3689 UDE Gary Chen July 2013 Disclaimer The information contained - - PowerPoint PPT Presentation

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3689 UDE Gary Chen July 2013 Disclaimer The information contained - - PowerPoint PPT Presentation

3689 UDE Gary Chen July 2013 Disclaimer The information contained in this confidential document ("Presentation") has been prepared by UDE (the "Company"). It has not been fully verified and is subject to material updating,


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3689 UDE

Gary Chen

July 2013

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Disclaimer

  • The information contained in this confidential document ("Presentation") has been prepared by UDE (the "Company"). It has not been fully verified and is

subject to material updating, revision and further amendment.

  • While the information contained herein has been prepared in good faith, neither the Company nor any of its shareholders, directors, officers, agents,

employees or advisers gives, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this Presentation, or any revision or supplement thereof, or of any other written or oral information made or to be made available to any interested party or its advisers (all such information being referred to as "Information") and liability therefore is expressly

  • disclaimed. Accordingly, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers takes any responsibility for, or will

accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness or injury of the Information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Presentation or the information.

  • Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any

transaction and the right is reserved by the Company to terminate any discussions or negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent.

  • This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents,

employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters.

  • This Presentation includes certain statements that may be deemed “forward‐looking statements”. All statements in this discussion, other than statements of

historical facts, that address future activities and events or developments that the Company expects, are forward‐looking statements. Although the Company believes the expectations expressed in such forward‐looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward‐looking statements. Factors that could cause actual results to differ materially from those in forward‐looking statements include market prices, continued availability of capital and financing, general economic, market or business conditions and other unforeseen events. Prospective Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward‐looking statements.

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World No. 2 in RJ‐45 Port Revenues

Founded in 2005 Ticker: 3689 TT 4,100 Full Time Employees Dedicated Mfg of Integrated RJ‐45 Ports 2012 Revenue of NT$3.9Bn

  • Headquarters: Taoyuan, Taiwan
  • Deyang, Sichuan, China Plant:

High Volume Mass Production

  • Donguan, Guangzhou, China Plant:

Product and Automation R&D, High Value‐ Added Production

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RJ45 Revenues (US$m)

‐ 50 100 150 200 250

Note: Bel Fuse recently acquired the RJ45 port business of TE Connectivity. This chart includes the TE Connectivity revenues in Bel Fuse’s total revenues.

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  • We are a Global Leader in Ethernet

Technology Applications.

  • We are the rare manufacturer that is

able to combine automated volume production capability with a high degree of product customization.

  • To maintain our cost leadership, we

tirelessly re‐engineer our management and production methods.

  • We aim to produce superior returns for
  • ur investors. Over the past three

years, net margin has exceeded 10% and ROE 25%.

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Executive Summary

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The UDE Way

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The UDE Way

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Soft Power UDPS Lean Production System Production Line Automation Strict Cost Management

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UDE Soft Power: Create, Destroy, Recreate

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  • It extends from Chairman to CEO to Plant Manager to

Line Operator.

  • We create it from the bottom up, with comprehensive

training for each new employee.

  • All employees are assigned to a specific production

group.

  • Each group is encouraged to innovate and improve

upon current production techniques.

  • With each new sunrise, the previous day’s production

methods are considered obsolete.

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Representative Principles of Soft Power

Creative Destruction Creative Destruction

  • Overthrow the traditional principles of production
  • Do not be satisfied with the status quo
  • Training for employees in UDPS methods in Japan and Taiwan
  • Work groups are promoted as a team
  • Production requirements double with each promotion
  • Production lines to eventually have only technicians, no operators

Work Smart Work Smart

  • Discourage frequent overtime
  • Show concern for staff contentment on the job
  • Emphasize teamwork, communication and efficiency

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Employee Development Employee Development

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39% 62% ‐7% 5% ‐6% 16%

‐10% 0% 10% 20% 30% 40% 50% 60% 70%

組裝線人力成長率 產出量成長率 2010 v 2009 2011 v 2010 2012 v 2011

The Fruits of UDPS + Automation

9 Growth in number of operators Growth in unit production

34 408 483 662 19% 28% 27% 26% 27% 19% 26% 13% 12% 10%

0% 5% 10% 15% 20% 25% 30% 35% 200 400 600 800 1,000

2008 2009 2010 2011 2012

More efficient production and higher profitability

NT$ million

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Assembly-TPS implementation

~2008 2008~2009 2010~2012 2013

Linear line 70~130 OPs U Line implementation 25~30 OPs Small U line 8~12 OPs Advanced U line 3~5 OPs

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OP Production line PPH Capacity/hr Linear line 80 1 10 pcs 800 pcs U line 80 10 (8 P/line) 80 pcs 6,400 pcs

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Experienced and Stable Int’l Mgmt Team

Chris Chen, President

20‐yrs experience Vice President, SpeedTech Manager of Mfg Technology, Delta

Justin Chang

Vice President of Guangdong Factory 20‐yrs experience SpeedTech KunShan Plant Manager

Tony Huang

Executive Assistant to the Chairman 18‐yrs experience CFO, Technology Quartek

Eric Shih, Head of Sales

16‐yrs experience Sales Manager, SpeedTech Supervisor – Sales, Delta Electronics

Elton Wu

CFO 18‐yrs experience Accounting Manager, Delta Electronics

Abel Lu

Vice President of Sichuan Factory 25‐yrs experience SpeedTech Dongguan R&D Manager

Alan Wang

Head of Audit and Head of IR 18‐yrs experience

TongLung Industry, Executive Assistant to the Chairman

Abulla Yu

Head of R&D 16‐yrs experience Vice Manager of R&D, Delta Electronics

Gary Chen

Founder and Chairman Over 25‐yrs experience Vice Chairman and President, SpeedTech

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The UDE Way

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UDE is a rarity – a high volume, low cost leader that also offers a highly customized product

Product Offering Customer Base

  • Wide range of electrical characteristics and structural options
  • Highly customized with low volume production run capability
  • 8,100 active part numbers
  • 4,500 different models produced each month
  • Low single client risk : 60% of sales from top ten clients
  • No client accounts for more than 15% of sales, only one client accounts for more

than 10%.

  • 730 active client accounts.

Industry Attributes

  • Barriers to entry are high
  • RJ45 Jack industry has only a handful of major players
  • These are UDE, Foxconn, Bel Fuse, Molex and Pulse
  • Bel Fuse has the most advanced technology
  • UDE is the largest scale producer and the low‐cost leader

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High Entry Barriers for Conventional Connector Producers

RJ45 port production requires mastery of conventional connector production techniques and additional techniques specific to high speed data transfer

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Conventional Connector RJ45 Port RJ45 Port Mechanical Precision Structural Design Precision Injection High Speed Stamping Precise Mold Design High Speed Transmission Electronic Fine Tuning Noise and EMI Reduction Network and MB Protection Circuit Design

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UDE Possesses Excellent Electromagnetic Signal Processing and Customization Capability

Signal Input Signal Filtering System Protection Signal Output Filter Surge/ESD Protection Integrated Ethernet IC RJ45 LAN Cable

Noise Filtering Signal Purification EMI Control Protection of networking IC and motherboard

Customized high frequency electromagnetic impedance design to match customer systems

Goal:Maintain high S/N ratio to guarantee complete and rapid signal transmission to the network IC on client motherboard

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The Most Diverse Application Base of Any RJ45 Producer

Motherboard / AIO PC Networking Set‐Top BOX Server Blu‐ray Player / Internet TV Printer

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

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Selling to global leaders in key product categories

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The UDE Way

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UDE’s Revenue and Market Share Targets

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Penetrate the high end networking market Claim share in the mass market consumer segment Raise global market share to 15% Grow annual revenues to NT$10bn

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New Worlds to Conquer…

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UDE’s current global market share is 9%

* Additional addressable market refers to devices that do not currently have RJ 45 connections, but are expected to incorporate them in the future. Source: brokers and UDE estimates 1,250 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% ‐ 100 200 300 400 500 600 700 Mn ports Additional addressable market* Market size Market Share (%, RHS)

⌇⌇

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The UDE Way

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500 1000 1500 2000 2500 3000 3500 4000 2009 2010 2011 2012

PC Networking Consumer

Networking Revenues are Driving Revenue Growth

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2009 2010 2011 2012

PC Networking Consumer

NTD m

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Forecasting Many a Cloudy Day

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Let it Rain

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Enabling factors in the growth of the Cloud

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Personal Mobile Broadband + Enterprise Networking Broadband + Home Networking Broadband Popularization of virtualization technology → Software management, platforms and service Improved network infrastructure and higher transmission speeds

These are all drivers for growth in demand for RJ45 2x1, 2x4 and 2x6 multiple port devices

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The UDE Way

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1,567 1,993 3,094 3,486 3,876 1,110 2008 2009 2010 2011 2012 1Q'13 125 268 472 454 528 166 2008 2009 2010 2011 2012 1Q'13 8.0% 13.4% 15.2% 13.0% 13.6% 15.0% 19.2% 27.8% 26.5% 25.5% 27.4% 27.3%

Revenues NTD$ million Gross Margin % Operating Profit

NTD$ million

Operating Margin %

Five‐year Revenues and Operating Profit

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118 84 341 353 443 125 2008 2009 2010 2011 2012 1Q'13 2.55 1.65 6.45 6.08 7.08 1.86

EPS NTD Net Income NTD$ million

20.7 11.6 37.0 27.3 24.8 12.7 6.0 18.1 14.2 14.0 2008 2009 2010 2011 2012 ROE % ROA %

Five‐year Financial Highlights

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Note: 2009 Net Profit was biased downwards by an NT$122m one time non‐cash write down of goodwill.

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2008 2009 2010 2011 2012 1Q’13 Sales Revenue 1,567 1,993 3,094 3,486 3,876 1,110 Gross Profit 301 553 820 890 1,063 303 OP Profit 125 268 472 454 528 166 Income before tax 142 130 409 481 539 168 Net Income 118 84 341 353 443 125 EPS(NTD$) 2.55 1.65 6.45 6.08 7.08 1.86

Five‐year P&L (Consolidated)

NTD$ million

YOY (%) 2008 2009 2010 2011 2012 1Q’13 47.3 27.2 55.2 12.7 11.2 34.7 225.3 84.0 48.3 8.5 19.5 27.4 129.8 114.0 76.1 ‐3.8 16.3 43.3 187.3 ‐9.0 215.4 17.7 12.0 48.5 182.5 ‐28.7 305.1 3.7 25.5 65.7 17.9 ‐35.2 291.0 ‐5.8 16.4 52.7 29

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2008 2009 2010 2011 2012 1Q’13 TOTAL ASSETS 1,243 1,565 2,194 2,784 3,566 4,058 Cash 143 314 275 751 1,099 1,289 NR & AR 362 580 706 757 918 1,247 Inventory 261 255 413 435 715 725 Fixed Asset 219 308 573 631 562 594 TOTAL LIABILITIES 587 774 1,142 1,248 1,525 1,824 Bank Loans 173 178 237 426 419 694 NP & AP 131 233 352 303 433 394 Accrued Exp 180 268 365 382 544 606 TOTAL EQUITY 656 791 1,052 1,536 2,041 2,234 Capital 483 527 532 614 676 676 Additional Paid‐in Capital 44 112 112 323 568 568 Retained Earnings 123 149 426 592 820 954

NTD$ million

Five‐year Balance Sheet (Consolidated)

YOY (%) 2008 2009 2010 2011 2012 1Q’13 99.5 25.9 40.2 26.9 28.1 13.8 37.5 119.6 ‐12.4 173.1 46.3 17.3 ‐22.2 60.2 21.7 7.2 21.3 35.8 715.6 ‐2.3 62.0 5.3 64.4 1.4 4,280 40.6 86.0 10.1 ‐10.9 5.7 322.3 31.9 47.5 9.3 22.2 19.6 84.0 2.9 33.1 79.7 ‐1.6 65.6 351.7 77.9 51.1 ‐13.9 42.9 ‐9.0 2,471 48.9 36.2 4.7 42.4 11.4 35.5 20.6 33.0 46.0 32.9 9.5 58.9 9.1 0.9 15.4 10.1 ‐20.0 154.5 188.4 75.9 186.0 21.1 185.9 39.0 38.5 16.3 30

A/R turnover days

96 86 76 77 79

Inventory turnover days

42 65 54 60 75

A/P turnover days

23 46 47 46 48

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2011 and 2012 Dividend Payout

( NTD Million ) 2011 2012 Net income 353 443 Cash dividend 215 257 Dividend p/s (NT$) 3.5 3.8 Cash yield (%) 6.7*1 5.3*2 Payout ratio (%) 61% 58%

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Notes:

  • 1. 2011 yield is based on UDE’s closing share price on July 23, 2012; the day before ex‐dividend day.
  • 2. 2012 yield is based on UDE’s closing share price on July 5, 2013; the day before ex‐dividend day.
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  • We pledge that our primary focus

will be the maximization of returns to our shareholders via the profitable long‐term growth of our core business

  • We aim to sustain revenue and

earnings growth superior to that of our peers

  • We intend to maintain a cash dividend

payout in excess of 50%

Our Commitment to Shareholders

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Appendix

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Manual Winding VS Auto Winding

Twisting Winding Assembly Process Complete

Hourly output Defect Rate Manual winding 50 pcs 2‐4% Auto winding 650 pcs Below 0.2%

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A Pictorial Illustration of the Manual Winding Process

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Why Copper?

Low cost Low cost Widespread adaptation Widespread adaptation Ease of troubleshooting in manufacturing processes Ease of troubleshooting in manufacturing processes High compatibility with existing internet infrastructure High compatibility with existing internet infrastructure The advantages of copper‐based transmission

We expect that the key transmission technologies – copper, fiber optics and Wifi – will continue to co‐ exist in separate niches

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