Makalot Industrial Co., Ltd. April, 2013

Transcription

1 April,

2 Table of Contents Agenda 1. Company Overview 2. Financial Highlight 3. Why Makalot 2

3 A Glance at Makalot A well known fashion manufacturer in the Asia Pacific region targeting global and regional big apparel retailers. Company Overview Established in 1990 and listed on TWSE in 2003, Makalot is one of the most wellknown apparel ODM/OEM company in the Asia Pacific region. Major customers include departmental stores (Kohl s, JC Penney), mass merchants (Target, Wal-mart) and apparel specialty stores (Gap, Old Navy, Hanesbrands,Carter s, Express, H&M ). Actively expanding into Asia market, like retailers in Taiwan, the specialty store in Japan, RT-mart and Metersbonwe in China. With its headquarters and R&D center in Taipei and production bases in five countries, Makalot exports most of its products to the US, which accounted for 89% of revenue in ( In 2008, 97% revenue came from U.S market) Company Overview 2012 Production sites China (11%) The Philippines (8%) Pure apparel manufacture, Makalot produces both knitted and woven fabric clothing. Department Stores Mass Merchants Specialty Stores Cambodia (24%) Vietnam (20%) Indonesia (37%) 3

4 4 Key Trends 4 Key Trends / Company Overview Expanding into emerging markets Capturing the growth opportunity in emerging domestic markets Many businesses still seem to regard expanding outside North America, Europe or Japan. Zara, H&M, Uniqlo and GAP are growing fast in these economies, particularly in places such as China where thriving domestic markets are helping them expand. Shifting west inland or overseas With China economy growth, and its wage rises gradually, manufacturers are facing a squeeze. Shifting Southeast Asia or China inland where wages are lower is a natural solution. Consider relocating at least some of their production to countries with cheaper work forces. Looking outside for garment production Less cost-efficient local players are squeezed out. Not only US retailers but also Chinese retailers diverse production locations to mitigate China cost hike Makalot could take more market share with its low-cost production sits in SE Asia. Further consolidation Help buyers manage cost (Cut procurement cost) Credit rating matters too (Avoid supply disruption) 4

5 New Markets Existing M arkets 5 Key Growth Drivers and Dual-Core Mode Growth Drivers+ Dual core mode / Company Overview In the next 5 years, 5 Key Growth Drivers = 3 N ( New markets, New customers, New products) + Economy Recovery + Vendor Consolidation Dual-Core Growth Mode = Specialized in large-scale production mode + Multiple products and flexible production mode Existing Products N ew Products Market penetration - Focus on selling existing products into existing markets and customers - US market recovery - Buyers consolidate and reduce vendors (First tier and Second tier customers) - Increase the market share of current products (Horizontal Expansion ) Market Penetration Product D evelopment Market development - Seek to sell our existing products into new markets and new customers - New geographical markets (China domestic market, Europe and Japan) - New customers (Global market + Big apparel retailers) - M&A and Strategic Alliance Market D evelopment D iversification Product development - Aim to introduce new products into existing markets and customers - Develop second core product line( Large size and basic items) - Specialized in large-scale production mode ( Vertical integration ) V.S. Multiple products and flexible production mode (core strengths) Diversification - market new products in new markets 5

6 Operating Highlight Company Overview Based on sales contribution, Kohl s, Target, Gap, Walmart, Hanesbrands stand out as Makalot key customers. Major products include pants(30%), knit top(22%),and sleepwear(19%). Actively expanding into Asia market Revenue by Product Line 2012 Revenue by Customers 2012 Revenue by Country 2012 Top clients revenue proportion diagram 6

7 Global Network/Production Sites Company Overview Site Function 2012 Capacity 2013 Capacity Month wages 2012 total costs 2013E total costs % % (dozens) (dozens) (US$/person) (US$/dozen) (US$/dozen) Taipei, Taiwan Headquarters Shanghai, China Office/ Sourcing Center Indonesia Factory 3,380,000 37% 3,700,000 34% Vietnam Factory 1,860,000 20% 2,900,000 26% Cambodia Factory 2,200,000 24% 2,800,000 25% China Factory 960,000 11% 820,000 8% Philippines Factory 760,000 8% 780,000 7% Total 9,160, % 11,000, % Capacity Distribution Chart (Country / Production %) 40% 30% 20% 10% 0% IND VIN CAB CHN PHL E We can quickly adjust capacities among these sites to capture low-cost advantages. 7

8 Cost Breakdown Company Overview Cost of good sold breakdown Cost structure based on ASP Overheads 10% Material 60% Labor 13% Labor 16% Overheads 7% Gross Margin 20% Accessories 16% Fabrics 58% 8

9 Regional Peers Company Overview Updated on Sep., 2012 Code Company Name Products Customers Prodction sites Kohl's(28%), Target(25%), Gap(10%), JC Indonesia(36%), Cambodia(25%), Pants(26%), Knit Top(21%), Sleepwear(19%), 1477.TW Makalot Industrial Penney(7%), Hanesbrands(5%), Vietnam(20%), China(11%), Blouse(16%), FR Infant(4%), Others(14%) Others(24%) Philippines(8%) 1473.TW Tainan Enterprise casual wear on OEM(50%) and OBM(50%) with Tony Wear and Emely brands in Asia with over 900 stores GAP, Mast, Ann Taylor, Macy, Talbots, Cambodia(43%), Indonesia(38%), ESPIRT Levis Target Sears Macy s China(15%), Taiwan(4%) KS Hansae shirts, women's formal dress and casual wears NA Sae-A swimwear, activewear, jacket,infantwear, pants Wal-mart,Target,Holister, NY&Co, A&F, Federated, Kohl's adidas A&F Banana Republic BCBG Carter s Express Gap Kohl s Levi s Mango Target Tommy Uniqlo Wal-Mart Nicaragua, Guatemala, Vietnam, Indonesia, Cambodia, China Indonesia(39%),Vietnam(22%), Chian(2%),Guatemala(24%), Nicaragua(13%),Haiti 0311.HK Luen Thai casual wear, ladies wear (career, intimate and fashion wear), sports and activewear, sweaters, outerwear, children s wear and laptop bags, luxury and fashionable bags adidas, Coach, Dillard s, Esprit, Fast Retailing, Limited Brands, Polo Ralph Lauren and Targus China, Philippines, Indonesia, India and Bangladesh 2313.HK Shenzhou sport wear(55%), causal wear(34%), lingerie(9%) and other knitting products(2%) Uniqlo, adidas, Nike, and Puma China (Ningbo, Quzhou and Anqing) and Cambodia 9

10 Financial Highlight Financial Highlight NT$mn Net Sales 8,283 8,565 10,377 12,556 14,845 13,185 13,311 14,135 15,123 15,867 Sales growth (%) 32.70% 3.40% 21.20% 21.00% 18.23% % 0.95% 6.19% 6.99% 4.92% COGS 6,884 7,156 8,409 10,008 11,648 11,056 10,428 11,296 11,966 12,712 Gross profit 1,399 1,409 1,968 2,548 3,197 2,130 2,883 2,840 3,157 3,155 Operating profit ,206 1, ,349 1,337 1,449 1,484 Net profit , ,112 1,177 Net profit growth (%) 33.90% 8.60% 1.50% 39.10% 34.49% % % 4.20% 21.21% 5.78% Basic EPS (NT$) Gross margin 16.90% 16.50% 19.00% 20.30% 21.53% 16.15% 21.66% 20.09% 20.88% 19.89% Operating margin 9.40% 8.90% 9.10% 9.60% 10.82% 5.27% 10.13% 9.46% 9.58% 9.35% Net margin 6.50% 6.80% 5.70% 6.50% 7.43% 2.20% 6.62% 6.49% 7.35% 7.42% ROE 33.21% 31.57% 28.60% 32.77% 35.51% 9.16% 26.84% 24.78% 27.09% 25.88% ROA 18.23% 17.02% 14.75% 17.36% 20.11% 5.53% 16.03% 14.43% 16.02% 15.00% 10

11 ASP/ Shipment Financial Highlight Shipment (m dz) ASP Shipment (million dozen) (LHS) ASP (US$/dozen) (RHS) Shipment (million dozen) Growth 11% 40% 26% 16% -7% 3% 13% 0% 12% ASP (US$/dozen) Growth -3% -10% -5% 0% -1% -5% -2% 15% -7% 11

12 Debt Ratio Financial Highlight Total debt / total assets Net debt to equity 10% 8% 6% 4% 2% 0% % -10% -20% -30% -40% -50% -60% % % % % % % 2012 Net Cash position = NT$ 2,529million = NT$ 3,216 million cash on hand - NT$ 687 million debts 12

13 Capital Expenditure Financial Highlight million NT$ Capex (NT$) 2007 capex was about US$17.11 million (NT$ 521 million) capex was about US$ million (NT$ 513 million) capex was about US$ 3.02 million (NT$ 99 million) capex was about US$ 4.02 million (NT$ 127 million) capex was about US$ million (NT$ 394 million) capex was about US$ 8.51million (NT$ 252 million). 13

14 FX gain/loss Financial Highlight Hedging strategies 1. Put in place much more conservative FX budget forecasts for the upcoming year. 2. Cash flow hedges to reduce the exposure to variability in certain expected future cash flows. Natural hedge = 80%, and net exposure position= 20%. Using USD/NTD forwards to hedge this 20% net position risk. 14

15 Dividend Policy Financial Highlight NT$ Cash Dividend Stock Dividend Mainly cash dividend payout ratio will be maintained between 70% and 90%. 15

16 Convertible Bond Financial Highlight Updated on 28, Mar, 2013 Duration Issue Amount (NT$mn) Outstanding Amount (NT$mn) Conversion Price (NT$) Potential Conversion (mn shares) Dilution (%) CB3 Jun. 22, Jun. 22, % CB4 Aug. 24, Aug. 24, % In 2009, we issued 1 convertible bonds (CB3) with par value of NT$600mn. CB3 potential dilution is 0.42%. In 2012, we issued 1 convertible bonds (CB4) with par value of NT$700mn. CB4 potential dilution is 4.67%. 16

17 Business cycle Sales(NT$million) Financial Highlight 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Dozens 1Q 2Q 3Q 4Q Q is traditionally the strong season. 3,000,000 2,500,000 2,000,000 1,500,000 27% 25% 24% 20% 22% 25% 23% 22% 26% 25% 25% 30% 24% 29% 29% 30% 20% 28% 24% 23% % to annual shipment volume 1,000, ,000-1Q 2Q 3Q 4Q

18 Why Makalot Why Makalot Strong management Leadership position Strong financial characteristics Sound financial structure Growing revenues and profit Strong cash flow, ROE and ROA High dividend payout policy High cash dividend 18

19 Appendix: Surefire Ways to Recession Strategies 4 Strategies/ Company Overview Focus on our core business (Concentrate on the 20 that produce the 80) Focus on selling necessity- based products and service Offer outstanding customer service Continue cost reduction and add profit Minimize our full-time staff Run a tight ship budget-wise Consolidate fabric vendor bases Increase large-size orders, drop small-size orders. Monitor credit risk One year EDF> 1 /1.5/ 3 + Factoring Ensure AR can be exchanged for Cash By Non-Recourse Factoring, cut credit risk and improve AR days. Diversify customers and markets Second tier and new customers Global market/ Big apparel retailers Look for M&A and Alliance opportunities Buy a business instead of starting one Complement Product lines Diversify clients and markets 19

20 Q&A Thank You Thank You 20