AmResearch expects EIG to improve its turnover by 33% to RM66.6mil for financial year 2006. Turnover growth would come primarily from increase in sales from Clinelle
The aggressive marketing of its in-house brand, Clinelle, has raised contribution from the company's distribution division to 70% of total revenue from 60% previously.
Revenue from the provision of professional services under Leonard Drake and Belle Lina is projected to grow 7-8% annually in financial years ending Jan 31, 2007 and Jan 31, 2008 respectively via the company's distribution activities.
EIG raised prices for its Dermalogica franchise to dealers and consumers by 3% to 5% in the middle of this year due to margin erosion as a result of higher transportation costs.
While the price increases have dampened demand, AmResearch Sdn Bhd believes that the EIG management team would carry out promotions to drive sales and sustain revenue.
The company has exclusive rights to distribute Dermalogica products in South-East Asia and Hong Kong.
The company is also entitled to use the Leonard Drake trademark at its professional care service centres via its business arrangements with Dermalogica Inc., United States.
Meanwhile, the company has put on hold plans to move into the male market, despite having done a concept study for the setting up of a professional skin care centre for men under its own range of professional skin care products, Belle Lina.
AmResearch believes that this decision was prompted by a need to raise awareness of the Belle Lina brand name before attempting to venture on a large scale into the male market.
As a result of the freeze, growth in the Dermalogica and Belle Lina franchises this year and 2006 would continue to come from the opening of skin care centres in new shopping malls on the west coast of the peninsula, it added.
The company has diversified to Multilevel Marketing or direct selling by forming a new company call Lexwell. AmResearch expected growth from this division for Year Ended 2006 is negligible.
The research house has a “buy” recommendation on EIG for its attractive dividend yield, of 9% and 12% for financial years 2006 and 2008 respectively.
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Tag: Cosmetic : Beauty :Malaysia: Health & wellness
