Special report: China has just become Australia’s biggest source of tourists and there is a new way to play this growing trend on the ASX: a soon-to-list company named Mediland Pharm.

Mediland Pharm is launching its $12.5m-15m IPO roadshow this week, offering investors shares at 20c.

They’ve been selling in-demand Aussie products to Chinese tour groups through specially designed retail stores in Sydney, Melbourne, and Surfers Paradise since 2002.

And now they want to kick that strategy up a notch, says Alex Sundich, director of Mediland Pharm’s lead manager for the IPO, Bridge Street Capital Partners.

“Chinese tourism into Australia has been increasing by an average 16 per cent a year and that is expected to continue, so there is a lot of new retail business to be won,” he told Stockhead.

“Mediland Pharm is highly profitable, has lots of growth opportunities available, and has been doing this for 16 years. They now want to use those profits, and the IPO proceeds, to make their growth strategy happen.”

The company has turned a profit for the last three years, making $3.7m in fiscal 2018. It has no debt and the initial market cap at the IPO price will be $62.5 million.

It says 50,000 Chinese visitors walked through its three stores in the 12 months to June 30 this year, all of whom were on organised tours.

They’re big spenders too: Tourism Australia says Chinese tourists spend $8000 each on a trip to Australia, compared with $5000 by other international visitors.

Get with the times

The Chinese tourism market is dynamic and Mediland is not resting on its laurels.

It’s a phenomenon Mediland Pharm managing director Yesh Mudaliar says they want to continue the company’s vision of further expansion, starting by capturing the non-group travel market or the independent traveller business by expanding into online,  establishing direct-to-customer stores and by designing their own branded products.

“The tour group side of things is extremely profitable now and we expect it to remain so in the future, but one day it might be limited so we’re using the IPO to diversify, as well as double down on the rising Chinese tourism wave,” he told Stockhead.

“The future is exciting.  With rising Chinese tourist numbers comes the opportunity to become the dominant retailer in this sector and we believe we are well placed to do that, given our profitable core business,” said Mr Mudaliar.

Mediland is investing in an e-commerce platform through which those 50,000 Chinese tourists a year can become repeat buyers (and recommend Mediland Pharm Products to their friends).

They also plan to launch a pilot direct-to-customer retail store aimed at local Chinese residents and Chinese tourists not travelling via tour groups.

And they are looking at building a range of Australian-made house-branded products, in the key categories of healthcare supplements and cosmetics.

This step is still in the pre-launch stages right now. Mr Mudaliar says the most popular category in their Australian stores is health and wellbeing supplements, and tourists will buy a year’s supply because they know they are unlikely to return soon.

He notes that buying in bulk may not be the case for people who are able to buy products more regularly, and they may want non-health products as well if buying from the comfort of their own home.

They plan to work with current suppliers to find out what is trending in China as well as take notes from what customers are already buying from their stores and their competitors.

“Chinese tourists are the biggest spenders and traveller market in Australia, so we wanted to diversify off our already strong base business to ensure that Mediland Pharm continues to grow and prosper.”

 

Medliand Pharm is a Stockhead advertiser.
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