Chinese manufacturer Rong Yu wants to be first ASX-listed TCM company

By Cheryl Tay

- Last updated on GMT

Rong Yu  is known for its cholesterol-lowering and women's health TCM products. ©Getty Images
Rong Yu is known for its cholesterol-lowering and women's health TCM products. ©Getty Images

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China-based TCM manufacturer Rong Yu Pharmaceuticals is aiming to be the first TCM company listed on the Australian Securities Exchange.

It intends to raise US$15m to US$20m in an IPO, which it believes will give it market capitalisation worth between US$75m and US$80m.

Chairman Rodney Hannington told Australian media: "Australia is a great place to list for a company like Rong Yu. Firstly, Australian investors get that China (presents) a big opportunity and they know they want to invest in China at some point, because of the growth potential of the health sector.

"Secondly, we want to register our products with the TGA (Therapeutic Goods Administration) so we can sell them in Australia. That registration will provide us with a great basis to export our products outside of China."

Regarding how the funds raised would be used, he said, "We're going to have two main priorities. One is geographic expansion — the business has great velocity with our existing distribution network, but we know we can expand that quickly and we want to accelerate our expansion.

"We're also buying some land, which we will cultivate to grow our own raw materials for TCM. We want to secure our supply chain and ensure greater quality, but from a GMP (good manufacturing practices) perspective, we want our existing GMP accreditation to then go back to our supply chain."

Double-barrelled success

Founded in 2004 by executive director Ye Rong Yu, the company is known for its products that are focused on two major categories for Chinese consumers: cholesterol-lowering and women's health.

These include two prescription and three over-the-counter Chinese medicines to treat high those with cholesterol, as well as women who suffer from anaemia, irregular periods, poor blood circulation, and impaired liver function.

Rong Yu sells these products directly to hospitals, doctors, pharmacies and wholesalers, and according to Hannington, has seen double-digit growth in the past decade, with net sales of $72m and profit after tax of $19m.

He said, "The business is unique in that its $72m in sales comes from only five products, and two of the products represent over 80% of the sales of the total business."

Hannington is one of two Australians on the company's board, the other being lawyer Philip Grundy, who had a hand in drawing up the IPO.

He added that further expansion was vital, saying, "The prescription TCM segment is worth approximately $500bn, and the category opportunity is massive for Rong Yu. 90% of our sales come from 10% of our provinces, and there are another 28 provinces where we can grow, so distribution expansion is an important priority for us."

Apart from the IPO, Rong Yu is opening an investor relations office in Melbourne that will also help ease its TGA registration process.

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