CHABA

Siam Wellness Group Public Company Limited (SPA) has nipped Chaba Elegance Company Limited (CHABA) in the bud before things could get any worse by divesting from CHABA’s business. CHABA conducts manicure, pedicure and eyelashes services but requires a specific skills which causes the plan for expansion to slow down and not what SPA had hoped. SPA will transfer its shares in Chaba Elegance Co., Ltd. total 349,600 shares or equivalent to 76% of registered shares back to Chaba Nail Wellness Spa at the East Co., Ltd. (previous shareholder) at the same price when purchase within the fourth quarter of 2019. SPA will recognize the revenue from the joint investment until September 30, 2019. In fact, SPA aims to strengthen its revenue by building through CHABA’s business with an investment of 125 million baht to hold 76% of CHABA’s shares at the beginning of 2019. CHABA had a total of seven branches at that time, and SPA expected to synergize their business together as the majority of SPA’s customers are foreigners while CHABA’s customers are Thais. Both businesses are spa and beauty which could support one another. More importantly, SPA could recognize the income instantly due to the already existing seven branches of CHABA. A very compact yet sufficient of CHABA’s branches could have made a fast expansion with minimum cost, giving an opportunity for a faster payback period. However, there are risks lurking in this deal. Firstly, the management of beauty salon such as manicure and pedicure might have been too difficult for SPA who is specialized in spa and massage. Secondly, CHABA is having the risk of lacking professionals for the job. If workers take any leaves, it could affect the business directly and instantly. Lastly, the revenue of CHABA is not anything outstanding. The business had been running since 2009 by individuals, but registered in 2018. In 2018, CHABA recorded a revenue at 218 baht while booked a loss of 431,056 baht. If things continue further, CHABA could turn from the one, expecting to have a profit coming out to be the one dragging the profit down instead. Thus, SPA has to close the deal after nine months of operation to limit the damage, giving a breather to SPA’s shareholders to see that the company did not have to run the long-term business at a high risk.