Healthcare segment to lead the way for DKSH

DKSH Holdings (M) Bhd, a market expansion services provider, anticipates further growth in its healthcare segment in the near term.

The company, which provides end-to-end marketing and distribution solutions for companies – usually the large ones, says there is a tendency for its clients to outsource this part of the job to it.

“There is demand for our services. Last year, there was strong momentum in the healthcare segment of our business.

“We are quite confident that healthcare will be a segment that will drive the business for us. Such companies tend to do commercial outsourcing to distribute their products to reach the consumer,” Sandeep Tewari, head country management and executive director of DKSH Malaysia, tells StarBizWeek.

“They will then focus on other parts of the business such as their core products, innovation, and the research and development (R&D) part of their business.

“Our role is to help our clients enter the market, give them brand visibility, and provide market knowledge, including regulatory compliance and customs clearance. Some clients are not present here, so they will totally outsource their brands to us,” Sandeep adds.

He points out the company’s consistent growth performance over the last few years and expects the trend to continue.

“We expect to sustain the good track record. In the last five years, our revenue has grown at par with the country’s gross domestic product growth and net profits, including the earnings per share, had grown some 29.7%,” Sandeep says.

DKSH Malaysia, which was listed in 1994 on Bursa Malaysia, is a subsidiary of DKSH Holding Ltd, based in Switzerland and listed on the SIX Swiss Exchange.

The Swiss holding company owns 74.3% of the Malaysian subsidiary.

DKSH Malaysia’s healthcare segment distributes products in various categories, including pharmaceuticals, over-the-counter, consumer health, and medical devices.

Its healthcare portfolio includes clients such as Novartis, Sanofi, Bayer, Omron, and Glenmark.

It also distributes its own in-house brands, including Hiruscar, Aqua Maris, Myonal, and Merislon.

“Acquisitions are usually done at the Swiss holding company level, and once it acquires a new brand, DKSH Malaysia will distribute it locally,” he says.

As a group, it will continue to look for suitable acquisitions. For example, in 2022, its Swiss holding company had acquired AcuTest Systems Sdn Bhd, a Malaysian in-vitro diagnostic provider that operates within the medical devices industry space.

“The growth in our healthcare segment is broadbased, spanning various clients and sectors. We have strategically shifted our focus to more value-added segments, meaning we are concentrating on areas that offer greater returns through innovation, enhanced quality, and tailored solutions that meet our client’s needs,” Sandeep says.

Despite relatively weaker consumer sentiment locally, DKSH Malaysia says it will largely be unaffected due to its vast array of clients.

“For us, this would bring more opportunity for growth since the bigger players would tend to consolidate their business during such times and would rather focus on innovation, R&D and manufacturing. Our opportunity here is to do the commercial outsourcing, as evident from the number of clients we have. We are able to provide them with more efficiency and cost-effectiveness with value added services,” Sandeep says.

Operating as an end-to-end supply chain market services provider, DKSH Malaysia also has a number of warehouses which it leases around the country for logistics purposes.

“While we don’t have any significant capital expenditure plans for 2024, we continue to upgrade our warehouse systems. We have just upgraded our Kuching, warehouse. We continue to invest in automation in this area to increase operational efficiencies,” he says.

Its newly relocated distribution centre in Kuching measures 105,000 sq ft and has a capacity of over 10,000 pallets.

The facility marks a significant enhancement of its capabilities in Sabah and Sarawak’s consumer goods and healthcare supply chain as well as logistics.

The company also has a consumer goods segment, with its own brands, SCS and Buttercup, which contribute significantly to the segment’s revenue.

“SCS is butter, while Buttercup is butter blend. We see higher demand for Buttercup products, especially during the Hari Raya and Chinese New Year seasons,” he adds.

Sandeep notes that in-house brands usually provide it with the highest growth in terms of revenue and profitability, and there is much potential to be realised in these areas moving forward.

“For some of the brands, such as Myonal, the holding company will acquire the brand from Japan-based Eisai Co Ltd and use a third-party manufacturing facility. We acquire the brand for this geographical area, so while it manufactures for us, we will do the rest (commercial outsourcing),” he says.

The only manufacturing facility which is housed under DKSH Malaysia is for its SCS and Buttercup brands.

DKSH Malaysia saw its net profit rise to RM40.45mil in the first quarter ended March 31, 2024 (1Q24), from RM37.03mil in 1Q23, in tandem with the increase in revenue. During the quarter in review, the company’s revenue increased to RM2.07bil from RM1.96bil in 1Q23.

It attributed the improvement in revenue to strong growth from existing clients and sales from new clients in the healthcare segment, higher outlet sales for the others segment, and resilient sales for the consumer goods segment.

In its filing with the stock exchange on May 16, DKSH Malaysia said it is cautiously optimistic on the outlook despite challenges arising from the current macroeconomic climate, thanks to its well-diversified portfolio.

DKSH Malaysia’s shares closed one sen higher at RM5.14 yesterday, giving the company a market capitalisation of RM808.8mil.

Year-to-date, the counter has gained about 12%.