEM player into a leading international consumer healthcare and pharmaceutical company

Started as an OEM manufacturer

Entered branded products and distribution business;

geographical expansion

Emerged as a leading branded and distribution company

2013

•Commissioning of new plant in Australia

•Planned manufacturing expansion in Thailand

• Successful IPO on SET

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MEGA is a leading participant in the health and wellness industry in developing countries. Our business may be categorized into three segments:

1. Mega We CareTM branded products business: We develop, manufacture, market and sell our own brand of market leading nutraceutical products, prescription pharmaceutical products and OTC products which are sold in 31 developing countries

2. MaxxcareTM distribution business: We market, sell and distribute various branded prescription pharmaceutical products, OTC and consumer products. We operate our MaxxcareTM distribution business in three countries, namely, Myanmar, Vietnam and Cambodia. Our clients for this business segment include leading domestic and international pharmaceutical and consumer goods companies

3. OEM business: In addition to manufacturing our own branded products, our manufacturing facilities in Thailand and Australia accept various production orders from third-party customers.

Our business segments …..

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Geographical overview of our operations We derive majority of our revenue from Southeast Asia

Thailand, Vietnam and Myanmar are our key geographies which accounted for 76.5% of our operating revenue in FY2014

1.Revenues exclude other income

Philippines

Indonesia

Malaysia

Singapore

Myanmar

Cambodia

Vietnam Thailand

Azerbaijan

Sri Lanka

Uzbekistan

Yemen

United Arab Emirates

Mongolia

Hong Kong

Ghana Kenya

Nigeria

Tanzania

Uganda

Kazakhstan Ukraine

Russia

Belarus

Peru

Denmark

Legend

Countries with sales of our branded products

Countries with manufacturing or product development capabilities

Ausralia

India Trinidad

Rwanda

Kuwait

South East Asia 86.5%

Rest of World 13.5%

Southeast Asia accounts for majority of revenues1 Revenue Breakdown by Region (FY2014)

Sudan Ethiopia

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Distribution Business

Branded Products Business

What our business segments contribute…..

OEM Business

Mega Lifesciences PCL

THB 3,612 mn 46.7%

THB 3,694 mn 47.8%

THB 424 mn

5.5%

Sales Contribution

FY2014 Total Sales: THB 7,730 mn

Gross Profit Contribution

FY2014 Gross Profit: THB 3,117 mn

THB 2,255 mn 72.3%

THB 794 mn 25.5%

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The future of our past and present …. 2014 1994 2019

Became the largest OEM supplier of soft gel caps out of Southeast Asia

Mega We CareTM Branded Products Business

MaxxcareTM Distribution Business

1985

OEM Business

Achieved leadership position in Indochina markets

Became leading international distribution company in Myanmar, Vietnam and Cambodia

Expect to double revenue and profits

Expect to double revenue and profits

Nutraceutical, OTC and Prescription products

Pharma and consumer products

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Mega We CareTM branded products business:

• MEGA expects to build growth by expansion of customer base in its existing underpenetrated developing markets, new product launches and new countries. Recovery in Thailand, stable forex rates and no further deterioration in Ukraine and Yemen would help improvement in Mega We CareTM business.

• Products sold in 31 underpenetrated markets with significant growth opportunities.

• 226 existing products, 815 product registrations across the world.

• Market leading positions in Indochina and the new markets in Africa.

• Going by emerging trends in consumer health care, prevention of disease rather than cure is the way forward ….. a sunrise industry.

• Strong pipeline of 60 products under registrations and 73 products under development.

• No major capex planned as manufacturing capacity recently doubled to meet growth requirements for the next 5 years. An amount of THB 94mn to be paid towards the acquisition of land in Bangkok as part of future expansion plan in addition to the normal maintenance capex.

• A strong balance sheet.

• Fundamental growth drivers are already in place to help deliver the expected growth organically. Any acquisitions would help further accelerate the growth.

While we expect the revenue and profits to double in 5 years, due to the nature of the industry and the markets we are in, growth may not be a straight line up but with occasional disruptions that may be caused by economic, political and other factors.

How to achieve our 5-year target revenue & earnings

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MaxxcareTM distribution business :

• Well poised to capture the strong growth potential offered by Myanmar, given MEGA’s leadership position as a distributor of pharma and consumer products.

• Leading multinational and regional companies as its principals.

• Other markets are growing with the industry.

• MEGA has adequately invested in infrastructure, latest technology and other resources to meet the growth requirements.

While we expect the revenue and profits to double in 5 years, due to the nature of the industry and the markets we are in, growth may not be a straight line up but with occasional disruptions that may be caused by economic, political and other factors.

How to achieve our 5-year target revenue & earnings

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Continue OEM

• Helps service our long standing customers and helps improve the productivity and efficiency of our manufacturing processes

Grow our market leading brands

• Leverage brand strength and recognition to increase demand

• Expand specialized sales and marketing team to increase our coverage of the market

Launch new branded products

• Launch new products and line extensions

• Leverage on speed to market competitive advantage

Expand distribution business

• Strengthen relations with existing principals, add new principals and invest in infrastructure

Enter new markets

• Selectively enter new markets where we can compete effectively

• Identified new markets in Africa, Middle East, CIS and South America as new frontier markets

Expand margins and profitability

• Minimize manufacturing and distribution cost inefficiencies

• Improving yield on manufacturing processes

Selective acquisitions

• Selectively assess complimentary acquisitions

• For e.g. the Eugica acquisition helped us add a leading brand to our portfolio

The road map ahead…..

Our strategies for the branded and distribution business will drive future growth

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Key investment highlights

Leading distributor of pharmaceutical and OTC products in select frontier markets of Myanmar, Vietnam and Cambodia (Refer to slide 20)

2

Focused on fast growing markets including a unique established and market leading presence in the Myanmar market (Refer to slide 21)

3

High quality products manufactured in world-class manufacturing facilities accredited by international regulatory agencies (Refer to slide 15)

4

Strong product pipeline driven by an efficient and targeted product development strategy (Refer to slide 18) 5

Proven track record of delivering growth and profitability (Refer to slide 27) 6

Experienced management team instrumental in building the business is significantly invested in the Company (Refer to slide 42)

7

Market leading own consumer health and pharmaceutical brands in fast growing developing markets (Refer to slide 14) 1

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c) OEM business


3. Appendix

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TM Branded products business

Categories Description Key Brands

Nutraceutical

Products

• Products which provide health benefits in addition to the basic nutritional value found in normal diet

• Regulation varies across jurisdictions but generally regulated for their manufacturing, safety, efficacy, labeling and marketing

• Dermatology , general health/Immunity, gastroenterology, men’s/women health and orthopedics are the key therapeutic categories

Prescription Products

• Medicines only available for purchase by consumers with a medical prescription

• Strictly regulated by authorities as to their manufacturing, safety, efficacy, labeling and marketing

• Diabetology, dermatology , gastroenterology and orthopedics are the key therapeutic categories

OTC

Products

• Medicines sold directly to consumer without a prescription from a healthcare professional

• Analgesics , gastroenterology and cough and cold are the key therapeutic categories

We sell nutraceuticals, prescription and OTC products within our branded business

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Own Brand Rank Therapeutic

Category (TC)

Nat C

#1 Vitamin C

Nat B

#1 Vitamin B Complex

Fish oil

#1 Anti-atheroma

Natural

Gofen

#4 Anti-rheumatics Non-

steroidal


Category (TC)

Ferrovit

#1 Haematinics

Enat

#1 Vitamin E

Calcivita

#1 Calcium Supplements

Livolin Forte

#1 Hepatoprotectant

Prenatal

#2 Prenatal

Nutrivita

#2 MVMM


Category (TC)

Enat

#1 Vitamin E

Eugica candy

#2 Pharyngeal preparation

Acnotin

#1 Oral Anti-acne

Preparation

Ferrovit

#4 Iron Combination

Products

Giloba

#2 Cerebral and

Peripheral Vascular

NNO

#3

Emollients and Protectives

Our market leading nutraceutical, branded generic and OTC brands

Source: IMS Health June 2014, Myanmar estimates based on Myanmar import customs data and Company assumptions

Thailand Vietnam Myanmar

Acnotin

#1

Oral Anti-acne Preparation

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Thailand Manufacturing Facility 1 – Soi 6, Samutprakarn • Commenced production in 1985

• Manufactures: Soft gels, Hard gels and Sachets

• Approved by German health authorities, the Thai FDA and the Australian TGA

Thailand Manufacturing Facility 2 – Soi 8, Samutprakarn • Commenced production in 2009

• Manufactures: Soft gels, Hard gels, Tablets and Sachets

• Approved by German health authorities, the Thai FDA and the Australian TGA

Australian Manufacturing Facility – Pakenham Facility • Facility replaces the manufacturing facility established in Dandenong, Melbourne

• Commenced production in 2nd quarter 2013

• Manufactures: Hard capsules, Tablets and Powders

• Approved by Australian TGA

World-class manufacturing facilities subordinated to

Mega We CareTM branded products

Post expansion, combined capacity of both manufacturing facilities in Thailand is 3.8bn soft gel capsules p.a.

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High quality products manufactured in world-class facilities accredited by international regulatory bodies

State of the art quality control laboratory Internationally accredited manufacturing facilities

Manufacturing facilities in Australia and Thailand

These facilities are accredited and regularly inspected by:

• German health authorities

• Australian TGA

• Thai FDA

• Additional GMP certifications from 12 countries

• Australian TGA approved since 1992 • Amongst the few manufacturers globally,

who apply the same standards for the manufacturing of nutraceutical products as with pharmaceutical products

• Team of 160 professionals in our Quality Assurance and Quality Control teams to ensure our products comply with the highest quality standards

• State of the art QC laboratory with world class Quality Assurance (“QA”) systems and EU GMP standard manufacturing facilities make us amongst the leading such facility in its category in Thailand and in Southeast Asia

Internationally accredited facilities Sizeable and dedicated teams monitor quality Significant investment made into

infrastructure

We manufacture our nutraceutical products to pharmaceutical standards

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Science-based sales and marketing approach to build awareness of the safety and efficacy of our brands

“Science-based” sales and educational approach catering to medical customers

Overview

• Customers of branded products business include:

– Pharmacies

– Hospitals

– Clinics

– Health practitioners

– Physicians

• Direct promotion to these channels to strengthen market recognition and build brand loyalty

• Sales representatives and product consultants promote products through

– Educational seminars

– Trade shows

– Product information and promotional material

– Academic trainings

– Informational sessions for medical professionals

• Sales force includes members with a medical background

Sales and product consultants promoting Mega products

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Product development strategy

Efficient and targeted product development strategy drives a strong product pipeline

Nutraceuticals

• Identify new clinically-effective and safe product candidates

• Create line extensions of existing established products

Prescription Pharmaceuticals

• Review effective pharmaceutical compounds which have been successful for major originator companies

• Products with expired or due to expire patents

OTC

• Develop products which offer the following: faster relief, are easy to use, have better formulations for self medication, and will be recommended by pharmacies

Our objective is to develop new products which offer consumers health and wellness benefits

Products - Key information as at 30 June 2015Existing registered unique formulations:

# of Unique formulations as at Dec'14 222

# additions during the period 4

# of Unique formulations as at Jun'15 226

Existing product registrations:

# of Product registrations as at Dec'14 781

# additions during the period 34

# of Product registrations as at Jun'15 815

Applications pending for registration:

# of Unique formulations 60

# of Product registrations 388

# of unique product formulations under development 73

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c) OEM business


3. Appendix

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Key Distribution Markets

Myanmar Vietnam Cambodia

Market Positioning

• Leading international distributor of pharmaceutical and OTC products

• Among top 2 distributors of consumer products



Distribution Infrastructure

• 8 warehouses strategically located across Yangon, Mandalay, Mawlamyaing, Naypyidaw, Taungyyi and Lashio

• Distribute to more than 27,204 outlets representing c.85% geographical coverage

• 3 warehouses strategically located in Hanoi, Danang, Ho Chi Minh, with 1 feeder warehouses in Can Tho

• Distribute to more than 12,280 outlets across 48 out of 58 provinces

• 1 warehouse located in Phnom Penh

• Distribute to more than 8,700 outlets

Number of principals (31 December 2014)

35 19 13

% of Distribution Sales (FY2014)

66.0% 27.8% 6.2%

We are a leading distributor of pharmaceutical and OTC products in select frontier markets

Distribution business

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58.9

23.8

6.0

ThailandVietnamMyanmar

Mega is well-positioned to capitalize on this development Myanmar is expected to enjoy significant GDP growth

Myanmar GDP at current prices in USD bns

… With a leading position in Myanmar A key market with significant growth potential

53

73

2012E 2016E

And this is set to benefit its significantly underpenetrated health care market

Myanmar pharma and consumer health market size per capita (USD)

1995

11.2%

85%

8

9

66.0%

Source: IMF, WEO Database, April 2013, ADB Study 2012, Estimates based on Myanmar import customs data and Company assumptions| Note: (1) Suffix ‘E’ represents IMF estimate, (2) as at 31Dec 2014

1 1

Establishment date testament to our long-standing presence in the country

of 2014 consolidated Mega We CareTM revenues (before inter-segment charges) generated in Myanmar

of 2014 MaxxcareTM revenues generated in Myanmar

# of our branded products ranked as leading brands in their respective therapeutic category

# of strategically located warehouses

Extensive distribution reach covering 85% of the country

Myanmar significantly lags behind Vietnam

and Thailand in healthcare spend

c.1,4462 # of employees in Myanmar

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Our value-added distribution business models for pharmaceutical and consumer products

Conventional distribution services (CDS)

• Our integrated approach lends enhanced efficiency and quality control of our products at every stage of our operations from procurement to delivery to our end consumers

• We purchase products from our principals, subject them to a quality control inspection, then warehouse the products in a climate-controlled environment until receipt of end customer orders. We arrange for logistics services and ensure the timely delivery of products

1

2

3

Sales and conventional distribution services (SCDS)

• In addition to our conventional distribution services, we also provide sales support to our principals

• Our sales channels include pharmacies, hospitals and clinics for pharmaceutical products and supermarkets, department stores, key accounts, wholesalers and dealers for consumer products

Marketing, sales and conventional distribution services (MSCDS)

• Our pharmaceutical and consumer products teams provide a complete package of marketing, sales and distribution services tailored to our principals and their products

• The teams market directly and engage in marketing activities through available channels

Principals can choose from any of our three service models to help meet their distribution needs

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Advanced information technology systems provide valuable business intelligence for our principals Overview

• Our advanced IT systems allow us to collect, analyze and derive business intelligence across each of our distribution markets

• We offer a broad range of value-added services, including: – Inventory tracking systems – Inventory management systems – Access to valuable market data – Real-time information sharing

• Our principals can leverage on the array of value-added services we offer in order to: – Increase operational efficiency – Reduce inventory cost, fulfillment cost and operational

expenses – Tailor their marketing activities to target their

customers – Improve overall efficiency of their businesses

• We believe this is a key competitive advantage and it strengthens the existing principal and customer relationships

Through our advanced IT systems we can provide value-added services to help our principals increase operational efficiency, reduce inventory cost, fulfillment cost and operational expenses, and tailor their marketing activities

Our teams collecting real time data on the field

We capture all aspects of our relationship

with customers,

providing us with current

market insights which

we use for effective sales & marketing

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c) OEM business


3. Appendix

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OEM Business

In addition to manufacturing our own branded products, our manufacturing facilities in Thailand and Australia accept production orders from third-party customers

• OEM Business contributed 5.5% and 2.2% to our operating revenues and gross profits, respectively for FY2014.

• We provide contract manufacturing of nutraceuticals, prescription pharmaceuticals and OTC products for third-party customers.

• We have 40 customers located in 9 countries.

• Most are long standing customers of the business.

• OEM Business provides us productivity and efficiency benefits through the utilization of unused manufacturing capacity.

• It also allows us to diversify our revenue sources.

• The contribution of OEM to overall business of MEGA is expected to remain at current levels.

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c) OEM business


3. Appendix

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• Historically, MEGA has doubled top line and bottom line in less than 5 years and we expect to double the 2014 levels in the ensuing 5 years, with growth trajectory expected to be non-linear.

• Net profit decline in 2014 was mainly a result of lower growth in Mega We CareTM revenue, additional overheads from the capacity expansion, and spending towards business expansion activities in Africa and Myanmar.

• Net profits for 1H15 was THB 272mn, higher by 46.5% YoY, driven by improvement in overall gross margins from 38.5% in 1H14 to 42.3% in 1H15, given the growth in Mega We CareTM revenue of 15.5% YoY in 1H15.

• Net cash from operations in 1H15 was 195.2mn, the YoY increase was a result of increase in profits and improvement in working capital.

Summarized income statement Figures inTHB mn 2011 2012 2013 2014 1H14 1H15 YoY Gr.

Operating Revenue 4,856.8 5,964.8 7,033.5 7,730.0 3,664.0 3,777.2 3.1%

Gross profit 2,308.8 2,633.3 2,959.4 3,116.8 1,409.7 1,599.0 13.4%

Selling and Admin. exp (SGA) 1,755.7 1,980.0 2,235.8 2,483.0 1,187.8 1,296.2 9.1%

SGA (% to revenue) 36.1% 33.2% 31.8% 32.1% 32.4% 34.3% -

EBITDA 657.3 799.8 887.6 786.7 283.9 405.4 42.8%

EBITDA (% optg.revenue) 13.5% 13.4% 12.6% 10.2% 7.7% 10.7% na

EBIT 588.6 723.4 788.7 655.3 218.7 334.0 52.7%

Net Profit 455.9 577.7 624.0 547.9 185.7 272.0 46.5%

Net profit (% optg.revenue) 9.4% 9.7% 8.9% 7.1% 5.1% 7.2% -

EPS (in THB) 0.63 0.79 0.84 0.63 0.21 0.31 -

Return on equity 41.6% 38.2% 23.1% 14.3% - - -

Net cash from operations 266.7 342.0 465.8 614.2 6.1 195.2

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Consolidated revenue (THBmn) Revenue mix (%) across segments

Segment wise revenue (THBmn)

• Mega We CareTM and MaxxcareTM revenue grew at a healthy CAGR of 16.3% and 20.4% during 2011-2014 taking the overall operating revenue CAGR to 16.8% during the same period.

• SEA2and Indochina3 contributed 86.4% and 80.8%, respectively, of our overall operating revenue in 1H15.

• 1H15 overall operating revenue was higher by 3.1% YoY ,mainly driven by Mega We CareTM revenue growth of 15.5% YoY.

• Overall operating revenue growth on normalized basis was 14.7% in 1H15 YoY. MaxxcareTM distribution revenue on reported basis was down by 7.1% YoY in 1H15 but was higher by 16.2% on normalized basis.

CAGR (1.4%)

Gr: 15.5% CAGR 20.4%

4,857

5,965

7,034

7,730

CAGR 16.3%

Gr:(7.1%)

Gr:(2.4%)

Consolidated revenue1

1.Operating revenue 2. Thailand, Myanmar, Vietnam, Cambodia, Malaysia, Philippines, Indonesia and Singapore. 3. Thailand, Myanmar, Vietnam and Cambodia. 4. The reported revenue adjusted for the business impact due to discontinuance of one principal since 4Q14 in Myanmar , also reported in our earlier MD&As

CAGR 16.8%

3,664 3,777

4,857

5,965

7,034

7,730

3,664 3,777

Gr:3.1%

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Consolidated Gross Profit (THBmn)

Consolidated Net Profit (THBmn)

• Net profit grew at healthy CAGR of 17.0% between 2011 to 2013. Decline in 2014 net profit was mainly a result of lower growth in Mega We CareTM revenue (slow down in Thailand and Ukraine), additional overheads from the capacity expansion, and spending towards business expansion activities in Africa and Myanmar.

• Net profit for 1H15 was THB 272mn, higher by 46.5% YoY, driven by improvement in overall gross margins from 38.5% in 1H14 to 42.3% in 1H15, given the growth in Mega We CareTM revenue of 15.5% YoY in 1H15.

• Net profits in 1H15 was impacted by a one-time SG&A charge towards receivables of THB 16.8mn, adjusting for this, 1H15 net profit would have been THB 288.8mn.

• Gross profit grew steadily during 2011 to 2014.

• 1H15 gross profits was THB 1,599mn, an increase of THB 189.2mn or 13.4% YoY. Overall gross margin was 42.3% in 1H15 compared to 38.5% in 1H14.

• Improvement in 1H15 overall gross margin was mainly led by growth in Mega We CareTM revenue resulting in better revenue mix (Mega We CareTMproportion in overall operating revenue increased from 43.7% in 1H14 to 49.0% in 1H15) and improved Mega We CareTM gross margins, from 61.8% in 1H14 to 63.8% in 1H15.

Consolidated profits

2,309

2,633

2,959 3,117

1,410 1,599

456

578 624

548

186

272

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Mega We CareTM branded products revenue Revenue (THBmn) Revenue split by geography1(THBmn)

Top 15 products contributing around 60 % of revenue • Strong CAGR of 22.2% during 2011-2013. 2014 recorded a subdued revenue growth of 5.4%, given the slowdown in Thailand and Ukraine taking the 3 years CAGR (2011- 2014) to 16.3%.

• Revenue growth is driven by volumes of our existing market leading brands and new product launches. The low per capita consumption and penetration levels for our products in these markets vs. developed markets enable us to sustain the good growth rates by expanding the consumer base.

• SEA and Indochina contributed 81.8% and 71.4% of total Mega We CareTM revenue in 1H15. Thailand was the largest market, followed by Vietnam and Myanmar.

• 1H15 Mega We CareTM revenue was THB 1,851mn, an increase of THB 249mn or 15.5% YoY. Growth was mainly led by Southeast Asia which was up by 20.8% YoY. 1H15 growth in Africa was subdued, given the Nigerian and Ghanaian currency depreciation of 16% and 28%, respectively against THB; at constant currency rate, the in- market sales for Africa was up by 25.3% YoY in 1H15.

1.Revenue reclassified between CIS and others region(s) for earlier periods.

2011 2012 2013 2014 CAGR 1H14 1H15 YoY Gr.

SEA 1,836 2,077 2,676 2,898 16.4% 1,253 1,514 20.8%

Africa 193 262 330 388 26.2% 191 197 3.6%

CIS 138 182 190 119 -4.7% 63 42 (33.0%)

Others 131 180 232 206 16.4% 95 97 2.4%

Total 2,297 2,700 3,428 3,612 16.3% 1,602 1,851 15.5%

2,297

2,700

3,428 3,612

1,602 1,851

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Revenue1 (THBmn) Revenue contribution by geography

• We provide distribution business to third-party principals in Myanmar, Vietnam and Cambodia (The operations in Nigeria was discontinued since 2013). Myanmar continues to be the largest market for MaxxcareTM distribution business, contributing 62% of the MaxxcareTM revenue in 1H15.

• Strong CAGR of 20.4% during 2011-2014 included an impact of change in distribution business model in 2012 for one our principals in Myanmar.

• 1H15 MaxxcareTM revenue was THB 1,712.7 mn, a decline of 130.5mn or 7.1% YoY, mainly led by the discontinuance of one of our principal in Myanmar (as reported in our 3Q14 and 4Q14 MD&As); we expect its impact to continue till 3Q15. Normalizing for the business loss from such principal, MaxxcareTM revenue growth for 1H15 was 16.2% YoY.

• As at 30 June 2015, we provided distribution services to 37 principals in Myanmar (including 18 consumer goods principals), a net addition of 2 new principals from 31 December 2014. We provided distribution services to 20 principals in Vietnam and 16 principals in Cambodia, net additions of 1 and 3 principals, respectively, from 31 December 2014.

1. Revenue re-classified between Mega We CareTM and MaxxcareTM for 2013

MaxxcareTM distribution business revenue

2,117

2,767 3,132

3,694

1,843 1,713

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Gross Profits (THBmn)

• Gross profit of Mega We CareTM grew steadily during 2011 to 2014 at a CAGR of 15.4%.

• Mega We CareTM gross margin remained steady between 62% to 64% during 2011 to 2014. 2014 gross margins of 62.4% was slightly lower than 63.6% in 2013, mainly due to additional overheads from the capacity expansion and lower revenue growth.

• Mega We CareTM gross profits of THB 1,181.4 in 1H15 was higher by 19.4% YoY with gross margins of 63.8%; improvement was mainly driven by growth in Mega We CareTM revenue resulting in improved efficiencies due to higher output and savings in raw material cost.

Gross margin (%)

COGS elements % to Mega We Care TM revenue

Raw material is the largest cost element in COGS amounting to 66.7% of Mega We CareTM COGS in 1H15.

36.1 35.8 36.4 37.6

Gross profits – Mega We CareTM branded products

38.2 36.2

1,467

1,734

2,179 2,255

990 1,181

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• Gross margins are driven by principal/service mix.

• Gross profit during 2011-2012 was impacted by change in business model for one of our principal in Myanmar.

• Normalized gross margins reflect the gross fee earned by distribution business adjusted for the impact of change in business model for one of our principal in Myanmar during 2012.

• Gross profit in 1H15 was THB 372.6mn, a decrease of THB 19mn or 4.8% YoY, driven by decline in revenue mainly arising from the discontinuance of one of our principal in Myanmar (as reported in our 3Q14 and 4Q14 MD&As).

Gross Profits (THBmn) Gross margins

Gross profits – MaxxcareTM distribution business

733 781

700

794

392 373

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Revenue (THBmn) Revenue mix % by geography

Gross Profits and margins (THB mn))

• Revenue decline in 2013 was a result of temporary suspension of production owing to relocation of the manufacturing plant in Australia while slowdown in Thailand impacted revenue growth in 2014 and 1H15.

• Australia is the largest market contributing 59.4% of total OEM revenue in 1H15.

• OEM business gross margin was 21.1% in 1H15 compared to 13.0% in 1H14.Improvement in gross margins was driven by better customer-mix and certain cost optimisation measures implemented in Australia.

Gr (2.4%)

OEM business

443 498

473

424

219 214

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SGA expense has reduced as a % to operating revenue Administrative expenses (THBmn)

Selling expenses (THBmn)

• On overall basis SGA expenses have been declining YoY between 2011 and 2014, from 36.2% of operating revenue in 2011 to 32.1% in 2014, a reduction of 4 percentage points.

• Advertisement is the largest component of selling expense, followed by personnel cost, contributing 54.3% and 30.4%, respectively, of the total selling expenses in 1H15.

• 1H15 SGA was THB 1,296.2mn representing 34.3% of operating revenue, compared to 32.4% in 1H14. There was a one-time charge of THB 16.8mn towards provision against receivables in 1H15. We expect SG&A by the year end to remain close to FY14 levels.

1,082 1,153

1,373

1,531

674

827 863 952

SGA benefiting from increased scale

730 796

500 458

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Balance sheet and key elements – significant investments to boost capacity incurred already

Note : Balance sheets elements of previous years are based on restated financials

• MEGA commissioned new plant in Australia in 2013 and invested in the expansion of its manufacturing capacity in Thailand during 2012-2014.

• MEGA’s current manufacturing capacity will be sufficient for its businesses for the next 3 – 5 years.

• Rise in equities in 2013 was driven by fresh issue of ordinary shares as part of IPO.

Consolidated Balance sheet for the period ending:

Cash cycle increased from 120 days in Dec’14 to 130 days in June’15. increase mainly driven by stocking of raw materials to take benefit of lower prices and THB depreciation resulting in higher receivables. Out of 138 days of Inventory as at June’15, inventory of finished goods and raw material at factory accounted for 36 days.

1.Cash and bank balances as at 30 June 2015 include THB 326.9mn of cash and cash equivalents and THB 939.3 mn of term deposits with banks 2.Capex towards tangible assets

All figures in THB mn Dec'11 Dec'12 Dec'13 Dec'14 June'15

Cash and bank balances1 330 354 1,540 1,281.0 1,266.2

Trade accounts receivable 1,386 1,288 1,747 2,116 2,322

Inventories 904 1,442 1,685 1,649 1,688

Property, plant and equipment 368 733 970 980 991

Other Assets 301 515 609 705 742

Total Assets 3,290 4,332 6,551 6,732 7,010

Debt 738 1,198 997 567 698

Trade Payables 787 769 1,168 1,404 1,355

Other Liabilities 446 654 694 783 939

Total Outside Liabilities 1,972 2,621 2,858 2,754 2,992

Shareholder Equity 1,318 1,710 3,692.5 3,978.3 4,017.4

Total Liabilities 3,290 4,332 6,551 6,732 7,010

Key Balance sheet elements

Net cash/(debt) (THB Mn) (408) (845) 543 714 568

Capex Spent2 (THB mn) 80 439 352 160 96

IBD/Equity (times) 0.56 0.70 0.27 0.14 0.17

Dec'11 Dec'12 Dec'13 Dec'14 June'15

Average receivable days 86 81 78 90 106

Average inventory days 112 127 138 130 138

Average payable days 90 84 86 100 114

Cash cycle (days) 109 123 130 120 130

For the period ending

37 We care

Cash flows

Cash flows from operations, investments and financing activities (THBmn)

Operating activities generated THB 195.2mn of cash in 1H15 compared to THB 6.1mn in 1H14. Increase in operating cash in 1H15 was mainly a result of increase in net profits and improvement in working capital. THB 614.2mn cash was generated from operating activities in FY14, an increase of THB 148.4mn or 31.9% compared to 2013’s THB 465.8mn, mainly a result of improvement in working capital.

In 1H15, net cash used in investing activities was THB 100.6mn. Out of this amount, THB 37.5mn was towards the acquisition of land in Australia as part of overall investment plan for future expansion, THB 34.5mn towards maintenance capex for Thailand manufacturing facility and THB 9.5mn for improvement in information systems . In FY14, net cash used in investing activities was THB 202.4mn, out of this amount, THB 159.9mn was towards the expansion and maintenance capex and THB 23.5 mn was towards improvement in information systems.

In 1H15, net cash outflow from financing activities was THB 104.5mn mainly arising from payment of FY14 final dividends amounting to THB 216.3mn which was partially offset by increase in short term loans of THB 155mn. In FY14, net cash outflow from financing activities was THB 671.4mn, driven by repayment of loans of THB 411.2mn and the payout of dividends amounting to THB 242.6mn (THB 156.0mn declared for financial year 2013 and THB 86.6mn for 1H14).

1.Cash and bank balances as at 30 June 2015 include THB 326.9mn of cash and cash equivalents and THB 939.3 mn of term deposits with banks

2011 2012 2013 2014 1H14 1H151

38 We care

Taxation and BOI privileges

Board of Investment (“BOI”) privileges

• Exemption from corporate income tax on the net profits derived from the promoted activity (Manufacture of Drugs for Human use) in Thailand

• The period of exemption is for 5 years from the date such income is first derived (Aug 2012 to July 2017)

• Exemption from payment of imported duties on machinery as being approved by BOI and the import should be before Jan 2015

• Exemption from import duties on raw and essential materials imported for use in producing to export, for period of one year after the first import

• Exemption from import duties on items which are imported for re-export, period of one year after the first import

• Exemption from tax on dividend distributed from profits of promoted activity for a period of 5 years (Aug 2012 to July 2017)

We have availed an amount of THB 149.1 mn (on cumulative basis) as an exemption from corporate income tax on profits as part of BOI privileges since 2013 till 1H15.

THB mn 2011 2012 2013 2014 1H14 1H15

Profit before tax 565.7 698.3 757.4 638.1 209.4 328.3

Current tax 107.4 141.2 125.5 106.9 50.6 68.0

Deferred tax - (22.1) 7.9 (16.6) (26.9) (11.8)

Total tax expenses 107.4 119.1 133.4 90.3 23.7 56.3

Effective tax rate 19.0% 17.1% 17.6% 14.1% 11.3% 17.1%

For the period ending

We care





c) OEM business


3. Appendix

40 We care

Organization structure

Mega Lifesciences Public Company Limited

(Thailand)

99.99% 99.99% 99.96%

99.99% 99.99%

99.99% 98.99% 99.99% 99.96% 99.99% 99.99%

99.99% 99.99% 99.99% 99.99% 99.99% 48.99%

Natural Health Foods Ltd.

(Thailand)

Mega Lifesciences PTY. Ltd.

(Thailand)

Mega We Care Ltd. (Thailand)

Mega Lifesciences PTY Peru S.A.C.

(Peru)

Mega Products (Mauritius) Ltd.

(Mauritius)

Mega Lifesciences Sdn. Bhd.

(Malaysia)

PT Mega Lifesciences (Indonesia)

Mega Lifesciences PTY Ltd.

(Cambodia)

E-Sense Ltd. (Thailand)

Mega Lifesciences Ltd. (Myanmar)

Mega Lifesciences (Vietnam) Ltd.

(Vietnam)

Mega Lifesciences Nigeria Ltd.

(Nigeria)

Mega Lifesciences Ghana Ltd.

(Ghana)

Mega Lifesciences Pvt. Ltd.

(India)

Mega Lifesciences Pte. Ltd.

(Singapore)

Mega Lifesciences (Australia) Pty. Ltd.

(Australia)

Mega Product (Yemen) Ltd.

(Yemen)

Note : As at 30 June 2015

Mega Lifesciences Limited (Ukraine)

100.00%

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Our Board of Directors

10

1. Mr. Mechai Viravaidya ‐ Chairman of the Board of Directors & Independent Director

6. Mr. Ishaan Shah – Director

2. Mr. Alan Kam ‐ Director / Independent Director / Chairman of Audit Committee 7. Ms. Sameera Shah – Director

3. Mr. Manu SawangJaeng ‐ Director / Independent Director / Audit Committee / Chairman of Remuneration and Nomination Committee

8 Mr. Shiraz Erach Poonevala – Director

4. Mr. Thor Santhisiri ‐ Director / Independent Director / Audit Committee 9. Mr. Vivek Dhawan – Director / Remuneration and Nomination Committee

5. Mr. Kirit Shah ‐ Director / Remuneration and Nomination Committee 10. Mr. Thomas Abraham – Director

1 2

3 4

5

6 7 8

9

42 We care

Management ably supported by other experienced in-country personnel and teams

Management team instrumental in building the business is significantly invested in the Company

Vivek Dhawan Chief Executive Officer and Chief coach

• Joined Mega in 1986

Thomas Abraham Chief Financial Officer and

Head coach


Duangnapa Tongsiri President and Head coach, Mega We Care , Thailand

(excluding Manufacturing)


Girish Wadhwa President and Head coach,

Mega We Care and Maxxcare, Myanmar


Paramjit Singh President International and

Head coach , Mega We Care and Maxxcare

(excluding Thailand , Myanmar and Manufacturing) Joined Mega in 1993

Management team has a collective history of over 100 years working with the Company. As at 30 June 2015, management including their family members held 11.78% of MEGA shares.

John Farley Managing Director, Australia, 1989

Apichai Chancharusiri Director Manufacturing, 1985

Pornchai Wongpayak Director Quality Control, 1990

43 We care

Shareholding Structure as at 30 June 2015

Management Shah Family

34.59% 11.78% 50.08% 0.02% 3.53%

Other Investors Unistretch Company Ltd.

Globex Corporation Ltd.

Mega Lifesciences PCL

Shah group 53.63%

44 We care

981 1,153 1,348 1,444 1,540

1,039 1,185

1,467 1,720 1,744 811

838

947

1,062 985

18 19

23

27 25

Mega We Care Maxxcare Manufacturing Corporate/Others

Number of employees have increased steadily with growth in the business

Human resources

Overview

• Mega prides on its ‘people-first’ culture which focuses on the development of human capital

• We focus on educating and developing skills of managers and employees

• Seek to help all employees capitalise on their strengths and develop to their full potential

• There have been no major labour disputes in the workforce

3,195

3,785

4,253

2010 2011 2012 2013 2014

2,849

4,294

45 We care

Disclaimer

The presentation contains forward-looking statements which are based on MEGAs’ current expectations, estimates and projections about its industry, management’s beliefs and certain assumptions made by MEGA.

These forward-looking statements are subject to various risks and uncertainties. No assurance is given that future events will occur or that our assumptions are correct. Actual results may differ materially from those projected.

For any further queries please contact:

Email : [email protected]

Telephone: +66 27694222 Ext. 4230

Fax: +66 27694244

mailto:[email protected]



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