ECS Corporate Presentation

ECS Corporate Presentation
1Q15 Financial Results Update
8 May 2015
Preferred Supplier of Choice for ICT Products & Value-added Services
1Q15 Operations Highlights
1Q15 Financial Results
Growth Strategies
Investment Merits
Appendix
CONTENTS
2
1Q15 OPERATIONS HIGHLIGHTS
3
1Q15 performance boosted by pre-GST spending…
continued to establish wider product range
• ICT Distribution driven by pre-GST spending
– Boosted by Group’s wide range of ICT products and
smartphones
Microsoft Lumia 535
• Expanded mobility products portfolio with new
brands
– Added range of Microsoft Mobile smartphones
Lumia 930
Lumia 735
(Microsoft Lumia 535, Lumia 930, Lumia 735 and Lumia 830)
– Appointed by Xiaomi to distribute MiPad; Xiaomi
typically uses online distribution channel worldwide
Lumia 830
• Enterprise Systems picks up in 1Q15
– Higher sales of servers and software products
Xiaomi MiPad
1Q15 Operations Highlights
4
1Q15 FINANCIAL RESULTS
5
Strong start to FY15… improved profitability despite lower
GP margin from product mix indicates economies of scale
Revenue & Profit Analysis
6
Double-digit sales growth in ICT Distribution and Enterprise
Systems segment…
1Q15 Gross Profit: RM26.0 mil
1Q15 Revenue: RM522.9 mil
+48.2%
YoY
+43.5%
YoY
+21.9%
YoY
ICT Distribution
1Q15 Gross Profit Margin Breakdown
+43.9%
YoY
ICT Distribution
+27.4%
YoY
+13.1%
YoY
Enterprise Systems
ICT Services
Revenue
Gross Profit
(RM’mil)
1Q14
1Q15
1Q14
1Q15
ICT Distribution
251.6
372.8
10.4
15.0
Enterprise Systems
95.5
137.1
7.3
9.2
ICT Services
10.6
12.9
1.6
1.8
357.7
522.9
19.3
26.0
Total
1Q15 Segmental Revenue
7
Group improves efficiency in 1Q15…cash conversion cycle
reduces to below 30 days
Operations Statistics
8
Expecting 2Q15 to even out the strong 1Q15… 2H15 to be
boosted by new products and normalized consumer
sentiment
+46.2% yoy
+25.0% yoy
Revenue Trend
9
Eyeing enhanced profitability with favourable product mix
and improved efficiency…
FY14 ROE: 13.7%
FY14 ROA: 7.7%
(FY13: 13.7%)
(FY13: 7.9%)
+96.2% yoy
Profit Trend
+1.3% yoy
10
Balance sheet remains robust… Net cash position provides
good opportunity for the Group to undertake expansion
plans
(RM’mil)
As at 31.03.15
As at 31.12.14
Comments
Plant & Equipment
3.1
3.3
-
Other Non-Current Assets
1.9
2.0
-
Current Assets
432.5
406.5
Increased due to higher receivables,
deposits and prepayments in line with
enlarged revenue base; also higher cash
and cash equivalents
Current Liabilities
204.1
187.7
-
0.0
0.0
-
233.5
224.1
-
-
Cash & Cash Equivalents
99.3
89.7
Gearing (net of cash) (x)
Net cash
Net cash
Group in good position to undertake any
growth plans
Net Assets/share (RM)*
1.30
1.24
-
Non-Current Liabilities
Total Shareholders Equity
Total Borrowings
Retained earnings continue to rise
No borrowings
Cash per share of 55 sen as at 1Q15
*Based on total number of shares of 180.0 mil shares of RM0.50 par
Balance Sheet
11
Proposes final dividend of 3.0 sen in respect of FY2014 for
shareholders’ approval… highest annual dividend
distribution to date
6.0 sen
#Adjusted
for 1-for-2 bonus issue
RM10.8 mil
*Assuming shareholders’ approval
Dividend History
12
GROWTH STRATEGIES
13
Malaysia expected to see healthy sales of ICT products and
smartphones… wearable technologies also an emerging
sector
•
Malaysia ICT spending expected to grow by 5% in
FY2015 to US$10.6 billion (Source: IDC)
 On the back of higher hardware and software sales
 Smartphone sales expected to at quicker pace of 8% in
FY2015 to US$2.4 billion
•
Sales of affordable smartphone brands continue to rise
(Source: IDC)
 Lenovo and ASUS smartphones ranked 2nd and 3rd
respectively in Malaysia
 Both ahead of Apple and OPPO
•
Worldwide shipments of ‘wearable products’ to
increase up to 2019 (Source: IDC)
Examples of wearables:
 Up to 45.7 million wearable devices to be shipped this year
 Shipments to grow up to 126.1 million by 2019 (CAGR: 45%)
Apple Watch
Sector Opportunities
ASUS ZenWatch
14
Aim to continue bringing exciting brands and new product
categories into Malaysian market… also ready to serve
Enterprise segment
•
To grow with ICT Distribution principals
– In talks with existing principals to distribute expanded range of products
– Looking to add ‘wearable technology’ and ‘internet of things’ products in second half of
2015
•
To grow Enterprise Systems segment
– Working with System Integrators and vendors to target more projects
• Public projects like KVMRT to provide IT systems implementation opportunities
•
To explore opportunities for expansion in ICT Services segment
– Seeking M&A opportunities in relation to ICT Services
Growth Strategies
15
INVESTMENT MERITS
16
Strong earnings growth to compress already affordable
valuations… commendable dividend yield
Share Price (@ 30 Apr 2015)
RM1.63
Market Cap (@ 30 Apr 2015)
RM293.4 mil
As at 30 April 2015
ECS:MK
FBMKLCI:IND
12mTrailing PE Ratio
8.6x
12m Trailing PE Ratio (net of cash) 1
5.7x
12m Trailing EV/EBITDA
4.3x
Price to book ratio 2
1.3x
FY14 Net Dividend Yield 3
3.7%
1
Net of cash per share of RM0.55 per share (as at 31 Mar 2015)
2
Based on Net Assets per share of RM1.30 (as at 31 Mar 2015)
3
Based on total dividend declared of 6.0 sen per share in respect
of FY14, translating to RM10.8 million dividend payout or 36.7%
of net profit (above the dividend policy of distributing minimum
30% of net profit)
Valuation
ECS 1-year Outperformance
Change
+28.7%
+0.3%
+28.4 pt
Source: Bloomberg
17
Market leadership, growth catalysts and dividend policy
underpin ECS’ investment case...
Market leader in ICT distribution in Malaysia
Domestic ICT market continues expansionary mode
Mobility devices to be growth catalyst
Net cash position allows for future expansion
Dividend payout policy of 30% on net profit
Proxy to growing ICT spending with consistent dividend payout
Single digit PE valuation
Investment Merits
18
THANK YOU
Bursa Code: 5162
Bloomberg: ECS:MK
www.ecsm.com.my
Appendix
20
CORPORATE PROFILE
21
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,
personal computers, smartphones, tablets, printers and software)
and value enterprise systems (network, communication
infrastructure, servers and enterprise software).
•
ECS has working relationships with 40 global brands such as
Hewlett Packard, Lenovo, Asustek, Dell, Oracle, Cisco, Microsoft,
Apple, Samsung and IBM.
•
ECS has a nationwide distribution network of more than 5,000
resellers consisting of retailers, system integrators and corporate
dealers.
Background
22
Aims to be at the centre of all things IT...
VISION
To be the leading provider of ICT products and valueadded services. We strive for sustainable growth to
achieve optimum returns to shareholders.
• 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.
Vision and Mission
MISSION
23
More than two decades in the ICT industry since the advent
of 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 & 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, Samsung smartphones (for enterprise systems segment), Microsoft Surface RT and Surface Pro
2014
• Appointed distributor for ASUS and BenQ smartphones, Zebra printing solutions, Seagate storage solutions and F5 Networks’ solutions.
2015
• Appointed distributor for Microsoft Mobile and Xiaomi MiPad.
Milestones
24
Focused on the distribution of ICT products...
ECS ICT
Berhad
Investment holding and provision of
e-commerce systems and solutions
ECS Kush
Sdn Bhd
(100%)
Management, Financial,
and Logistics services
ECS Astar
Sdn Bhd
(100%)
Distribution of ICT
Products
Corporate Structure
ECS KU
Sdn Bhd
(100%)
Provision of ICT
Systems and Services
ECS Pericomp
Sdn Bhd
(100%)
Distribution of Value ICT
Products
25
Well-positioned to play and intermediary role in the ICT
supply chain...
ICT Principals
ICT Distributors
Resellers
Retailers, System
Integrators, Corporate
Dealers
Resellers
End Customers
Direct Sales
Market Positioning
Two-Tier Distribution
One-Tier Distribution
26
“One-stop shop” ICT supplier for diverse customer base...
ICT PRINCIPALS
ICT DISTRIBUTORS
Value Products
Channel Development and
Management
Servers
Network Systems
Data Centers
Enterprise Software
Cloud Services
Logistics
Volume Products
Notebooks
Personal Computers
Smartphones
Tablets
Printers & Supplies
Software
END USERS
Services
Economies of
Scale and Better
Pricing
Aggregation

Pre-sales

System Architecture

Implementation

Training

Post-sales

Maintenance
Finance
RESELLERS
Finance
Telco
System
Integrators
Single
Source
Supplier
Solutions
Providers
Service
Providers
Corporate
Dealers
Manufacturing
Total
solution
Services
Government
Corporate
Enterprises
Commercial
Retailers
SME
Home
After sales support
Business Model
27
Principals are the “who’s who” of brands in the ICT
industry...
Product Portfolio
28
ECS distributes a wide array of ICT products and Enterprise
Systems... value added with strong technical support
ICT Products
•
•
•
•
•
•
Notebooks
Personal Computers
Smartphones
Tablets
Printers & Supplies
Software
Enterprise Systems
•
•
•
•
•
Servers
Network Systems
Data Centers
Enterprise Software
Cloud Services
Products and Services
ICT Services
• More than 40 engineering
personnel providing support for
ICT products
• Over 200 certifications from 15
principals
29
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 more than
RM6 mil with 750
invoices/deliveries
Distribution Infrastructure
30
ECS’ leadership driven by established brand name, efficient
distribution ability and strong relationships with principals ...
1
2
Established Name in ICT Industry
• In business for 30 years since the
introduction of personal computers
Partnership with Key ICT Players
• Long term track records with 40
leading ICT principals
3
Wide range of ICT products
• More than 3,000 SKUs (Stock Keeping
Unit) sold in FY2014
Strong Technical Support Team
• Team of 40 certified service personnel
with certifications from leading ICT
principals
4
5
Time-tested Distribution Infrastructure
• Extensive network of more than 5,000
resellers
• Timely delivery supported by an
integrated ERP system
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
reduce credit exposure
6
Competitive Advantages
31
Led by industry veterans...
Mr. Foo Sen Chin, Executive Chairman
• 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 of
advisors from 2006 to present
Mr. Soong Jan Hsung, Chief Executive Officer
• Responsible for the development of new sales and marketing strategies
• Contributed significantly to the Group’s success, especially in market development aspects
• Has close to 30 years experience in ICT products distribution
• Graduated with a Bachelor in Science majoring in Mathematics from the University of Malaya
Mr. Tee Ang Kuan, Group General Manager
• Responsible of the overall distribution and services business of the Group
• Has more than 25 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, Group Financial Controller
• Responsible for the Group’s financial planning & control, financial compliances, credit management, risk management, and other finance
related operations
• Has more than 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
Key Management
32
With years of experience in the industry…
Mr. Chia Chin Pooi, General Manager of ECS Astar
• Responsible for the operations, namely the design and development business and marketing
strategies, marketing distribution of ICT products, and sales staff management
• Has more than 20 years in the ICT industry
• Graduated with a Diploma in Computer Science from TAR College, Malaysia in 1990
Mr. Chang Yew Hwa, General Manager of ECS Pericomp
• Responsible for the operations, namely the design and development of business and marketing
strategies, marketing and distribution of Enterprise ICT products, and sales staff management
• Has more than 20 years of working within the Group
• Graduated with a Bachelor of Science in Economics from Portland State University, USA in 1988
Mr. Tan Say Meng, General Manager of ECS Ku
• Responsible of the overall ICT sales and services
• Has been with the Group for more than 20 years and is still involved in the ICT services
component of the Group
• Graduated with a MBA majoring in e-Commerce from Charles Sturt University, Australia
Key Management (cont’)
33
Part of a leading regional ICT player based in Singapore...
33% free float
Incorporated in Singapore
Oasis Hope
Sdn Bhd (2)
Sengin
Sdn Bhd (1)
ECS Holdings Ltd
Incorporated in Malaysia
41.0%
12.2%
Incorporated in Malaysia
8.6%
Dasar Technologies
Sdn Bhd
Incorporated in Malaysia
5.5%
ECS ICT Berhad
(1) Deemed interest of Mr. Foo Sen Chin, Executive Chairman of ECS ICT Berhad
(2) Deemed interest of Dato’ Teo Chiang Quan, Non-independent & Non-executive director of ECS ICT Berhad
Substantial Shareholders
34
Industry Statistics show growing market potential…
Source: IDC report published in July 2014
Data : Total Hardware and Software excluding Services
Industry Statistics
35