How You Can Invest In The Body Shop of Southeast Asia

Since listing on 20 February 2020, InNature Berhad (“InNature”) (KLSE: INNATURE) has seen its share price halved from its initial public offering (IPO) price of RM0.64 to RM0.32 as at 8 April 2020.  In this article, we will take a closer look at the business, management and financial aspects of the Group, to gauge if there is an opportunity for investment.  

Company Background

InNature, through its subsidiaries, is a franchisee of The Body Shop® (TBS) brand in Malaysia, Vietnam and Cambodia. TBS offers natural cosmetics and personal care products, which are produced sustainably and ethically – against animal testing and being environmentally friendly. 

InNature has more than 35 years of experience in the TBS franchise business since opening its first store in 1984. The TBS brand is the leading mono-brand beauty retailer, with an 11% market share in Malaysia and highest number of physical point-of-sales (POS) – 89 stores countrywide. Meanwhile, its Vietnam operations have a market share of 3.5% with 34 physical stores. 

The group was recently awarded with a franchise right to distribute TBS products in Cambodia for a 10-year period, with the option to renew for a further five years, starting June 2019. It opened its first store in Cambodia in November 2019. 

(Source: 2019 Q4 results presentation)

Loyal Customer Base

InNature adopts a “masstige” positioning i.e. between mass and prestige, in terms of pricing and brand perception, and has earned a strong customer base of members in Malaysia and Vietnam. 

The group’s customer loyalty programme, Love Your Body™, has 298,999 active members in Malaysia and 43,352 active members in Vietnam. Love Your Body™ members contributed appropriately 71.0% of annual sales in Malaysia and 66.4% of annual sales in Vietnam in 2018. 

The programme ensures sustainability of the business going forward and provides further growth opportunities to increase average spending and frequency of visit of each member. 

Growth Plans

Moving forward, InNature aims to expand its retail footprint. RM14.5 million of its IPO proceeds is allotted to open 29 new TBS POS over the next few years (Malaysia (6), Vietnam (15), Cambodia (5)), and RM8.4 million is set aside for renovations of 21 existing POS. Vietnam is seen as the group’s second base especially with the growth of the middle-income class and increased spending power of women in the workforce. 

In addition, InNature will be looking to improve its multi-channel customer experience (online and offline) to drive same store sales growth, and assimilate its business into the growing e-commerce market. Currently, the group’s online presence is through online platforms such as TBS’s websites in Malaysia, Vietnam and Cambodia, as well as via selected third party online stores such as Hermo in Malaysia, Tiki in Vietnam, and Lazada in both markets. 

InNature recently introduced the Natura brand into Malaysia, after it entered into a supply agreement with Natura Cosmeticos SA in November 2019. The group has launched Natura’s e-commerce website and a pop-up store in Sunway Pyramid. Note that Natura Cosmeticos SA owns The Body Shop International, a TBS franchisor.  

The group plans to use RM15.1 million of its IPO proceeds to nurture the Natura Brand. It plans to open 6 Natura POS over a period of 3 years. This new venture is likely to dampen near-term earnings due to the start-up costs involved. InNature will also incur an additional 1% sales as royalty fee after listing as part of its franchise agreement. However, over the longer-term, the Natura line could propel the group to a bigger scale. 

Key risks 

  • Lack of brand control: As InNature is not the brand owner of TBS and Natura, the group has no control over actions or events of the franchisor, or other franchisees that may erode and tarnish consumer confidence towards the brands.  
  • Foreign exchange risk: InNature mainly imports products from its franchisor in foreign currency, hence fluctuation of foreign currency (especially GBP against MYR) could affect its bottom-line. The group’s operations in Vietnam and Cambodia also exposes it to VND/USD and KHR/USD fluctuations respectively. However, the group actively hedges against foreign exchange (FX) fluctuations by 3-6 months by using forward contracts. If there is a significant change in FX rates, the company may consider passing on the difference to end customers by increasing retail prices. 
  • Competitive environment and proliferation of unauthorized imports: The cosmetics and personal care industry is highly competitive and fragmented. Moreover, proliferation of unauthorized imported products and/ or counterfeit products may damage brand reputation and impede the growth of the industry.

Substantial Shareholders

(Source: 2019 IPO prospectus) 

Subsequent to its IPO, InNature’s largest shareholders are Dato’ Simon Foong and his wife, Datin Mina Cheah, at an equity stake of 71.89%. Dato’ Simon is a Non-Independent Non-Executive Chairman of the group, while Datin Mina serves as Managing Director of the group. Both individuals have extensive experience in retail as well as the cosmetic and toiletries industry, and have been instrumental in shaping the group’s business to what it is today. 

Financial Highlights

Profit or Loss2016
Gross Profit106,304115,495121,986129,280
Profit After Taxation (PAT) 26,81324,10045,62530,151
Core PAT*27,04730,56936,09733,742
Gross Profit Margin66.5%67.2%66.1%67.4%
Core PAT Margin*16.9%17.8%19.6%17.6%

*Excludes non-core items 

(Source: Company’s website)

InNature’s sales have increased steadily from RM159.9 million in 2016 to RM191.7 million in 2019, which translates to a compound annual growth rate (CAGR) of 6.23%. On the other hand, core PAT has grown in tandem from RM27.0 million in 2016 to RM33.7 million in 2019, at a slightly faster CAGR of 7.65%. 

The group’s gross profit margins and core PAT margins are at healthy levels and remain stable from 2016 to 2019. These ratios show the group’s products have a certain degree of pricing power and the group is diligently managing its costs.

At present, TBS Malaysia and TBS Vietnam are the main contributors to the group’s bottom line. By contrast, TBS Cambodia and Natura Malaysia are still at their infancy and loss making.   

(Source: 2019 Q4 results presentation)

(Source: 2019 Q4 results presentation)

Liquidity-wise, InNature is in a stable financial position as its cash & cash equivalents and other investments of RM17.5 million exceeds bank borrowings of RM16.6 million as at 31 December 2019. Furthermore, the group has just raised RM47.4 million from its recent listing (source: 2019 Q4 results). 


With a closing share price of RM0.32 as at 8 April 2020, InNature is trading at a price of earnings (PE) ratio of 6.71, with a market capitalisation of RM225.9 million. Valuation-wise, the group is certainly attractive, despite its short history as a listed entity. The group has stated in its IPO prospectus it intends to distribute at least 30% of profits as dividends. 

InNature’s near-term operating environment has clouded due to the outbreak of Covid-19. However, management remains confident in being able to weather the challenges ahead, as “people will not stop buying toiletries and soaps”. The group may even come out stronger from this event, as this becomes an opportune time to grow its e-commerce channels. Time will tell.  

(Source: Google Finance)

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