ECS Corporate Presentation 1Q13 Financial Results Update 8 May 2013 - - PowerPoint PPT Presentation

ECS Corporate Presentation

1Q13 Financial Results Update 8 May 2013

Preferred Supplier of Choice for ICT Products & Value-added Services

CONTENTS

Recent Developments 1Q13 Financial Results Growth Strategies Investment Merits Appendix – Corporate Profile

RECENT DEVELOPMENTS

Continuing to grow products and services portfolio in 1Q13...

Recent Developments

• Expanded tablet PC range

– Appointed by Microsoft to distribute Surface tablet PC

• Surface RT launched in April 2013
• Surface Pro to be launched in June 2013

– ECS now major tablet PC distributor to the local market, with models from Apple, Samsung, Asus and Lenovo already in the stable

• Expanded smartphone distribution segment

– Now also the distributor for Lenovo smartphones and Samsung mobility devices for the enterprise market – New products augment existing Huawei Ascend P1

• ffering
• Enhanced Enterprise Systems portfolio

– Appointed by IBM to offer its SmartCloud cloud computing solutions to the enterprise market – Inks deal with CA Technologies to distribute its data management solutions in Malaysia

4

1Q13 FINANCIAL RESULTS

Revenue mainly boosted by tablet and notebook PC sales... profit, however, affected by lower contribution from Enterprise Systems

Revenue & Profit Analysis

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Segmental Revenue

+5.2% YoY +4.0% YoY

+15.2% YoY

Revenue (RM’mil) 1Q12 1Q13 ICT Distribution 197.7 207.9 Enterprise Systems 104.4 108.5 ICT Services 3.3 3.9 Total Revenue 305.4 320.3

1Q13 Revenue: RM320.3 mil

+3.9%

YoY

• 22.1%

YoY +38.7% YoY 1Q13 Gross Profit: RM19.6 mil

Gross Profit (RM’mil) 1Q12 1Q13 ICT Distribution 8.4 8.7 Enterprise Systems 12.7 9.9 ICT Services 0.7 1.0 Total Gross Profit 21.8 19.6

ICT Distribution Enterprise Systems ICT Services

All three business divisions report revenue growth... Enterprise Systems’ profit margin, however, not matching to last year’s

8

Operation Statistics

Continues to optimise working capital needs by controlling debtors’ and inventory levels...

9

Balance sheet remains strong...

Balance Sheet

(RM’mil) As at 31.3.13 As at 31.12.12 Comments Plant & Equipment 4.7 4.7

• Other Non-Current Assets

2.3 2.1

• Current Assets

305.9 324.8 Decrease due to lower debtor level Current Liabilities 119.0 143.9 Due to lower payables and accruals Non-Current Liabilities 0.0 0.0

• Total Shareholders Equity

194.0 187.6 In line with increase in retained profits Total Borrowings

• No borrowings

Cash & Cash Equivalents 67.1 73.0

• Gearing (net of cash) (x)

Net cash Net cash Able to fund future expansion initiatives easily Net Assets/share (RM)* 1.08 1.04

• *Based on total number of shares of 180.0 mil shares of RM0.50 par

GROWTH STRATEGIES

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Growth in the ICT sector remains unabated... driven by consumer demand and public sector initiatives

Sector Opportunities

• Malaysia’s 2013 ICT spending expected to hit USD10.6 billion

(Source: IDC) – Up 4.0% from 2012’s estimated USD10.2 billion – Compounded annual growth rate of 8.0% between 2011 and 2016 – To be driven by expected growth in tablet PC, enterprise networking, service provider equipment and smartphone demand

• Consumer demand for smart devices in Malaysia on the rise

(Source: IDC) – Smartphone spending to hit USD2.1 billion in 2013

• Up 30.3% from 2012’s estimated USD1.6 billion

– Tablet PC sales to grow 17.7% to USD664 million

• Good potential for further ICT growth (Source: Media reports)

– Government initiatives like the Economic Transformation Programme (ETP) and Digital Malaysia Master Plan expected to be growth catalysts – SME investment in ICT still low; opportunity for growth – Cloud computing adoption in Malaysia inevitable; already made headway in regional neighbours Japan, Hong Kong and Singapore

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Growth Strategies

Strategies in place to spur the Group forward in non- traditional segments ...

• Expanding tablet and ultrabook PC offerings

– Already distributing Microsoft Surface RT; looking to distribute Surface Pro variant in June – Ultrabook PCs have high-growth potential

• Main demographic for ultrabooks – enterprise users –

posted sales growth in a quarter where consumer PC demand fell (Source: Gartner)

• Cheaper prices of newer, more advanced models in the

consumer market can lead to higher PC sales – Continuing to look for more devices to add to product portfolio

• Eyeing further expansion of smartphone portfolio

– Expanded offerings with Lenovo’s entire line of consumer smartphones; also offering Samsung’s entire range of enterprise mobility devices – Looking to add more products to tap into market opportunities

• Targeting opportunities in cloud computing

– Augments existing enterprise systems products and services – Modular IBM SmartCloud enterprise solutions to generate recurring income from both large enterprise and SME clients

INVESTMENT MERITS

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Valuation

Single-digit valuation make the Group an interesting prospect for investors keen on Malaysia’s ICT sector... Share Price (@ 30 Apr 2013) RM 1.14 Market Cap (@ 30 Apr 2013) RM205.2 mil Trailing PE Ratio 7.3x Trailing EV/EBITDA 3.6x Price to book ratio 1.1x Historical Net Dividend Yield 4.8%

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Solid fundamentals, market leader, growth catalysts and dividend policy underpin an interesting investment case...

Investment Merits

Market leader in ICT distribution in Malaysia Domestic ICT market continues to be growth industry Cloud computing and mobility devices to be growth catalysts Net cash position allows for future expansion Dividend policy of 30% payout’s historical net yield of 4.8% Single-digit PE valuation an affordable entry into ICT growth proxy

THANK YOU 08 MAY, 2013

APPENDIX – CORPORATE PROFILE

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Background

Malaysia’s leading ICT distribution hub...

• Established in 1985, ECS is in the business of distributing ICT

products in Malaysia

• ECS’ range of products include volume ICT products (notebooks,

desktop, computers, printers and software) and value enterprise systems (network, communication infrastructure, servers and enterprise software)

• ECS has working relationships with more than 30 global brands

such as Hewlett Packard, Asus, Dell, IBM, Cisco, Microsoft, Apple, Oracle, Epson, Samsung, Buffalo, Adobe, Juniper, Blue Coat, VMWare and Google.

• ECS has a nationwide distribution network of more than 3,000

resellers consisting of retailers, system integrators and corporate dealers.

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Vision and Mission

Aims to be at the centre of all things IT...

To be the leading provider of ICT products and value- added services. We strive for sustainable growth to achieve optimum returns to shareholders.

VISION

• To be the preferred supplier of choice for ICT products and

value-added services by building stronger customer relationships.

• To bring the best-of-breed ICT products and services to

enhance the competitiveness of our customers' businesses.

MISSION

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Milestones

More than two decades in the ICT industry since the advent

• f personal computers...

1985

• Began business in marketing personal computers under K.U. Sistem Sdn Bhd (now known as ECS KU Sdn Bhd)

1986

• Management buy-out of K.U. Sistem Sdn Bhd by founders Foo Sen Chin and Dato’ Teo Chiang Quan
• Pericomp Sdn Bhd (now known as ECS Pericomp Sdn Bhd) was formed to distribute peripherals to dealers

1994

• Set up a branch office in Penang

1997/98

• KUS Holdings Sdn Bhd (now known as ECS Kush Sdn Bhd) won the inaugural Enterprise 50 award
• Astar Sdn Bhd (now known as ECS Astar Sdn Bhd) won the Enterprise 50 award

2000

• KUS Holdings Sdn Bhd (now ECS Kush Sdn Bhd) became a 60% subsidiary of ECS Holdings Limited of Singapore

2001

• Listing of ECS Holdings Limited on the SGX Mainboard

2004

• KUS Group of companies adopted the ‘ECS’ corporate identity
• ECS ICT Berhad was awarded MSC status by MDeC

2005

• Introduction of program to install credit card terminals at resellers’ sales points

2006

• Implemented Enterprise Knowledge Portal to improve information storage and sharing

2007

• Establishment of warehouses in Kota Kinabalu and Kuching

2008

• Installation of 720 credit card terminals with over 107 retailers to improve collections
• Implemented the FPX payment gateway which enables direct online payment from resellers
• Establishment of sales office in Johor Bahru and Kuantan
• Launch of our integrated corporate office and warehouse facility in Kota Damansara

2010

• Listing of ECS ICT Berhad on the Main Market of Bursa Malaysia Securities Berhad

2011

• Appointed strategic authorised distributor for Dell’s commercial & consumer products & solutions
• Appointed as Lenovo's distributor for 3 business segments: Consumer, Small & Medium Business and Relationship (corporate)
• Set up of ECS Technology Centre at ECS’ head office, showcasing Oracle Exadata Database machine, the first in Malaysia
• Nominated as one of the companies in "The Edge Billion Ringgit Club“

2012

• Appointed distributor for Google Nexus 7 and Asus Padfone tablet PCs; enters smartphone segment with Huawei Ascend P1 & first foray into cloud

computing

• Signs agreement to distribute Huawei’s entire range of enterprise systems products and services
• Undertook 1-for-2 Bonus Issue

2013

• Appointed distributor for Lenovo smartphones, Microsoft Surface RT, IBM SmartCloud for enterprise and CA Technologies

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Corporate Structure

Focused on the distribution of ICT products...

ECS ICT Berhad

ECS Kush Sdn Bhd (100%) ECS Astar Sdn Bhd (100%) ECS KU Sdn Bhd (100%) ECS Pericomp Sdn Bhd (100%)

Management, Financial, and Logistics services Distribution of ICT Products Provision of ICT Systems and Services Distribution of Value ICT Products Investment holding and provision of e-commerce systems and solutions

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Market Positioning

Well-positioned to play and intermediary role in the ICT supply chain...

Direct Sales Two-Tier Distribution One-Tier Distribution

End Customers Resellers Resellers

Retailers, System Integrators, Corporate Dealers

ICT Distributors

ICT Principals

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Business Model

“One-stop shop” ICT supplier for diverse customer base...

ICT DISTRIBUTORS Channel Development and Management Logistics Finance Services

• Pre-sales
• System Architecture
• Implementation
• Training
• Post-sales
• Maintenance

ICT PRINCIPALS Value Products Network & Communication Servers Storage Software Volume Products PCs Notebooks Printers Supplies Software END USERS Finance Telco Manufacturing Services Government Corporate Enterprises Commercial SME Home RESELLERS System Integrators Solutions Providers Service Providers Corporate Dealers Retailers

Economies of Scale and Better Pricing Aggregation Total

solution

Single Source Supplier

After sales support

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Product Portfolio

Principals are the “who’s who” of brands in the ICT industry...

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Products and Services

ECS distributes a wide array of ICT products and Enterprise Systems... a rare distributor with strong technical support

ICT Products

• Notebooks
• Tablet PCs
• Personal Computers
• Printers
• Software
• LCD Monitors

Enterprise Systems

• Servers
• Network Systems
• Data Centers
• Enterprise Software

ICT Services

• More than 30 engineering

personnel providing support for ICT products

• Over 150 certifications from 15

principals

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Distribution Infrastructure

Established and efficient distribution infrastructure backed by advanced logistics centre...

• Purpose-built flagship warehouse in

Kota Damansara spanning 40,000 sq ft

• Handles an average intake of

5 containers and output of 25 lorries per day

• Daily sales of RM4 mil to RM5 mil with

400-500 invoices/deliveries Warehouses & Offices

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Key Management

Led by industry veterans...

• Mr. Foo Sen Chin, Managing Director
• Responsible for steering the Group’s overall corporate direction; instrumental in guiding ECS into a RM1 billion company
• Has more than 30 years of experience in the ICT industry
• Graduated with a Bachelor of Science in Electrical and Electronic Engineering from the University of Birmingham, UK; later obtained

an MBA from Cranfield School of Management, UK

• A key figure in the ICT industry: served as councilor, treasurer, and deputy chairman of PIKOM from 1995 – 2005; on PIKOM’s board
• f advisors from 2006 to present
• Mr. Soong Jan Hsung, Executive Director
• Responsible for the development of new sales and marketing strategies
• Contributed significantly to the Group’s success, especially in market development aspects
• Has more than 20 years experience in ICT distribution
• Graduated with a Bachelor in Science majoring in Mathematics from the University of Malaya
• Mr. Tee Ang Kuan, General Manager
• Responsible for overseeing the Group’s operations such as developing business and marketing strategies, marketing and distribution
• f ICT products, and sales staff management
• Has about 24 years of experience in the promotion and distribution of ICT products to end users as well as corporate customers
• Graduated with a Bachelors of Art (Honours) majoring in Economics from the University of Malaya
• Mr. Chan Puay Chai, Financial Controller
• Responsible for the Group’s financial planning & control, financial compliances, credit management, risk management, and other

finance related operations

• Has about 20 years of experience in various key accounting positions
• Is an associate member of the Charted Institute of Management Accountants (U.K.) and a registered accountant with the Malaysian

Institute of Accountants

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Substantial Shareholders

Part of a leading regional ICT player that is listed on the SGX... 33% free float

ECS ICT Berhad ECS Holdings Ltd Sengin Sdn Bhd (1) Oasis Hope Sdn Bhd (2) Dasar Technologies Sdn Bhd

(1) Deemed interest of Mr. Foo Sen Chin, Managing Director of ECS ICT Berhad (2) Deemed interest of Dato’ Teo Chiang Quan, Chairman of ECS ICT Berhad

41.0% 12.2% 5.5%

Listed on SGX, Singapore Incorporated in Malaysia Incorporated in Malaysia

Incorporated in Malaysia 8.6%

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Competitive Advantages

ECS’ leadership driven by established brand name, efficient distribution ability and strong relationships with principals ...

Partnership with Key ICT Players

• Long term track records with more than

30 leading ICT principals Wide range of ICT products

• More than 3,000 SKUs (Stock Keeping

Unit) sold in FY2012 Effective Financial Management

• Effective inventory management to

minimise product holding cost

• Credit card terminal programme, trade

card programme and ePayment interfaces to improve collection and profit margin Time-tested Distribution Infrastructure

• Extensive network of more than 3,000

resellers

• Timely delivery supported by a fully-

integrated ERP system Strong Technical Support Team

• Team of 30 certified service personnel

with certifications from leading ICT principals Established Name in ICT Industry

• In business for more than 25 years since

the introduction of personal computers

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