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Wednesday 26 June 2013

It's good to listen - Sa Sa - Strongest brand in the expanding personal care market - Part 1

I first became seriously aware of lipstick and mascara back in my final year of secondary school where for the one and only time, a four-eyed geek got an invitation to a dance party organized by Main Convent Girls School.  The girls school in Ipoh, Perak, Malaysia where all the girls were hot, fashionable, sophisticated and worldly - well that's how wide eyed boys perceived it anyway.  With their heavily painted faces I was not disappointed.

Dancing to Kylie Minogue's Locomotion, it still sends shivers done my spine till this day when I think of that pair of glasses - thick rimmed, thick glass.  What made it even worst was the sellotape...

After that episode and as I grew up over the years, I never again took any serious notice of how woman (even men) would powder on, lengthen their eyelashes, draw lines under (to enhance) the eye line and made their lips red hot.  It was beautiful to look at, a few gawks and furtive glances were offered.  This ritual became very much daily normality for grown ups.  It was war paint that one had to put on to face the world and I soon became desensitized to it.  It was - moral is not the issue here - for women and men to look good and presentable to the world outside that mattered.

A friend of mine even sold skin care products and won a Proton Saga.  The brand name escapes me but I am pretty sure has been consigned to history.

The article that reinforced my view of the importance of looking good was a special report in the Financial Times on Argentina's never ending financial and economic crisis in the mid-90s.  Tucked into the very bottom corner was a picture of a couple performing the Argentine tango at the Plaza de Mayo.  The article was about looking good in time of crisis and apparently Argentinians have a way to flaunt in through dance, dress and appearance.  It was one of those articles that I remembered well because of a statement that rang piercingly practical and (pause) matter of fact.  It summarizes in one sentence where society is gravitating to.  The woman that was interviewed said, "there is no contest between eating and looking good.  You have to look your best because no one wants to hire an old and ugly person.  Looking good puts food on the table."

I never questioned afterwards about the need for youthful appearance and beauty, it was a society imposed necessity.  I am not addressing a moral issue here, there are many successful people who have become successful not through how they look but their contribution to society.  It is merely an observation for me that the majority of human beings need to feel assured that looks determine how far you get ahead.

The first time I popped into a Sa Sa store was with the wife in 2003 we popped out 30 minutes later with nearly HK$3,000 worth of purchase.  What struck me most was the sales woman, she was amazing, complimentary and knowledgeable.  She knew how to push the right buttons and her ability to sniff out a serious buyer amongst those that were just browsing in the heavily perfumed store was a class act.  I of course protested about the profligacy - for something that had no conclusive prove that it worked - bordered on lunacy which elicited a snap response - what would I know?  A women's face is a small part of their body and it is important to keep it well nourished to look good.  I guess I better keep my opinions to myself.

Over the years this shopping ritual to Hong Kong was almost a pilgrimage to Sa Sa.  The wife is not the exception I must add.

My second run in with Sa Sa was a freelance consulting job to study the cosmetics and skin care market in Asia.  An interesting statistic from Global Insight I found reported that per capita spend in 2006 on personal care in Japan was US$150 and in China it was US$5.  The report also went on to note that is was growing a 4% per annum whilst Japan declined.  Sa Sa was the first company I analyzed.  There are other competitors such as Bonjour, Water Oasis and Modern Beauty, but none have come close to is distribution network, product knowledge and range of SKUs. 

Sa Sa's stock performance

In 2003, Sa Sa's stock price, adjusted for bonus issue was trading between HK$12cents and HK$21cents, by 2011 when I was commissioned to carry out the personal care industry market study, it was trading at between HK$1.20 and HK$4.85.  In the 10 years since I have been aware of this company, it had distributed a total HK$1.20 worth of dividends. 

The share price at the end of 31 March 2003 was HK$16cents and at the close of 21 June 2013 was HK$7.73.  The compound rate of return for the last 10 years was 47.4%.  The absolute return including dividends was 5,500%.  If in 2003, I was smart enough to put in the equivalent of HK$3,000 (the amount I spent in 2003 in the shop), that HK$3,000 would now become HK$167,000.  Enough to pay for the spend at the shop itself.

In Part II, I will outline my investment rational and why I think this stock could be a 10 bagger.

1 comment:

  1. I have also observed that Bonjour stores offer similar products and they are in the vicinity of most SASA stores as well....a poor cousin but it does have its customers, although SASA has better and stronger branding among foreigners and tourists.