After the lean pandemic years, the Asia-focused goods and services provider Aumake (ASX:AUK) is reaping the top-line benefits of its revised strategy, ahead of the expected return of droves of Chinese visitors to Australia.
Listed on the ASX under the ticker AUK, Aumake recently reported revenue of $16.8 million for the December 2023 half, a 726% improvement on the previous period. Aumake’s net loss also declined 2%, to $1.36 million.
As a specialist premium Australian goods and services provider to the Asian market – notably China – the ASX listed, Parramatta-based Aumake (AUK) is tackling the market gap via its ‘brand incubation’ model. This is based around Hunter Valley wine and the region’s other offerings.
In August last year the Chinese government accorded Approved Destination Status to Australia, opening the way for inbound tourism to resume. While guided tours are yet to return in earnest post-pandemic, Australian and Chinese tourism research forecasts 1.45 million Chinese visitations in 2025 – above the pre Covid levels of 1.4 million.
In 2028,1.89 million Chinese visitors are expected.
While the opportunities are compelling, there’s also there’s a clear need for more immersive and cohesive ways to expose Asian visitors to the best products and experiences the country has to offer.
Last November Aumake entered a non-binding agreement with the Hunter Valley-based Petersons Wines – the company’s first entry into the Australian wine industry.
Last month, the parties sealed the deal with the creation of a joint venture company, Hunter Valley Wine and Tourism Alliance Pty Ltd.
“This foundation will integrate tourism, wine and shopping into a cohesive experience, setting a new standard in the industry,” says Aumake co-founder and managing director Joshua Zhou.
This partnership draws on Aumake’s “direct and effective” connections to the Chinese market.
“By driving innovation and fostering long-term growth, we are set to transform the landscape of the Australian wine industry and its connection with Asia, especially China,” Zhou says.
The tie-up enables a curated exposure to Petersons’ premium drops for Asian visitors – including its $200-a-bottle Back Block shiraz – but the venture goes well beyond wine quaffing.
As part of its broader ambitions, Aumake proposes a Hunter Valley-centred marketplace to facilitate bookings (including customised tours) and showcase the region’s charms. The winery will host the Hunter Valley Gallery which will showcase wine and wine-related products.
Aumake is partnered with Grand Australia International Pty Ltd (GAT), which provides customised group and private tours for Chinese tourists in Australia. GAT is a key operator in the sector, having handled more than 50,000 tourists annually before the pandemic hit.
In calendar 2024, Aumake expects to open five company-branded stores in Australia, as well as one in Auckland.
Meanwhile, the company attributed the December-half revenue uptick to bolstered sales to its partner and major shareholder, Hong Kong’s HK Huibeijia Brand Manage Co (HKH).
HKH operates both online and physical stores across China. The latter includes 30 flagship stores, with access to up to 1000 more.
Aumake also continues to sell product – including premium seafood, red meat and health supplements – through its WeChat app.
For the full financial year, Aumake targets a 40% revenue increase and a 40% plus margin, as the benefits of the company’s inbound tourism strategy become apparent.
Given Aumake’s slender December end cash balance of $1.688 million – albeit 21% higher than previously – the ability to access capital remains crucial. In its “emphasis of matter” in its half-year review, Aumake’s external auditor notes a material uncertainty about the company’s ability to continue as a going concern.
However the board is confident of accessing further capital as required, given the company’s large shareholder base and is sound reputation with the Chinese community.
In November last year the company raised $1.48 million from new and existing institutional and sophisticated shareholders.
In late February this year, Aumake secured a further $2 million of debt funding from an unnamed “strategic shareholder”, to its subsidiary Newera Australia Pty Ltd.
Aimed at bolstering Aumake’s supply chain capacities, the deal sees the investor emerge with a 49% Newera stake, with Aumake retaining 51%.
The two-year loan is interest-free in the first year, with the second year’s interest at a margin to the RBA’s cash rate. This premium will be negotiated on a “best endeavours” basis.
The Aumake board believes that given the current poor climate for equity raising, debt is a “more prudent and less dilutive” source of funding.
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