Here's 'the cure' to Eu Yan Sang share price woes

It lost $9m in Australia.

According to CIMB, Singapore turned 48 years old this year. Yet, on the SGX, you can find a brand that is older than even Coca Cola. Eu Yan Sang, the well-known Singapore company selling traditional Chinese medicine, was founded in 1879 by Chinese immigrant Eu Kong, seven years before Coca Cola was introduced in the United States. 

Its businesses in Singapore, Malaysia and Hong Kong are doing well while China is loss-making but manageable. The “cure” that Eu Yan Sang’s share price needs is a turnaround in the Australian business.

Here's more:

We estimate that the company lost S$9m in Australia in FY13. FY14 losses could slow to S$3m-5m and breakeven could happen in FY15.

If we add the S$9m loss back to FY14 profits, P/E falls to 11.6x, well below its 5-year average P/E of 14.2x. Eu Yan Sang looks very much the stock for those who are patient and investing for the long term.

We continue to believe that the Eu Yan Sang brand name has value (perhaps better appreciated by industry players than financial investors) and the company’s recent initiatives in expanding capacity and raw herbs JV bring new opportunities.