3689 UDE Gary Chen April 2014 Disclaimer The information - - PowerPoint PPT Presentation

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3689 UDE Gary Chen April 2014 Disclaimer The information - - PowerPoint PPT Presentation

3689 UDE Gary Chen April 2014 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


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3689 UDE

Gary Chen

April 2014

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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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  • 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.

  • While we are proud of our historical record of healthy growth in profits

and 20%+ ROE, we seek investors who believe in our vision for future growth.

  • We are not wedded to any single product, but instead seek to leverage

UDE manufacturing management expertise to seek out new business

  • pportunities.

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UDE – Young and Restless

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2013 Results & 2014 Outlook Strategic Vision for 2014 & Beyond The UDE Way Appendix

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2013 Results and 2014 Outlook

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Total Shareholder Return was 54% in 2013

  • Share Price Appreciation:

UDE’s share price rose 48% in 2013, closing at NT$91.1/share on December 31, 2013.

  • A 5.8% Yield:

We paid a cash-dividend of NT$3.8/share on 2012 earnings, representing a 5.8% yield based on UDE’s year-end 2012 close.

  • Rising Dividend Payment:

The UDE Board of Directors has proposed a cash dividend of NT$4.5/share for 2013 earnings. This is an increase of 18% over 2012 and represents a 60% payout.

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Review of 2013 Operating Results

  • Record High Revenues:

UDE’s 2013 revenue reached a record NT$4.7bn, growing 21% YoY.

  • Margin Expansion:

Operating income and Income Before Tax both reached record highs, growing by 26% and 25% YoY, respectively. -Networking revenues reached a record high 38% of sales. -Efficiency and automation gains extended our cost advantage versus peers.

  • Higher Tax Rate:

Effective 2013 tax rate was 23.7% versus 17.8% in 2012. -Higher tax rate for Dongguan plant. -Extra taxes were booked in 3Q13 due to insufficient booking of taxes for the China plant in the previous two years.

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61% 46% 45% 35% 29% 23% 23% 25% 34% 38% 16% 31% 30% 31% 33%

1,000 2,000 3,000 4,000 5,000 2009 2010 2011 2012 2013

PC Networking Consumer

Networking Revenues are Driving Revenue Growth

NT$mn

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1,993 3,094 3,486 3,876 4,692 2009 2010 2011 2012 2013 268 472 454 528 664 2009 2010 2011 2012 2013 13.4% 15.2% 13.0% 13.6% 14.1% 27.8% 26.5% 25.5% 27.4% 27.4%

Revenues NT$ million Gross Margin % Operating Profit NT$ million Operating Margin %

2013 Operating Profit Reached a Record High

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UDPS + Automation: Continued Payoff in 2013

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More efficient production and higher profitability

39% 62%

  • 7%

5%

  • 6%

16%

  • 2%

16%

  • 20%
  • 10%

0% 10% 20% 30% 40% 50% 60% 70% Growth in number of

  • perators

Growth in unit production

2010 v 2009 2011 v 2010 2012 v 2011 2013 v 2012 34 408 483 662 1,078 19% 28% 27% 26% 27% 27% 19% 26% 13% 12% 10% 4%

0% 5% 10% 15% 20% 25% 30% 200 400 600 800 1,000 1,200 1,400 2008 2009 2010 2011 2012 2013

NT$ million

Estimated Gross Margin Improvement from TPS Reported Gross Margin (includes effects of TPS implementation) Estimated Gross Margin (without TPS implementation)

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2014 Outlook

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A strong start to 2014:

1Q14 revenues grew 15% YoY to NT$1.28bn as a strong start to 2014.

Pricing Pressure:

Our clients in the PC and consumer space are under significant pricing pressure.

Accelerated investment in Capex:

The outlook for volume demand is

  • strong. We are also optimistic

about the prospects for share gains in the networking segment, and subsequent product mix improvement.

Accelerated investment in Sales & Marketing + R&D:

We feel that the timing is right to put increased emphasis on the development of advanced products and penetration into these markets.

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Strategic Vision for 2014 & Beyond

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Strategic Vision for 2014 & Beyond

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Robust Investment in Advanced Products and Markets

1.

Systematic Cultivation of Human Resources

2.

Accelerate Process Automation

3.

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Integrated Investment in R&D, Sales and Marketing

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Robust R&D Investment

R&D spending to be increased by 50%

  • ver the next two years.

Focus to be on high-end networking products Will establish an advanced R&D lab in Taiwan.

Penetrating New Markets

Sales & Marketing outlay to be increased by 30% over the next two years. New hires to be focused on North American networking market. Secondary focus is mass market consumer segment in China. Seek to win share when networking companies introduce new generation

  • products. This generally happens on

a 2-year cycle. Our initial efforts in this area look set to pay off in 4Q14.

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Investing in HR to Manage Future Growth

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  • With an eye to the next stage of UDE’s growth, we are cultivating teams of

veteran employees that will be capable of managing new product initiatives. Systematic Training SOP: We have established a program of rigorous and systematic training for all UDE operators and technicians. Apprenticeship Program in Sichuan: We offer 2-year apprenticeships with on-site plant training to students attending our technical college.

  • We are pursuing organic product development and M&A, seeking to take

small but promising business lines and expand their scale.

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The UDE Way

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Differentiated Product Focus Targeting Market Share Gains Outstanding Financial Performance Keeping Up With the Cloud

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The UDE Way

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

1. 2. 3. 4.

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Representative Principles of Soft Power

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Employee Development

  • 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

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

Creative Destruction

  • Overthrow the traditional principles of production.
  • Do not be satisfied with the status quo.
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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
  • 8,500 active part numbers
  • 4,700 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%.

  • 1,300 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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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

MB / AIO PC Networking Set-Top BOX Server Blu-ray Player / Internet TV Game Consoles Printer

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

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Selling to global leaders in key product categories

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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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1,650 0% 10% 20% 30% 40% 50% 60% 70%

  • 100

200 300 400 500 600 700 Mn units Additional addressable market* Market size Market Share (%, RHS)

⌇⌇

New Worlds to Conquer…

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UDE’s current global market share is 9.5%

* 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

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84 341 353 444 514 2009 2010 2011 2012 2013 1.65 6.45 6.08 7.08 7.69

EPS NT$ Net Income NT$ million

11.6 37.0 27.3 24.8 23.7 6.0 18.1 14.2 14.0 13.3 2009 2010 2011 2012 2013 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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2009 2010 2011 2012 2013 Sales Revenue 1,993 3,094 3,486 3,876 4,692 Gross Profit 553 820 890 1,063 1,284 OP Profit 268 472 454 528 664 Income before tax 130 409 481 539 674 Net Income 84 341 353 443 514 EPS(NTD$) 1.65 6.45 6.08 7.08 7.69

Five-year P&L (Consolidated)

NT$ million

YOY (%) 2009 2010 2011 2012 2013 27.2 55.2 12.7 11.2 21.1 84.0 48.3 8.5 19.5 20.8 114.0 76.1

  • 3.8

16.3 25.7

  • 9.0

215.4 17.7 12.0 25.1

  • 28.7

305.1 3.7 25.5 16.0

  • 35.3

291.0

  • 5.8

16.5 8.6

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NT$ million

2009 2010 2011 2012 2013 TOTAL ASSETS 1,565 2,194 2,784 3,567 4,356 Cash 314 275 751 1,099 1,258 NR & AR 580 706 757 918 1,184 Inventory 255 413 435 715 881 Non-current Asset 332 605 675 629 785 TOTAL LIABILITIES 774 1,142 1,248 1,526 1,977 Bank Loans 178 237 426 419 417 NP & AP 233 352 303 433 476 Other Payables 268 365 427 570 695 TOTAL EQUITY 791 1,052 1,537 2,041 2,340 Capital 527 532 614 676 676 Additional Paid-in Capital 112 112 323 568 582 Retained Earnings 149 426 600 828 1,091

Five-year Balance Sheet (Consolidated)

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A/R turnover days 86 76 77 79 82 Inventory turnover days 65 54 60 75 84 A/P turnover days 46 47 46 48 48 YOY (%) 2009 2010 2011 2012 2013 25.9 40.2 26.9 28.1 22.1 119.5

  • 12.5

173.3 46.3 14.4 60.1 21.6 7.4 21.2 28.9

  • 2.2

61.6 5.4 64.4 23.1

  • 9.4

82.3 11.6

  • 6.8

24.8 31.8 47.6 9.2 22.3 29.6 2.9 32.9 79.9

  • 1.7
  • 0.3

78.5 50.8

  • 13.7

42.6 10.1 49.1 36.1 16.9 33.4 22.0 20.6 32.9 46.1 32.9 14.6 9.2 0.9 15.4 10.1 - 154.0 0.8 187.4 75.8 2.4 21.4 186.6 40.6 38.2 31.7

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2011-2013 Dividend Payout

( NT$ Million ) 2011 2012 2013 Net income 353 444 514 Cash dividend 215 257 306 Dividend p/s (NT$) 3.5 3.8 4.5 Cash yield (%) 6.7*1 5.3*2 4.2*3 Payout ratio (%) 61% 58% 60%

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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.
  • 3. 2013 yield is based on UDE’s closing share price on March 24, 2014.
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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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World No. 2 in RJ-45 Port Revenues

Founded in 2005 Ticker: 3689 TT 4,300 Full Time Employees Dedicated Mfg of Integrated RJ-45 Ports 2013 Revenue of NT$4.7Bn

  • 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)

Note: Bel Fuse acquired RJ45 port business of TE Connectivity in March 2013. This chart includes the TE Connectivity revenues in Bel Fuse’s total revenues.

50 100 150 200 250

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Assembly-UDPS 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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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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Experienced and Stable Int’l Mgmt Team

Chris Chen, President

21-yrs experience Vice President, SpeedTech Manager of Mfg Technology, Delta

Justin Chang

Vice President of Guangdong Factory 21-yrs experience SpeedTech KunShan Plant Manager

Tony Huang

Executive Assistant to the Chairman 19-yrs experience CFO, Technology Quartek

Eric Shih, Head of Sales

17-yrs experience Sales Manager, SpeedTech Supervisor – Sales, Delta Electronics

Elton Wu

CFO 19-yrs experience Accounting Manager, Delta Electronics

Abel Lu

Vice President of Sichuan Factory 26-yrs experience SpeedTech Dongguan R&D Manager

Alan Wang

Head of Audit and Head of IR 19-yrs experience

TongLung Industry, Executive Assistant to the Chairman

Abulla Yu

Head of R&D 17-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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