3689 UDE Gary Chen September 2015 Disclaimer The information - - PowerPoint PPT Presentation

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3689 UDE Gary Chen September 2015 Disclaimer The information - - PowerPoint PPT Presentation

3689 UDE Gary Chen September 2015 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

September 2015

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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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UDE – World No. 2 in ICM revenues

Founded in 2005 Ticker: 3689 TT 4,300 full-time employees Dedicated supplier of integrated RJ-45 ports 2014 revenues: NT$5.2 billion

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

High-volume production

  • Dongguan, 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.

Source: Company.

50 100 150 200

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  • We are a global leader in the Ethernet technology applications.
  • We are one rare manufacturer that is able to combine automated volume

production capability with a high degree of product customization.

  • 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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5

The UDE Strategy UDE Goals Financial Performance

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Optimizing automation + customization Differentiated product focus Keeping up with the cloud Targeting market share gain The UDE strategy

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Optimizing automation + customization Differentiated product focus Keeping up with the cloud Targeting market share gain The UDE strategy

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UDE’s market positioning

  • UDE positions itself in the Ethernet market

UDE focuses on the copper connection of the global Ethernet market, where it enjoyed 10% market share in 2014 in volume terms.

  • ICM is the key focus

With key offering of integrated connection module (ICM), UDE aims to gain share within the ICM market and from the discrete segment.

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Global Ethernet market Copper connection (RJ45) Fiber connection Discrete jack Integrated jack (ICM)

10% market share in 2014

UDE’s target market

Source: Company.

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Core competence

Core Technology Key Application Manufacturing Advantage

Hi-Speed

10/100BT/ 1GBT/ 10GBT/ 40GBT

Integrated Magnetic

PoE/ PoE+/ Protection Coil/ Choke

TPS Automation

JIT/ Flexible Robot + Vision System/ In-house Designed machines

Cloud Computing PC and Consumer Electronics Networking Products We aim to leverage our manufacturing advantages to products beyond RJ45

MB / AIO PC STB Internet TV / Blu-ray Player Printer / Game Console Gateway / Modem IPC Switch Server

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

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 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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Most diverse application base of any RJ45 producer

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

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

11 Source: Company.

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Selling to global leaders in key product categories

12 Source: Company.

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UDE is a rarity

Product

  • ffering

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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  • A high-volume/low-cost leader also offering highly customized products
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Optimizing automation + customization Differentiated product focus Keeping up with the cloud Targeting market share gain The UDE strategy

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New world to conquer

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UDE’s 2014 global market share is 10%

* Additional addressable market refers to devices that currently do not have RJ45 connections but are expected to incorporate them in the future.

Source: Brokers and UDE estimates

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 100 200 300 400 500 600 NB Gateway/Switch/ Modem, etc. TV Sever Game Console STB Printer AIO Blue Ray DVD MB IPC Mn ports Market size Additional addressable market* Market share (%, RHS) 1600

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61% 46% 45% 35% 29% 24% 16% 30% 30% 31% 33% 40% 23% 24% 25% 34% 38% 36% 1,000 2,000 3,000 4,000 5,000 6,000 2009 2010 2011 2012 2013 2014 NT$mn PC Consumer Networking

Networking driving LT revenue growth

16 Source: Company.

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Optimizing automation + customization Differentiated product focus Keeping up with the cloud Targeting market share gain The UDE strategy

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Stamping Plastic injection

Shell

Twisting & wiring PCB SMT Moduling

Filter PCB Automated by TPS Subcontract

  • TPS & automation has significantly lifted productivity at twisting & wiring and assembly.
  • Subcontract focuses on moduling, which represents further efficiency with automation.

TPS automated process flow

Plating

Contact pins Case Coil wires Housing

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Assembly

Source: Company.

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Continued efforts in automation

2015 2016 2017

Assembly Moduling

To implement 500 sets robots + vision systems

Estimated capex: NT$300 -400mn

To implement 380 sets in-house designed machines

Estimated capex: NT$300-500 mn

To reduce labor costs, outsourcing costs, manufacturing uncertainties, and inventories, and shorten delivery time

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Assembly-UDPS implementation

~2008 2008~09 2010~12 2013~14

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

Source: Company.

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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

Source: Company.

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Optimizing automation + customization Differentiated product focus Keeping up with the cloud Targeting market share gain The UDE strategy

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The concept of cloud

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  • Growth in cloud computing means increased market potential for UDE

UDE’s target addressable market

Source: Company.

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The concept of IoT

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  • Internet of things (IoT) appears to be the next big thing, driving new devices

used in our daily lives to create new data flows (anywhere, everywhere).

Source: Company.

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Cloud and IoT to drive potential growth

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Conventional 3C devices

Data flow transmission

Computer Consumer Networking & communication Internet of things (IoT) Potential expansion in data flow

Cloud computing Ethernet jack market

Potential expansion in jack demand enabled by IoT that UDE can capture

Source: Company.

Digital home appliances Wearable devices Connected vehicles POS …

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UDE Goals

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UDE’s targets and commitments

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Penetrate the high-end networking market leverage our manufacturing advantages to new business Maintain a cash dividend payout in excess of 50%

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2011-14 dividend payout

( NT$ Million ) 2011 2012 2013 2014 Net income to parent 353 444 520 509 Cash dividend 215 257 306 300 Dividend p/s (NT$) 3.5 3.8 4.5 4.3 Cash yield (%) 6.7*1 5.3*2 4.2*3 8.3*4 Payout ratio (%) 61% 58% 59% 59%

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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 July 11, 2014, the day before ex-dividend day.
  • 4. 2014 yield is based on UDE’s closing share price on July 15, 2015, the day before ex-dividend day.

Source: Company.

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Financial Performance

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Five-year financial highlight

30 Source: Company.

37.0% 27.3% 24.8% 23.7% 19.8% 18.1% 14.2% 14.0% 13.0% 10.9% 2010 2011 2012 2013 2014 ROE ROA 341 353 444 520 509 6.45 6.08 7.08 7.69 7.38

  • 1.00

2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

2010 2011 2012 2013 2014

  • 100

200 300 400 500 600 700 800

Net income (NT$ mn) EPS (NT$)

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Five-year P&L (consolidated)

31 Source: Company.

NT$ million 2010 2011 2012 2013 2014 Revenues 3,094 3,486 3,876 4,692 5,156 Gross profit 820 890 1,063 1,284 1,368 Operating profit 472 454 528 664 626 Pre-tax profit 409 481 539 674 636 Net income to parent 341 353 444 520 509 EPS (NT$) 6.45 6.08 7.08 7.69 7.38 Growth YoY (%) 2010 2011 2012 2013 2014 55.2 12.7 11.2 21.1 9.9 48.3 8.5 19.5 20.8 6.5 76.1

  • 3.8

16.3 25.7

  • 5.7

215.4 17.7 12.0 25.1

  • 5.7

305.1 3.7 25.5 17.1

  • 2.1

291.0

  • 5.8

16.5 8.6

  • 4.0

Margin (%) Gross margin 26.5 25.5 27.4 27.4 26.5 Operating margin 15.2 13.0 13.6 14.1 12.1 Net margin 11.0 10.1 11.4 11.1 9.9

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Five-year balance sheet (consolidated)

32 Source: Company.

NT$ million 2010 2011 2012 2013 2014

Total Assets 2,194 2,784 3,567 4,356 4,898 Cash 275 751 1,099 1,258 1,013 NR & AR 706 757 918 1,184 1,164 Inventory 413 435 715 881 1,325 Non-current assets 605 675 629 785 1,136 Total Liabilities 1,142 1,248 1,526 1,977 2,078 Bank loans 237 426 419 417 554 NP & AP 352 303 433 476 510 Other payables 365 427 570 695 768 Total Equities 1,052 1,537 2,041 2,340 2,786 Capital 532 614 676 676 697 Additional paid-in capital 112 323 568 582 727 Retained earnings 426 600 828 1,091 1,293

Growth YoY (%) 2010 2011 2012 2013 2014

40.2 26.9 28.1 22.1 12.4

  • 12.5

173.3 46.3 14.4

  • 19.4

21.6 7.4 21.2 28.9

  • 1.7

61.6 5.4 64.4 23.1 50.4 82.3 11.6

  • 6.8

24.8 44.7 47.6 9.3 22.3 29.6 5.1 32.9 79.9

  • 1.7
  • 0.3

32.7 50.8

  • 13.7

42.6 10.1 7.0 36.1 16.9 33.4 22.0 10.6 32.9 46.1 32.9 14.6 19.0 0.9 15.4 10.1 0.0 3.1 0.8 187.4 75.8 2.4 24.9 186.6 40.6 38.2 31.7 18.5

Key Financial Metrics

A/R turnover days 76 77 79 82 83 Inventory turnover days 54 60 75 85 106 A/P turnover days 47 46 48 49 48

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Q&A

Thank you very much!

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For more information regarding UDE www.ude-corp.com For all inquiries, suggestions, and comments service@ude-corp.com