A Business Plan By Manoj Karia [email protected], 519-434-3742 Smita Yadav [email protected], 519-474-7648 Saurav Singhal [email protected], 519-857-3532 Ashwat Yennagudde Quality • S afety • E fficacy • Research • Brand Health • Longevity • Immunity • E nergy Service • T C M C linics • C onsultancy • Helplines DRAGONCARE CANADA Ltd Quality • S afety • E fficacy • Research • Brand Health • Longevity • Immunity • E nergy Service • T C M C linics • C onsultancy • Helplines DRAGONCARE CANADA Ltd
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We recommend that DragonCare Ltd expand its footprint to Canada through a fully
owned subsidiary by the name of “DragonCare Canada Ltd”.
Awareness of alternative health medicine is increasing rapidly in Canada. The Canadian
Natural Health Products (NHP) industry (Market Size: $2620 million)1, of which the
herbal medicines have a 40% share (Market Size: $1048 million), is growing at 20%
annually2.
The Traditional Chinese Medicine (TCM) segment in particular is highly
fragmented with no major brand in the marketplace. Market share of none of the current
players exceeds 5%. In this respect, the market condition in Canada is similar to what
exists in DragonCare’s current markets and provides DragonCare a good opportunity to
create a niche for itself by building a brand on the strength of its scientific research
capabilities and experience of operating in such markets.
ROLL OUT STRATEGY
DragonCare Canada should employ a phased approach in introducing its products,
its geographic expansion in Canada and introduction of its full value proposition to the
Canadian customers.
1 Trade Facilitation Office Canada – Pharmaceuticals and Natural Health Products Market Research 2003. Canada Business Service Centre www.cbsc.org2 Same as above. TFOC www.tfoc.ca
2
2005
2006
2007
2008
2009
2010
2011
2012
June 2005:June 2005:
DragonCare Canada registered and set upin BC and Alberta.
Jan 2006:Jan 2006:
DragonCare Canada goes operational.
Launch of “HealthCareFor Women” products
Oct 2007 Oct 2007 -- Jan 2008:Jan 2008:
DragonCare launches “HealthCare for Children” products.
It leverage established customer base of women to ventureinto infant products.
DragonCare sets up two – three TCM clinics in Vancouver.
Mar Mar –– Oct 2009:Oct 2009:
DragonCare goes east.Starts operations inOntario.
Jan Jan –– Dec 2010 :Dec 2010 :
DragonCare introduces more products in a phased manner to support its “Flagship” women’sproducts.
Product line includes soups, cereals, etc.
Jul Jul –– Dec 2011: Dec 2011:
DragonCare Canada sets upa “Concept Store” in Vancouver.
The Store promotes and sells complete line of DragonCare products
20112011--2012:2012:
DragonCare sets up Manufacturing unit in Vancouver.
Plant to cater to Canadian And US markets.
2005
2006
2007
2008
2009
2010
2011
2012
June 2005:June 2005:
DragonCare Canada registered and set upin BC and Alberta.
Jan 2006:Jan 2006:
DragonCare Canada goes operational.
Launch of “HealthCareFor Women” products
Oct 2007 Oct 2007 -- Jan 2008:Jan 2008:
DragonCare launches “HealthCare for Children” products.
It leverage established customer base of women to ventureinto infant products.
DragonCare sets up two – three TCM clinics in Vancouver.
Mar Mar –– Oct 2009:Oct 2009:
DragonCare goes east.Starts operations inOntario.
Jan Jan –– Dec 2010 :Dec 2010 :
DragonCare introduces more products in a phased manner to support its “Flagship” women’sproducts.
Product line includes soups, cereals, etc.
Jul Jul –– Dec 2011: Dec 2011:
DragonCare Canada sets upa “Concept Store” in Vancouver.
The Store promotes and sells complete line of DragonCare products
20112011--2012:2012:
DragonCare sets up Manufacturing unit in Vancouver.
Plant to cater to Canadian And US markets.
DragonCare should enter Canada with two patented women’s healthcare products
preferably for nutritional benefits & immunity development which have the highest
demand in Canada3. The strategy is to develop these products as DragonCare’s
“Flagship” products in Canada. Introduction of other products will be after the
“DragonCare Brand” is established. Further, DragonCare should initially limit itself to
British Columbia and Alberta since these are the biggest markets for TCM products (51%
of people in BC & Alberta use NHPs & TCM)4. BC also has a high Chinese immigrant
population (380,000 Chinese immigrants i.e. 31% of Chinese immigrants in Canada are
in Vancouver, BC)5, thereby providing an attractive easy-to-tap market for DragonCare.
After 3 years of operations in Canada, DragonCare should introduce services in the form
of TCM clinics, thereby completing its value proposition.
Dragoncare, with its limited resources should focus on growing primarily in the
Canadian market. However, if a few years down the road, DragonCare decides to enter
the US market, it should consider setting up a manufacturing unit in Canada to take
advantage of the North American Free Trade Agreement and use Canada as a
manufacturing base for North America. However, we do not recommend setting up a
manufacturing unit in Canada to target the Canadian market because of higher risk
associated with high initial investment and also because the production costs are lower in
Malaysia and Singapore.
OPERATING MODEL
DragonCare Canada should source products from its manufacturing facilities in
Singapore and Malaysia, and use Canadian pharma-products distributors to reach the
Depreciation 4% 0.0 200.0 350.0 612.5 1071.9 1447.04% of Sales based on assumption that Depex is 10% of Fixed Assets
EBIT -800.0 -700.0 525.0 918.8 1607.8 2170.5
Interest 0.0 108.8 190.3 333.0 582.8 786.8Interest Rate 7.5%. Prime Lending Rates of Most Singapore Banks is around 5.5%
PBT & Minority Interests -800.0 -808.8 334.7 585.7 1025.0 1383.7Minority Interests -153.6 -155.3 64.3 112.5 196.8 265.7 19.2% Min. Interest. (From 2004 PBT -646.4 -653.5 270.4 473.2 828.2 1118.0Taxes Payable on Profit -245.6 -248.3 102.8 179.8 314.7 424.9 Taxes =38% (Canadian)Tax Cover from previous Year 0.0 245.6 494.0 391.2 211.4 0.0Actual Taxes Paid 0.0 0.0 0.0 0.0 103.4 424.9Tax Cover Carried Over 245.6 494.0 391.2 211.4 0.0 0.0PAT -400.8 -405.2 270.4 473.2 724.8 693.2NOTE: 1) Sales are based on Dragoncare's price to retailers. Retailer margins are above this price.2) Fixed Assets/Sales is assumed to remain at current level of 0.29 (It has been in the range of 0.3 for the past 4 years)3) TCM products come under classification 3004.20.00.79 and no customs duty applies. Only PST applies which is levied on the customer. Sources: http://www.cbsa-asfc.gc.ca/E/pub/cm/d10-14-30/d10-14-30-e.html & Departmental Consolidation of the CUSTOMS TARIFF 2005
Net Cash Flow Projections for Canadian Operations2005E 2006E 2007E 2008E 2009E 2010 E
Net Cash Flow from Operations -646.40 -1117.17 122.65 610.19 964.48 1460.57Net Cash Flow in Investments 0.00 -1450.00 -1087.50 -1903.13 -3330.47 -2719.88Cash Flow from Financing 0.00 1450.00 1087.50 1903.13 3330.47 2719.88
-646.40 -1117.17 122.65 610.19 964.48 1460.57Note:Cash flow in investments in future years will be low due to slower average growth of around 5-10%. Hence, cash flows from operations in future years will be steady and sufficient to cover any future investment requirements Growth will slow down because DragonCare would have completed its geographic and product line expansions by end of 2010.
NET CASH FLOW
5- Year Return on Initial Investment: 14.43% (Refer Exhibit 33 for details)
Net Present Value of Project: 5.2 Million SGD (Refer Exhibits 32 & 33)
Initial Investment Required: $2.1 million in 2005-06.
Profitable in 2007. 7% of DragonCare Ltd’s net profits in 2010 will be from Canadian
operations. 14% of DragonCare Ltd’s sales in 2010 will be from Canadian operations.
Positive cash flows from operations in 2007.
Breakeven Sales Volume: $ 5.3 million/year in 2006 (Refer Exhibit 44 for details)
Breakeven Market Share: 4.2% (Refer Exhibit 44 for details)
Interest Coverage Ratio: Healthy (> 4 ) Refer Exhibit 40 for other ratios.
Refer Exhibits 28 to 44 for projected financial statements (Canadian operations and
Consolidated), ratios, cash flows, sensitivities and assumptions.
Source of Funds: DragonCare Ltd should secure long term loans from its current bank in
Singapore to fund capacity expansion in its Singapore/Malaysian facilities and its own
excess cash for funding initial working capital requirements. In later years the Canadian
division can source working capital requirements from Canadian banks.
Risks: a) High working capital requirements in future years to meet growth.
Business Environment of Top TenCountries, Rank in 2004-2008
World
Rank
1st 2nd
3rd 4th
5th6th
7th
10th9th8th
Business Environment of Top TenCountries, Rank in 2004-2008
World
Rank
1st 2nd
3rd 4th
5th6th
7th
10th9th8th
Exhibit 2: PEST Analysis
28
Free Trade Agreement in Progress with Singapore Natural Health Product industry not highly regulated Flexible health care plans to cover NHP costs Favorable tax policy
Political
High GDP Growth Positive Consumer
sentiment and spending Low unemployment Strong Dollar value Favorable Exchange Rate with Singapore Low interest rates Low Inflation
Economic
High Computer literacy Widespread use of internet. B2B software solutions for
supply chain integration High effectiveness of Online Advertising. Focus on R&D
Technological
Health Consciousness Increasing awareness of TCM and its benefits. Increasing population growth rates Large Population of Chinese Immigrants
Social
Canada Macro Economic Analysis
FAVORABLE!!!
Free Trade Agreement in Progress with Singapore Natural Health Product industry not highly regulated Flexible health care plans to cover NHP costs Favorable tax policy
Political
High GDP Growth Positive Consumer
sentiment and spending Low unemployment Strong Dollar value Favorable Exchange Rate with Singapore Low interest rates Low Inflation
Economic
High Computer literacy Widespread use of internet. B2B software solutions for
supply chain integration High effectiveness of Online Advertising. Focus on R&D
Technological
Health Consciousness Increasing awareness of TCM and its benefits. Increasing population growth rates Large Population of Chinese Immigrants
Social
Canada Macro Economic Analysis
FAVORABLE!!!
Exhibits on the Canadian Natural Health Products Market
Exhibit 3: A Market Research Summary
29
A) % of Canadians using NHPs = 51%B) Market Size of Herbal Medicine Industry in Canada = $ 1048 millionC) Annual Industry Growth Rate = 20%D) % of Women using NHPs = 49%E) % of Men using NHPs = 37%F) % of people taking NHPs in Alberta and British Columbia = 51%
References:Source of A, D, E & F: http://www.ndmac.caNDMAC - Self Care and Health - Consumer Profile - The use of Natural Products in Self CareSource of B & C: www.tfoc.caTFOC Market Research Report on Pharmaceuticals and Natural Health Products 2003.
Exhibit 4: Use of Natural Health Products(NHPs)by Region
Source: http://www.ndmac.caNDMAC - Self Care and Health - Consumer Profile - The use of Natural Products in Self Care
Exhibit 5: Reasons for taking Natural Health Products (NHPs)
No major players in the marketLow product differentiationLow capital requirementsLimited access to distribution channelsLow economies of scaleLiberal government policyFew patents
Many small suppliersGeographically distributedLess forward integrationLow Bargaining Power
DistributorHigh volumeChoice of many small suppliersConsumerLow volume purchasesWide choice of herbal productsLow differentiation, Low availability
Regular use prescription medicinesNon-prescription OTC medicinesAyurvedic medicines
Many small competitors No major brands
Barriers to Entry
Supplier Power
Buyer Power
Threat of Substitutes
Competitive Rivalry
Low
Low
Medium
Medium
Medium
HIGH
Forces Analysis EffectIndustry
Attractiveness
No major players in the marketLow product differentiationLow capital requirementsLimited access to distribution channelsLow economies of scaleLiberal government policyFew patents
Many small suppliersGeographically distributedLess forward integrationLow Bargaining Power
DistributorHigh volumeChoice of many small suppliersConsumerLow volume purchasesWide choice of herbal productsLow differentiation, Low availability
Regular use prescription medicinesNon-prescription OTC medicinesAyurvedic medicines
Many small competitors No major brands
Barriers to Entry
Supplier Power
Buyer Power
Threat of Substitutes
Competitive Rivalry
Low
Low
Medium
Medium
Medium
HIGH
Forces Analysis EffectIndustry
Attractiveness
Other Factors Considered Joint Venture
Acquisition New Manufacturing
Set Up in Canada
Exporting
Implementation Time Low Low High LowInvestment Low Very High Very High ModerateDragonCare’s past experience with the Alternatives
None None None High
Potential to Leverage Partner’s Knowledge about the Canadian Market
High Moderate-High
Low Low
Exhibit 11:
34
Quality
•Safety
•Efficacy
•Research
•Brand
Health
•Longevity
•Immunity
•Energy
Service
•TCM Clinics
•Consultancy
•Helplines
DRAGONCARE CANADA Ltd’s
3 PRONGED VALUE PROPOSITION TO CUSTOMERS
Quality
•Safety
•Efficacy
•Research
•Brand
Health
•Longevity
•Immunity
•Energy
Service
•TCM Clinics
•Consultancy
•Helplines
Quality
•Safety
•Efficacy
•Research
•Brand
Health
•Longevity
•Immunity
•Energy
Service
•TCM Clinics
•Consultancy
•Helplines
DRAGONCARE CANADA Ltd’s
3 PRONGED VALUE PROPOSITION TO CUSTOMERS
35
Exhibit 12:
36
Bra
nd I
mag
e
Scientifically Researched & Developed Products
Competitors
Dragon Care
Dragon Care Product PositioningB
rand
Im
age
Scientifically Researched & Developed Products
Competitors
Dragon Care
Dragon Care Product Positioning
Exhibit 13: Market Size for Women’s Products
A) Population of Canada 30750100B)% of Population Using Natural Health Products (NHPs) 51%C)Number of Consumers of NHPs 15682551 C = A*BD)% of Canadian Population in Upper Middle and Higher Income group 65%E)Number of Upper Middle class and Rich class consumers of NHPs 10162293 E = C*DF)% of Women in among E 51%G)Number of Upper Middle and Higher Income women consumers of NHPs 5192932 G = F*EH)% of above women population in 15+ age group 91%I)Number of women in 15+ age group using NHPs 4709989 I = G*HJ)% of I in BC and Alberta 24%K)Number of women users of herbal medicines in the 15+ age group in BC and Alberta 1130397 K = J*IL)Average spending per month for above women population on NHPs $30M)Total Women Natural Health Product Market Size in canadian dollars per year $406,943,058 M = K*LN)% of M for products similar to Dragoncare's 40%O) Target Market size in canadian dollars per year $162,777,223 O = M*NP)One canadian dollar to Singpore dollar conversion factor $1.31Q)Target Market size in Singapore dollars per year $213,238,162 Q = P*O
Source of B): http://www.ndmac.ca/index.cfm?fuseaction=main.DspSubPage&PageID=10&SubPageID=950&fkMainPage=10Source of F & H):http://www.answers.com/topic/demographics-of-canadaSource of J) http://atlas.gc.ca/site/english/maps/peopleandsociety/populationSource of D) http://www.cfc-efc.ca/docs/ccsd/00000324.htm. (4th and 5th Quintiles have been considered)Source of L: http://www.hc-sc.gc.ca/hppb/healthcare/pubs/comp_alt/stock.htmlN): 40% of the NHP industry is for TCM products.
Western Canada Women's Natural Health Product Market Size Calculations Remarks
Size (in 000's SGD) 213238 255886 294269 332524 365776
Note: Growth in Western Canada is forecasted to slow down in the later years as the market matures. Exhibit 14: Market Size Calculations for Children’s Products
A) Population of Children in Canada (< 10 Years of age) 3700000B)% of Infant Population in BC & Alberta (Same as % of Candian Population in BC &Alberta) 23%C)Number of Children in BC & Alberta 854700 C = A*BD)% of Children Population in Upper Middle and Higher Income group 65%E)Number of Children in Upper Middle class and Rich class 553846 E = C*DF)Average Number of Children / Family in Canada 1.5G)Number of Upper Middle Class & Higher Income Mothers in BC & Alberta 369230 G = E/FH) % of Mothers who use Natural Health Products (NHPs) for themselves 51%I) Number of Mothers using NHPs 188308 I = G*HJ) % of I who will buy NHPs for their kids 85%K) Number of Mothers buying NHPs for their kids 160061 K = I*JL) Average spending per month on NHPs $30M)Total Children's Natural Health Product Market Size in canadian dollars per year $57,622,096 M = K*LN)% of M for products similar to Dragoncare's 40%O) Target Market size in canadian dollars per year $23,048,838 O = M*NP)One canadian dollar to Singpore dollar conversion factor $1.31Q)Target Market size in Singapore dollars per year $30,193,978 Q = P*O
Source of A): http://www.absoluteastronomy.com/encyclopedia/D/De/Demographics_of_Canada.htmSource of B): http://www.absoluteastronomy.com/encyclopedia/L/Li/List_of_Canadian_provinces_and_territories_by_population.htmSource of D) http://www.cfc-efc.ca/docs/ccsd/00000324.htm. (4th and 5th Quintiles have been considered)Source of F: http://www.statcan.ca/english/Pgdb/famil50a.htmSource of H): http://www.ndmac.ca/index.cfm?fuseaction=main.DspSubPage&PageID=10&SubPageID=950&fkMainPage=10Source of J): An estimate. Most mothers will want to provide the health benefits they get from NHPs to their kids.Source of L: http://www.hc-sc.gc.ca/hppb/healthcare/pubs/comp_alt/stock.html N: 40% of herbal medicines in the market are TCM products.
Western Canada Children's Natural Health Product Market Size Calculations Remarks
37
Exhibit 15: Asian Immigrant Population Distribution
Population in Millions
As a % of Total Canadian Population Remarks
Canadian Total 29.64Chinese 1.09 3.68%Filipino 0.3 1.01%Vietnamese 0.15 0.51%Total Asia- Pacific 1.54 5.20%
Population in Millions
As a % of Total Province Population Remarks
British Columbia 3.8
Chinese Population % in BC is much higher than canadian average and is 35% of entire chinese population
Chinese 0.38 10.00%Filipino 0.068 1.79%Japanese 0.037 0.97%
Population in Millions
As a % of Total City's Population Remarks
Vancouver 1.96 Vancouver accounts for 51% of BC population
Chinese 0.347 17.70%Note: Almost 90% of chinese population in BC is in Vancouver
Vietnamese 0.022 1.12%
Synopsis of Exhibit: Western Canada, especially British Columbia, is an attractive market for DragonCare due to the large, concentrated and potentially easy to tap Asian Immigrant Population.
Exhibit 17: Marketing Budget Allocation for 2006Budget Allocation for Market Tests
Cost Remarks - Simulated Testing 15000 Limited Group - Controlled Test Environment 50000 Testing in Sample Retail Outlets in different localities
Budget Allocation for Advertisements
Vehicle
Total Reach/ Circulation in
Western Canada Cost/Use (SGD)
Frequency/ Duration of
Use
Total Annual
Cost(SGD)
Estimated Response
RateCustomers Acquired
Cost/ Customer
(SGD) Remarks
- Health Magazines/Books 315000
$17000 per Full Page Advt. 25 per Year 425000 3.00% 9450 44.97
Advertisements in Chatelaine, Canadian Living & Homemaker's
- Bill Boards 150000 people per Bill Board
$2500 per Month per Board
10 Boards Year Round 300000 1.00% 15000 20.00
Bill Boards in High Foot Step Areas
- Cable TV 1300000
$ 200 per 30 secs slot +
$ 5000 for developing Advt. 1000 per Year 220000 1.20% 15600 14.10
Low cost targetted advertising through local cable TV. 4 Different Advts will be developed
- Radio 2100000$50 for a 30 sec
airing 3000 per Year 150000 0.50% 10500 14.29 Effective if used repeadtedly.
- Newspaper 2000000 $10 per Line Daily 182500 0.50% 10000 18.2525 Line Ad with Logo DAILY in top two Newspapers
- Online Advts 1000000
$700 per month for websites reaching
100000+10 Websites Year Round 84000 0.20% 2000 42.00
Online Advts Will help drive sales demand.
- Total 1361500 62550 21.77 Average Cost/Customer
Sources of Information Costs for Cable TV: http://www.4hb.com/marketing/0131wwiobiz64adcable.htmlCost of Developing TV Advt: http://www.cheap-tv-spots.com/options.htmlCost of Health Magazine/Books Advt: http://www.chatelaine.com/binary/pdf/CHERateCard.pdfReach of Health Magazines/Books: http://www.transcontinentalpro.com/eng/pdf/canadian_living_m.pdfCosts for Bill Boards: http://www.gaebler.com/Billboard-Advertising-Costs.htmCosts for Radio Advt: http://www.albertaprolife.com/resources/radio.htmlCosts of Online Advt: http://vancouver.weatherpage.ca/info/vwp_rate_card_0305.pdfCosts of Online Advt: http://www.vistamagonline.com/articles/page.php?s=ad_ratesCosts of Online Advt: https://adwords.google.com/support/bin/answer.py?answer=6382&hl=en_USCosts of Newspaper Advt: http://www.canada.com/national/nationalpost/info/advertise/ad_pdfs/2005_1477_%20Western_Rates.pdf
Exhibit 17 Continued on Next Page
39
Recommended Dosage: 2 Tablets a day
Directions for Use:
Mfg Date:
Exp Date:
Batch No:
Mfg at: DragonCare Ltd, Singapore
Recommended Dosage: 2 Tablets a day
Directions for Use:
Mfg Date:
Exp Date:
Batch No:
Mfg at: DragonCare Ltd, Singapore
TM
Fo r mu l a t o a Hea l t h y Lif e
CMPACertified
DragonCare Brand Logo in this position
Information in FrenchInformation in English
Scientifically Proven
A Chinese wellness formula for women
Recommended Dosage: 2 Tablets a day
Directions for Use:
Mfg Date:
Exp Date:
Batch No:
Mfg at: DragonCare Ltd, Singapore
Recommended Dosage: 2 Tablets a day
Directions for Use:
Mfg Date:
Exp Date:
Batch No:
Mfg at: DragonCare Ltd, Singapore
TM
Fo r mu l a t o a Hea l t h y Lif e
CMPACertified
DragonCare Brand Logo in this position
Information in FrenchInformation in English
Scientifically Proven
A Chinese wellness formula for women
Budget Allocation for Sales PromotionsCost (SGD) Remarks
Bundling 165000 Buy one get one free/ discount on secondCoupons 100000 Discount CouponsFree Samples with Magazines 187500
Free Samples distributed with 30000 Health Magazines
Bundle other Items 100000 DragonCare logo bearing Key
Chains,Pens, Coffee MugsLottery 100000 Lucky Draw CampaignInstore Promotions & Trade Discounts 150000 Special promotion activities in retail outletsTotal 802500
Budget Allocation for Direct Mail Campaigns
ReachCost/Person Approached
Total Annual Cost
Response Rate
Customers Acquired
Cost/ Customer
(SGD) Remarks
Direct Mail Campaigns 20000
$1 per reference + $2 Material + $1 Postage. Target 80000 0.08 1600 50
These Customers can be expected to have long term Value to DragonCare as they will definitelyy be repeat buyers
Budget Allocation for Other PromotionsCost (SGD) Remarks
Free Samples to Practitioners 16000 100 Practitioners given 25 Samples each
Sponsorships of Social & Charitable Causes 150000
High Spend inline with Long Term Strategy of Creating Goodwill for better returns
Depreciation 4% 0.0 200.0 350.0 612.5 1071.9 1447.04% of Sales based on assumption that Depex is 10% of Fixed Assets
EBIT -800.0 -700.0 525.0 918.8 1607.8 2170.5
Interest 0.0 108.8 190.3 333.0 582.8 786.8Interest Rate 7.5%. Prime Lending Rates of Most Singapore Banks is around 5.5%
PBT & Minority Interests -800.0 -808.8 334.7 585.7 1025.0 1383.7Minority Interests -153.6 -155.3 64.3 112.5 196.8 265.7 19.2% Min. Interest. (From 2004 PBT -646.4 -653.5 270.4 473.2 828.2 1118.0Taxes Payable on Profit -245.6 -248.3 102.8 179.8 314.7 424.9 Taxes =38% (Canadian)Tax Cover from previous Year 0.0 245.6 494.0 391.2 211.4 0.0Actual Taxes Paid 0.0 0.0 0.0 0.0 103.4 424.9Tax Cover Carried Over 245.6 494.0 391.2 211.4 0.0 0.0PAT -400.8 -405.2 270.4 473.2 724.8 693.2NOTE: 1) Sales are based on Dragoncare's price to retailers. Retailer margins are above this price.2) Fixed Assets/Sales is assumed to remain at current level of 0.29 (It has been in the range of 0.3 for the past 4 years)3) TCM products come under classification 3004.20.00.79 and no customs duty applies. Only PST applies which is levied on the customer. Sources: http://www.cbsa-asfc.gc.ca/E/pub/cm/d10-14-30/d10-14-30-e.html & Departmental Consolidation of the CUSTOMS TARIFF 2005
Exhibit 29:
Sensitivity Analysis of Income from DragonCare Canada
Note: Sales in 2006 will be $5 million in all scenarios. This is a conservative figure given that the market size itself is $ 213 million and is growing at 20% per annum.
Profits (in 000's of SG$)
Exhibit 30:
Operating Cash Flow for Canadian Operations
2005E 2006E 2007E 2008E 2009E 2010 E Remarks & AssumptionsNet Income -400.8 -405.2 270.4 473.2 724.8 693.2Add: Depreciation 0.0 200.0 350.0 612.5 1071.9 1447.0Less:Taxes carried forward 245.6 248.3 0 0 0 0Increase in AR 0 438.36 328.77 575.34 1006.85 822.26 32 Days receivable
Increase in Inventory 0 917.81 688.36 809.08 1415.88 1156.30
67 Days inventory upto 2007. Reduced to 45 days after that since we will have better experience by then
Increase in Other Current Assets 0 57.53 43.15 75.51 132.15 107.92 4 Days other current assetsAdd: Increase in Current Liabilities 0 750.00 562.50 984.38 1722.66 1406.84 15% of sales (similar to current levels)
Net Cash Flow from Operations -646.4 -1117.2 122.7 610.2 964.5 1460.6
46
Exhibit 31:Net Cash Flow Projections for Canadian Operations
-646.40 -1117.17 122.65 610.19 964.48 1460.57Note:Cash flow in investments in future years will be low due to slower average growth of around 5-10%. Hence, cash flows from operations in future years will be steady and sufficient to cover any future investment requirements Growth will slow down because DragonCare would have completed its geographic and product line expansions by end of 2010.
NET CASH FLOW
Exhibit 32:NET PRESENT VALUE OF DRAGONCARE CANADA PLAN (in 000's SGD)
Assumptions Made RemarksSales Growth Rate upto 2009 75% Aggressive sales growth estimate due to plans of expansion through product launches and geographic expansionSales Growth in 2010 35%Sales Growth from 2010-2015 10% Sales growth estimate is lower due to no major growth drivers & increased competition. Assumptions for Terminal Value CalculationNOPAT Growth Rate beyond 2016 5% Market to reach maturity and stiff competition expected.Weighted Average Cost of Capital 10%In the Long Run, Depreciation = Capital ExpenditureIn the Long Run, Working Capital Change = 0
Exhibit 33: NPV Sensitivity & ROI CalculationsSensitivity Analysis for NPV of DragonCare Canada Project
5- Year Return on Initial Investment2005 2006 2007 2008 2009 2010
Profit After Tax -400.768 -405.1514 270.4275 473.2481 724.8281 693.1902PV of Profits -400.768 -368.3195 223.4938 355.5583 495.0673 430.4166Total PV of Profits 305.032Investments 2113.70Return on Initial Investment in 5 years 14.43%
47
Exhibit34:
Net Profit Trend for DragonCare Canada
-600.0
-400.0
-200.0
0.0
200.0
400.0
600.0
800.0
2005E 2006E 2007E 2008E 2009E 2010E
Year
000'
s S
inga
pore
$
Exhibit 35:
Cash Flow from Operations of DragonCare Canada
-1500.0
-1000.0
-500.0
0.0
500.0
1000.0
1500.0
2000.0
2005E 2006E 2007E 2008E 2009E 2010 E
Year
000
s o
f Sin
gapo
re $
48
Exhibit 36:
Cumulative Cash Flow from DragonCare Canada Operations
-2500.0
-2000.0
-1500.0
-1000.0
-500.0
0.0
500.0
1000.0
1500.0
2005E 2006E 2007E 2008E 2009E 2010 E
Year
000
's o
f Sin
gap
ore
$
Exhibit 37:
Forecasted Income Statements of Non-Canadian DragonCare Operations
% of Sales 2005E 2006E 2007E 2008E 2009E 2010E Remarks
DEPARTMENT OF FOREIGN AFFAIRS AND INTERNATIONAL TRADEInformation Services (SXCI)125 Sussex Drive, Ottawa, Ontario K1A 0G2Tel: 1-800-267-8376Fax: 1-613-996-9709e-mail: [email protected] e-mail requests, please include your name, telephone number and return address.internet site: http://www.dfait-maeci.gc.ca
CANADIAN ASSOCIATION OF IMPORTERS AND EXPORTERS438 University Avenue, Suite 1618Toronto, Ontario, Canada M5G 2KB Tel: (416) 595-5333Fax: (416) 595-8226internet site: www.caie.ca
CANADIAN HEALTHCARE ASSOCIATION17 York StreetOttawa, Ontario, Canada K1N 9J6Tel: (613) 241-8005Fax: (613) 241-5055internet site: www.cha.ca
CANADA CUSTOMS AND REVENUE AGENCYinternet site: www.ccra.gc.ca/tariff
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ANNEXURE: ADDITIONAL LIST OF SOURCES
CANADIAN HEALTH FOOD ASSOCIATION550 Alden Road, Suite 205Markham, Ontario, Canada L3R 6A8Tel: (905) 479-6939Fax: (905) 479-1516internet site: www.chfa.ca
CANADIAN HOMEOPATHIC PHARMACEUTICAL ASSOCIATION408 Queen Street, Suite 105Ottawa, Ontario, Canada K1R 5A7Tel: (613) 594-5965Fax: (613) 235-5866internet site: www.chpa-aphc.ca
CANADA’S RESEARCH BASED PHARMACEUTICALS ASSOCIATION (formerly Pharmaceutical Manufacturers’ Association of Canada)55 Metcalfe Street, Suite 1220Ottawa, Ontario, Canada K1P 6L5Tel: (613) 236-0455Fax: (613) 236-6756internet site: www.canadapharma.org
HEALTH CANADAA.L. 0900C2Ottawa, Ontario, Canada K1A 0K9Telephone: (613) 957-2991Fax: (613) 941-5366internet site: www.hc-sc.gc.caHas links to the Canadian Institute for Health Information under theHealth Care section (www.cihi.ca)
INDUSTRY CANADACommunications and Marketing BranchSecond Floor, West Tower235 Queen Street, Ottawa, Ontario, Canada K1A 0H5internet site: www.strategis.ic.gc.ca(Trade Data Online)
NON-PRESCRIPTION DRUG MANUFACTURERS ASSOCIATION OF CANADA1111 Prince of Wales Drive, Suite 406Ottawa, Ontario, Canada K2C 3T2Tel: (613) 723-0777Fax: (613) 723-0779internet site: www.ndmac.ca
PATENTED MEDICINE PRICES REVIEW BOARDBox L40, Standard Life Centre333 Laurier Avenue West, Suite 1400Ottawa, Ontario, Canada K1P 1C1internet site : www.pmprb-cepmb.gc.ca