WHILE traditional medicine and cosmetic retailers have never stopped looking for ways to improve their products to bring them upmarket, they have also relied on their property businesses as a source of major income earnings. At least half of their business portfolios are property development projects and investments. Kwong Sang Hong International, which produces the nostalgic Two Girls brand of cosmetics, says its cosmetics business contributes only eight per cent of the company's earnings while the majority comes from trading and investment of properties. However, managing director Jennifer Tose said the percentage would increase gradually: 'This year's earnings was a 30 per cent increase from last year.' Mrs Tose said the cosmetic side had gradually been expanding. When she took over in 1989, the company had only five product lines. She relaunched the Two Girls brand in 1990 and now the company had more than 20 product lines. Mrs Tose said 1995 would be a turning point when the company introduced a new line of skin care products in Shanghai - the first in China and a launch into the Japanese market. In contrast, property investments contribute to the bulk of the company's profits every year. The executive director, who oversees the company's property businesses, Edward Cheung, said: 'The majority of the profits in the last two years came from trading of properties. 'We adopt a flexible policy unlike developers who just buy sites. We sell our sites when prices are right. 'In the past few years, we depended a great deal on trading of properties. But this year and next, our own development properties will be completed,' Mr Cheung said. He said 70 per cent of the company's investments were in Hong Kong while the remainder was in China and the region. He said the company could increase its investments in the region in places such as Malaysia and Vietnam. The company has two office buildings in Malaysia. On the cosmetics side of the business, he said it was the 'traditional image' while property was there since parent company Peregrine Investments Holdings took over Kwong Sang Hong. 'It is a new feature but we still adhere to the traditional Kwong Sang Hong concept by choosing a good location and building with high quality,' Mr Cheung said. Traditional Tung Fong Hung falls in the same category. The Chinese medicines, health foods and dried seafoods retailer relied on the disposal of property investments to maintain steady earnings growth. Net profit was lower in absence of large gains on property disposal in the 1992-93 financial year despite a rebound in profits in core business. In the 1991-92 fiscal year, the rise in net profit was largely attributed to the sale of seven properties; core business profits fell about 29 per cent. Traditional medicated oil manufacturer, Pak Fah Yeow International, besides introducing new products to broaden its market and income base, has also begun to engage in property investment. Executive director Stephen Gan Fock-wai said property investments could be used to generate rental income but the manufacture and distribution of medicated oils remained the main source of revenue. Income from property investments accounted for only about three per cent of the company's total turnover for the year ended December, 1993. However, Mr Gan hoped the proportion between property investments and manufacturing would balance one day. In December last year, Pak Fah Yeow bought a five-storey commercial building in London for GBP2.02 million (about HK$24.16 million) for long-term investment. The company also has property in Singapore and is considering investing in Taiwan.
