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Camsing Healthcare Retail Cuts Help Narrow Losses In Q1 FY2027 · Investor Exchange

• 0:00
  Time for another Investor Exchange Podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome to the Deep Dive. We are jumping straight into the numbers today, unpacking the latest
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  financial performance of Kamsing Healthcare Limited. Specifically, we're looking at their
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  condensed interim financial statements for the three months ending April 30, 2026.
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  Yeah, and it is quite a report.
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  It really is. And, you know, as an investor, evaluating a company that is going through
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  this kind of massive restructuring well, it requires really reading between the lines.
• 0:35
  Oh, absolutely. Because the core contradiction of this report is, honestly, it's wild. You
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  have a company that just saw its revenue plunge by 30%, but they somehow managed to significantly
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  shrink their financial losses at the exact same time.
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  Right.
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  So the big question we're going to explore is, is this a masterclass in corporate survival?
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  Or is it a giant red flag for the future?
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  Yeah, I want to start right at the top of the income statement, because like you said,
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  the numbers are glaring. So revenue dropped by 30%. It went from 1.25 million Singapore
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  dollars in the same period last year, all the way down to 871,000 Singapore dollars.
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  Which is a massive hit.
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  It's huge. And the primary driver they cited is weaker consumer demand, but also a deliberate
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  reduction in the number of operating retail outlets for their principal subsidiary, Nature's
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  Farm, which sells health foods and supplements.
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  Right. They're physically boarding up the stores.
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  Exactly. But here's the thing. Let's unpack this. Normally, when a retailer's revenue
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  falls off a cliff like that, the losses explode, right? Because of fixed costs. It sounds like
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  they're trying to shrink their way to profitability. So how exactly does a shrinking pie lead to
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  a smaller loss? Because their loss before tax actually improved by 38%.
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  It dropped from a loss of 480,000 Singapore dollars down to 299,000 Singapore dollars.
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  Well, it really comes down to margin preservation. I mean, think about what happens when a physical
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  Nature's Farm store in a really high-rent area is just not getting the foot traffic.
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  Right. You still have to pay the rent.
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  Exactly. You pay the rent, the electricity, the staff. So every single dollar of revenue
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  that store brings in might actually cost the company, say, $1.20 to generate.
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  Oh, wow. So you're literally losing money on every sale.
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  Right. You are actively paying for the privilege of selling vitamins.
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  So by aggressively rationalizing costs and shutting down those specific underperforming outlets,
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  they basically eliminate that 20-cent penalty.
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  I see.
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  You lose the revenue, yes, but you also vaporize the massive infrastructure costs that were
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  dragging you down.
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  Okay. I mean, that makes sense. It's like pruning a tree so the roots can survive the winter.
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  That's the perfect analogy, actually.
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  But, you know, seeing it on the spreadsheet, it looks intense because if we look at the
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  specific line items where they slashed expenses, marketing and distribution expenses were chopped
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  in half.
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  Literally in half, yeah.
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  Falling 52 percent from $844,000 Singapore dollars down to $405,000 Singapore dollars.
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  I mean, are these cuts sustainable or are they cutting into the bone here?
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  A reduction like that really just reflects the reality of physical retail. When you close stores,
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  you just don't need to spend capital on window displays anymore or local mall promotions or,
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  you know, the complex logistics of trucking inventory all over the city.
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  So the marketing budget just naturally shrinks alongside the physical footprint.
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  Okay, that tracks. I also noticed finance costs dropped by 44 percent.
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  And they say it's because they have fewer lease liabilities,
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  which confused me at first because rent is an operating expense, right?
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  Why is breaking a lease lowering finance costs?
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  Yeah, that's a really common point of confusion.
• 3:52
  Yeah.
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  It comes down to modern accounting standards.
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  When a company signs a long-term lease for a retail space,
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  they don't just put the monthly rent on the books.
• 3:59
  Oh, really?
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  No, they have to put the entire value of that lease on their balance sheet as a liability.
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  It's treated almost like they took out a massive loan to secure the space.
• 4:08
  Oh, I had no idea.
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  Yeah, and just like a loan, there's an implicit interest expense tied to it.
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  So the moment they terminate those store leases because they're closing locations,
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  the liability disappears, and so does that interest expense.
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  Okay, so that explains the drop in finance costs.
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  But there's a weird accounting nuance further down.
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  Administrative expenses actually went up.
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  They went up by 16 percent.
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  So they're firing retail staff, closing stores, but admin costs go up.
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  It feels like, you know, corporate headquarters might be bloat.
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  It definitely looks like that at first glance.
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  But it's really just an accounting reclassification.
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  They didn't hire a bunch of new managers.
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  Okay.
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  What happened is they moved payroll, along with mandatory payroll contributions and levies,
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  out of the marketing budget and shifted them into the administrative budget.
• 4:56
  Wait, really?
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  So it's just moving money from one bucket to another?
• 4:59
  Exactly.
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  The actual cash leaving the business for salaries didn't necessarily spike.
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  It's just categorized differently now to reflect the leaner structure.
• 5:08
  Got it.
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  Okay, so all of this cost cutting is great for the income statement.
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  It looks like they've stopped the massive bleeding.
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  But as an investor, you have to look at the balance sheet to see if the patient is actually
• 5:19
  going to survive.
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  And that is where the story gets much, much more precarious.
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  Yeah, because they are in a net deficit position of 6.47 million Singapore dollars.
• 5:28
  Right.
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  Which means they are deeply underwater.
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  And the financial statements themselves actually explicitly note a, quote,
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  material uncertainty regarding the company's ability to continue as a going concern.
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  I mean, they are burning cash too.
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  Operating cash flows were negative 280,000 Singapore dollars in just three months.
• 5:47
  Exactly.
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  So if they're burning cash and they're in a massive deficit,
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  how on earth are they keeping the lights on?
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  Well, the lifeline is coming directly from their major controlling shareholders.
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  Okay.
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  In this quarter alone, those major shareholders injected 500,000 Singapore dollars in new loans.
• 6:03
  Oh, wow.
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  Just to keep things running.
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  Yep.
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  And the terms of these loans are really telling.
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  They are completely unsecured, entirely interest-free,
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  and they aren't even due until late 2026 to 2028.
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  See, here's where it gets really interesting.
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  If you are an independent investor looking at this, you have to ask yourself,
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  is this a viable standalone business?
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  Or is it basically on life support,
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  just entirely dependent on the goodwill of its major shareholders?
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  That is the ultimate question.
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  Because if a standard commercial bank looked at that balance sheet,
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  they wouldn't lend them a dime.
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  Right.
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  Because of the going concern warning?
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  Exactly.
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  So you really are entirely reliant on these controlling shareholders
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  continuing to open their wallets,
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  which means you need to have a lot of trust in the governance and history of the company.
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  Speaking of trust and historical baggage, we need to talk about the audit qualification.
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  Because any serious investor reading the fine print is going to spot this.
• 6:57
  Yes.
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  The ghost of past transactions.
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  So the independent auditors issued an except for qualified opinion
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  on the previous financial year's statements.
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  Which is a big deal in the accounting world.
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  Yeah. And this specifically relates to a balance owed to a company called
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  iNitra Consulting Limited.
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  It's roughly 139,000 Singapore dollars.
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  Right.
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  Now, to be fair and not take sides here,
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  the context is that this involved consignment arrangements for honey products
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  under the previous management team.
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  The old management, yeah.
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  Right.
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  But the auditors flagged it as potential round-tripping.
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  Can you quickly explain round-tripping for the listener?
• 7:34
  Sure.
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  Round-tripping is basically a tactic used to artificially inflate revenue.
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  You sell a product to someone and then immediately buy it back from them or a related party.
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  So no actual economic value is created.
• 7:47
  Right.
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  No real money was made.
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  But on paper, your top line revenue looks bigger.
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  Okay.
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  But the report does clarify that special auditors were brought in.
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  They conducted an extensive investigation,
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  and they concluded there was no conclusive evidence of round-tripping.
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  They did.
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  So if they were cleared,
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  why does this historical audit qualification still matter to current investors?
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  The current board even confirmed the impact is fully disclosed.
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  It matters because an audit qualification is like a permanent stain on the record.
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  Even if current management is entirely transparent and fixed the issues,
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  that qualification tells future investors
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  that the foundation of the house was once incredibly shaky.
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  So it forces you to look at everything with a more skeptical eye.
• 8:30
  Exactly.
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  It's a harsh lesson in reading the fine print.
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  You're adopting that historical baggage when you invest.
• 8:36
  Okay.
• 8:37
  So we've got the historical baggage,
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  the massive deficit,
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  the reliance on shareholder loans.
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  Let's pivot to the future.
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  What is management's actual plan to turn this around?
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  Because you can't just shrink forever.
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  No, you can't.
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  And their plan is a massive digital shift.
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  Great, the official reorganization.
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  Yes.
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  By closing those loss-making physical brick-and-mortar outlets,
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  they're essentially forcing a transition to online sales.
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  Which is risky because if my local vitamin shop closes,
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  I might just go to the pharmacy next door instead of downloading an app.
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  It's incredibly risky.
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  But the report actually notes a really specific optimistic detail.
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  They claim they have successfully retained most of their customers
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  by redirecting them to digital channels.
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  Wait, really?
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  Most of them?
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  That's what they're saying.
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  And that these digital channels are showing encouraging momentum.
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  Okay, well, that's huge if it's true.
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  It is.
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  Plus, they're actively in discussions with potential strategic partners
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  to find new revenue streams.
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  Okay, so they're trying to pivot to an asset-light e-commerce model.
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  Which brings us to a really major subsequent event
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  that happened right after the reporting period.
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  On May 8, 2026, the company converted
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  2.5 million Singapore dollars of zero-coupon bonds
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  into 50 million new ordinary shares.
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  That is a staggering amount of dilution.
• 9:58
  Right.
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  I mean, what does that bond conversion actually mean for the listener if they hold shares?
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  Well, the bad news is it heavily dilutes existing shares.
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  The total share count jumps to 140 million shares.
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  So your slice of the pie just got a lot smaller.
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  Yeah, nobody likes that.
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  No.
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  But the critical good news is that it completely removes
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  2.5 million Singapore dollars of hard debt obligation from the company's shoulders.
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  Oh, okay.
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  Zero-coupon bonds usually mean a massive balloon payment is due all at once.
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  By wiping that out, management is buying themselves crucial breathing room.
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  They desperately need that oxygen to execute their digital strategy
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  without the immediate threat of defaulting on that debt.
• 10:38
  I see.
• 10:39
  So it's a trade-off, except the dilution,
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  so the company actually survives long enough to try this turnaround.
• 10:43
  Well, we've seen Kamsing Healthcare successfully shrink its physical footprint
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  to stop the massive financial bleeding,
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  and they're clearly buying time with shareholder loans and debt conversions.
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  But the ultimate question for you, the investor, is this.
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  Can a traditional brick-and-mortar health supplement brand
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  truly reinvent itself as a digital-first company in an uncertain global economy,
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  or is shrinking just delaying the inevitable?
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  That's exactly what everyone should be asking themselves.
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  This content is intended to serve strictly and only as an informational,
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  independent, objective summary of recent events,
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  and should in no way be interpreted, construed,
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  or relied upon by any party as inside information or financial advice.