SINGAPORE (Feb 7): Having just turned 52 years old, Terence Tea, executive chairman and managing director of Accrelist, does not look a day over 40. Proudly crediting his aesthetic doctor for helping to reverse his signs of ageing, Tea debunks the old attitude that aesthetic treatments were something people would have to hide. To him, how and where to get the best skin treatments, and who the most skilful doctors are, are things to be discussed and not hidden under the surface.

Tea explains that he started his aesthetic treatments about four years ago at the chain of four aesthetic medical clinics under the brand Refresh Laser Clinics. His interest in the medical aesthetics industry grew as his results with the clinic improved. That led him to conduct a makeover for Accrelist, and use the listed entity to embark on an expansion into the medical aesthetics business.

“I was a client of Refresh and throughout the years of my treatments there, I talked to the doctors and consultants, and learnt a lot about the procedures involved and how they help you look and feel better. [The acquisition of Refresh] seemed like a natural process, and the group also felt that it was a viable business,” he says.

The acquisition of Refresh Laser Clinics for $4 million was completed in October 2018. Now, Tea wants a much bigger piece of the medical aesthetics pie, which is growing because of higher disposable income, ageing population, and heightened consciousness on wellness and beauty.

Accrelist has rebranded the network of Refresh Laser Clinics to AM Aesthetics and now has grown the brand to be one of the largest aesthetics players in Singapore with seven clinics in Singapore, Malaysian and Penang. For 2020, the group aims to have about 15 clinics across the region. It also plans to enter the Vietnam market and will look into this in the second half of the year.

This move into aesthetics might just be the turnaround Accrelist as a company needs. From FY2016 to FY2017, Accrelist has been mostly running at a loss, as its main electronics manufacturing business remains mired in the red.

On Feb 5, Accrelist shares closed at 5.6 cents, valuing the company at just $15.6 million.

Selling beauty

To be sure, there are many aesthetic clinics around. They are either individual practices or part of integrated healthcare groups. Despite the competition, Tea is upbeat that the market is a growing one – not merely because more people want to look good. Treatment costs are getting more affordable. A laser session, for example, used to cost $200. It can now be as low as $50. That has attracted the younger crowd. Tea says the majority of his clients are between 30 and 35 years old.

The lower treatment costs are the reason the AM Aesthetics outlets are all located in the heartlands, instead of prime Orchard or downtown areas. The five outlets are in Toa Payoh, Bedok Mall, SingPost Centre, Lot 1 Shoppers Mall and Clementi Mall.

Even so, Accrelist will still want to capture a bigger number of high-end patients who are willing and able to spend more for such discretionary treatments. Following its recent proposed acquisition of The Wellness Clinic in Wheelock Place, Accrelist is starting to move towards targeting a more premium and upmarket region. Apart from this clinic in Orchard Road, the company plans to open another premium clinic somewhere central where they can capture a piece of the medical tourism pie.

Down the road, Accrelist will be launching its own skincare brand through its subsidiary, A Skin Products. The subsidiary is set to develop and sell its own original design manufacturer (ODM) products with support from South Korean dermatologists, alongside other non-ODM products. These products will be produced and manufactured by the group’s associate in South Korea.

The first range of products, consisting of serum, moisturiser and mask, is expected to reach Singapore and be sold in all of Accrelist’s clinics by end-January. The group also has plans to sell these products online.

Complete makeover

On Dec 26, 2019, Accrelist announced that it would divest its electronics manufacturing business, which is held via its controlling stake in another separately listed company Jubilee Industries. Accrelist will then fully focus on medical aesthetics.

Going into medical aesthetics is a radical change from Accrelist’s previous core business of precision moulding, distribution of electronic components, which accounts for the bulk of its revenue.

Citing the US-China trade war, Accrelist reported revenue of $78.1 million from its electronics and mechanical business unit, down 12% y-oy, for 1HFY2020 ended Sept 30, 2019. From earnings of nearly $1.9 million in 1HFY2019, the business went into the red with a $735,000 loss for 1HFY2020.

In contrast, AM Aesthetics contributed positively as it recorded $3.5 million in revenue, and earnings of $688,000. But since it was acquired in October 2018, the medical aesthetics business did not contribute meaningfully to Accrelist’s FY2019 results – the group’s overall revenue was down 8% y-o-y to $81.6 million, and losses widened from $629,000 to just nearly $2.1 million.

Accrelist now holds a 65.82% stake in Jubilee. The proposed divestment of this stake in Jubilee consists of two main parts.

First, Accrelist will be selling a stake of 17.5% in Jubilee to Bursa Malaysia-listed EG Industries for $6.95 million. EG Industries, whose executive chairman is also Tea, is engaged in the provision of electronic manufacturing services, which is a similar industry to Jubilee.

The remaining 48.32% of Accrelist’s stake in Jubilee will then be distributed to its shareholders through a distribution in specie, allowing Accrelist shareholders to directly hold the shares of two companies without any additional outlay. Based on Jubilee’s closing price of 10.2 cents on Dec 24, 2019, the total value of Jubilee shares to be distributed comes up to about $12.5 million or 3.93 cents per share.

Meanwhile, subject to completion of Accrelist’s stake divestment, Jubilee intends to dispose of its entire 13.77% interest in EG Industries to Tea for $5.37 million. Following which, Tea’s aggregate interest in EG remains the same, while his direct interest will increase from 3.18% to 16.95%.

According to Tea, this is a win-win situation for all three companies involved, as well as the minority shareholders for the respective companies. “After selling our 17.5% stake in Jubilee (to EG Industries), the cash from the sale will go into Accrelist, and as for the group’s remaining stake in Jubilee – we will treat it as a bonus for the shareholders of Accrelist and distribute this back to them.”

Upon completion of the deal, Accrelist will cease to have any interest in Jubilee and the management can focus their efforts to develop its medical aesthetics segment.

“As for Jubilee, their EG shares will be sold to me, and Jubilee will gain cash with that deal,” says Tea. “And since EG is going to be the controlling company of Jubilee, Jubilee is able to tap on EG’s resources to expand the business. Also, Jubilee is a supplier for EG, so with this deal, EG is able to have a tighter control of its supply chain. I believe that deal overall has benefitted three companies.”