Makalot Industrial Co., Ltd. October, 2013

Transcription

1 October,

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, macy s), mass merchants (Target, Wal-mart) and apparel specialty stores (Gap, Old Navy, Hanesbrands,Carter s, H&M ). Actively expanding into Asia market, like retailers in Taiwan and the specialty store in Japan. Company Overview 2012 Production sites China (11%) 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) The Philippines (8%) Pure apparel manufacture, Makalot produces both knitted and woven. 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. 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 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 Markets New Markets Existing Products Market Penetration Market Development New Products Product Development Diversification 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 development - Seek to sell our existing products into new markets and new customers - New geographical markets - New customers (Global market + Big apparel retailers) - M&A and Strategic Alliance 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 V.S. Multiple products and flexible production mode Diversification - market new products in new markets 5

6 Focus on TPP (Trans-Pacific Partnership) Creating new cost advantage in Vietnam - The average Vietnam apparel tariff to the US market is around 17.5%. - The tariff of special items, like synthetic garment, are more than 30%. - Vietnam s apparel export to US will enjoy duty free advantage, if TPP be approved in future. TPP / Smile curve Smile Curve Investing upstream mill by JV - Invest a fabric mill in Vietnam by JV to meet the yarn-forward requirement in the TPP trade pact. - Control material quality, raise local sourcing and save transport cost. Upgrading Smile curve - Improve Makalot s margin gradually by vertical Integration. - Exploit new fabric and product line (ex: performance item) - Opportunity to develop new buyer & new market. 6

7 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 7

8 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, Taiw an 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. 8

9 Cost Breakdown Company Overview Cost of good sold breakdown Cost structure based on ASP Labor 16% Overheads 10% Material 60% Labor 13% Overheads 7% Gross Margin 20% Accessories 16% Fabrics 58% 9

10 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 10

11 Financial Highlight Financial Highlight NT$mn H1 Net Sales 8,283 8,565 10,377 12,556 14,845 13,185 13,311 14,135 15,123 15,867 8,420 Sales grow th (%) 32.70% 3.40% 21.20% 21.00% 18.23% % 0.95% 6.19% 6.99% 4.92% COGS 6,884 7,156 8,409 10,008 11,648 11,056 10,428 11,296 11,966 12,712 6,704 Gross profit 1,399 1,409 1,968 2,548 3,197 2,130 2,883 2,840 3,157 3,155 1,716 Operating profit ,206 1, ,349 1,337 1,449 1, Net profit , ,112 1, Net profit grow th (%) 33.90% 8.60% 1.50% 39.10% 34.49% % % 4.20% 21.21% 5.78% Basic EPS (NT$) Gross margin 16.90% 16.50% 19.00% 20.30% 21.53% 16.15% 21.66% 20.09% 20.88% 19.89% 20.38% Operating margin 9.40% 8.90% 9.10% 9.60% 10.82% 5.27% 10.13% 9.46% 9.58% 9.35% 9.36% Net margin 6.50% 6.80% 5.70% 6.50% 7.43% 2.20% 6.62% 6.49% 7.35% 7.42% 8.07% 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% 11

12 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% 12

13 Debt Ratio Financial Highlight Total debt / total assets Net debt to equity 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% H1 0% -10% -20% -30% -40% -50% -60% -70% H % % % % % % % 2013 H1 Net Cash position = NT$ 2,941million = NT$ 3,461 million cash on hand - NT$ 520 million debts 13

14 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). 14

15 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. 15

16 Dividend Policy Financial Highlight NT$ Cash Dividend Stock Dividend Mainly cash dividend payout ratio will be maintained between 70% and 90%. 16

17 Convertible Bond Financial Highlight Updatedon 30, Sep, 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 0.15%. In 2012, we issued 1 convertible bonds (CB4) with par value of NT$700mn. CB4 potential dilution is 3.63%. 17

18 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 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000-1Q 2Q 3Q 4Q % 27% 25% 27% 25% 23% 24% 24% 29% 30% 25% 28% 25% 26% 22% 24% 24% 22% 20% 20% 1Q 2Q 3Q 4Q Q is traditionally the strong season. % to annual shipment volume 18

19 Why Makalot Why Makalot Makalot s core competence True industrial culture : Integrity, Team, Share Go onward with the time Strong management Professional manager team Operation flexibility Speed to market & Quick replenishment Production base diversify & Full product line Vertical integration Strong financial characteristics Sound financial structure Growing revenues and profit Strong cash flow, ROE and ROA High dividend payout policy High cash dividend 19

20 Q&A Thank You Thank You 20