Star Combo Boosts Aust-China Product Sales Network with Transformational E-Commerce Acquisition

Key Points:

  • Star Combo will acquire Austoyou Group Pty Ltd and Koala Mall Pty Ltd (“acquisitions”)
  • Austoyou is a fast-growing Australian based E-commerce platform with over 5,000 high demand product lines selling direct to Chinese consumers (B2C)
  • Purchase price of A$10m representing a 10x multiple on FY18 Net Profit After Tax (NPAT) of A$1.0m. • Management expects NPAT of the acquired businesses to grow in excess of 20% in the FY19 year from FY18 revenue of approximately $17 million
  • Acquired B2C channel will complement Star Combo’s existing B2B channels into China. Existing Star Combo products will be sold on the Austoyou platform over time.
  • E-commerce platform now positions Star Combo as a vertically integrated brand owner, manufacturer and distributor of vitamins and health supplements into China.
  • 2018 Chinese market for vitamins and supplements over US$5.2 billion, Australian trusted products in demand.

Vitamin and supplements manufacturer Star Combo Pharma (ASX: S66) has agreed to pay $10 million to acquire the retail operations of Koala Mall Pty Ltd and Austoyou Group Pty Ltd in an effort to boost its sales into China.

Austoyou is a well-established, Australia-to-China e-commerce platform offering more than 5,000 high-demand product lines to Chinese health product consumers.

The e-commerce platform provides Star Combo with an opportunity to significantly increase product sales and accelerate its China growth strategy.

It will also allow Star Combo to enhance its product lines to meet changing customer demand trends.

The Koala Mall business will offer a range of Star Combo Pharma vitamins, skincare, milk products and health supplements at a number of retail stores in Sydney.

Purchase agreement

Austoyou and Koala Mall will be acquired via a three-stage share sale and purchase agreement commencing with an immediate payment of 70% of the sale price on settlement of the acquisition, split 50:50 between cash and shares.

The remaining 30% will be split equally and paid 12-months and 24-months post-settlement.

The acquired businesses – both part of the Ausway Group of companies – delivered around $17 million in sales for the 2018 financial year and have demonstrated more than 20% per annum growth since 2016.

The growth has been attributed to increased Chinese demand for a broad range of Australian-manufactured and quality-controlled consumer goods.

Growing market

China’s vitamins and health supplements market has been estimated to grow well past its current US$5.2 billion value.

Chief executive officer Su Zhang said the acquisition will allow Star Combo Pharma to capitalise on that growth and will complement its existing B2B channels into the country.

“Chinese consumers view Australian-made products as being of high quality and subject to rigorous regulation and quality control,” she said.

“The addition of the Austoyou e-commerce platform will deliver Australian-made supplements direct to the consumer in China – it is a transformational acquisition which will accelerate [our] growth plans and provide a significant near-term increase in revenue.”

At mid-afternoon, shares in Star Combo Pharma were trading 17.27% higher at $0.645.

About Star Combo Pharma

Star Combo Pharm (ASX: S66) is a leading distributor and manufacturer of branded premium health and natural beauty products. Based in Sydney, our products are distributed to both local Australians and to overseas markets. Star Combo has offices and distribution agreements in China and currently supplies Australian pharmacy lines as well as distribution to over 450 Terry White and Symbion Chemists and wholesale customers in Australia and China. Directed by pharmacists and experts in health supplement manufacturing, Star Combo’s vision is to curate health products made from natural ingredients with scientific R&D and manufacturing practices. Since its establishment in 2004, Star Combo has demonstrated strong product and business development and continues its vision to expand our current operations to serve our loyal business partners, customers and employees.

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