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Woongjin Coway plans to list unit in Malaysia

posted Jun 30, 2010, 8:29 PM by Coway Malaysia
The household electronics manufacturer plans to launch its first initial public offering outside South Korea on the Malaysian bourse in 2014

South Korean household electronics manufacturer, Woongjin Coway Co Ltd, plans to list its Malaysian unit on the local bourse in 2014, the first initial public offering (IPO) outside its home country.

Woongjin Coway (M) Sdn Bhd (Coway Malaysia), set up in 2006, is already the parent's fastest-growing overseas operation, Coway Malaysia head of marketing department Andy Kim Ja-jong told Business Times.

"We also plan to set up a manufacturing plant in Malaysia in 2014. The Malaysian operation will service countries in the East Asian region," he said.

At present, Woongjin has three manufacturing factories: in Incheon and Yugu in South Korea and Tianjin, China.

Coway Malaysia is the group's fourth overseas operation, after China, Japan and Thailand. It also has branches in the US and Hong Kong and a distribution base in the Netherlands.

Plans to float Coway Malaysia and set up the plant will hinge on its ability to increase the sales target set by its parent.

"In order to set up a manufacturing facility here, the condition is that regional sales, including Singapore, Indonesia, Thailand, Vietnam and Malaysia, should hit over 30,000 units per month," Kim said.

The Malaysian business replicates Woongjin's existing model in South Korea, which is engaged in the sales and rental of water and air purifiers and bidets.

Kim expressed confidence that sales, currently at 10,000 units a month, would hit the target in three years.

Coway Malaysia, already Woongjin's best overseas branch, is expected to contribute up to 70 per cent of the regional sales target.

Kim was of the view that Coway Malaysia, when listed, would mirror the performance of its South Korean-listed parent, which now has a stock value of RM8.65 billion since listing in 2006.

"We are very sure that, once listed on the local stock market, Coway Malaysia would be positioned as a blue-chip stock," he said.

Woongjin chief executive Hong Joon-kee has said that the group aims to make Coway Malaysia its best overseas branch and plans to invest about 70 per cent of its market development fund for this year in the Malaysian operation.

According to Kim, Woongjin will invest about RM15 million in Malaysia this year.

"Our headquarters aims to invest the market development fund to increase awareness of the Coway brand in the country. About 60 per cent of the fund will be for advertising purpose, while the balance is for beefing up the sales development channel," he said.

Woongjin invested RM5.8 million in its debut in Malaysia in 2006. To date, it has invested about RM50 million.

Coway Malaysia expects its branding and promotion to help increase sales by more than 100 per cent this year, from 1,500 units a month last year.

"We expect sales in Malaysia alone to reach 10,000 units per month by the end of this year. In 2011, sales volume should double to hit 20,000 units per month," Kim said.

Earlier, Coway Malaysia sales senior general manager K.C. Hoe said it would need to secure enough rental customers each year to list the company.

"Ideally, we want 100,000 rental customers each year for our water purifier products," he said.

The company adopts a rental business model to make its products more accessible and has about 28,000 customers currently.

This year alone, it wants to increase its customer base to 50,000.

According to Hoe, the rental scheme contributes about 85 per cent of Coway Malaysia's sales.

It opened its first branch in Sabah in January this year and is looking to step up its expansion into Sabah and Sarawak.

"We are expecting to sell up to 500 units each in Sabah and Sarawak in the second quarter of this year," said Hoe.