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BOTHHAND - AsianNet...2016/11/01 · Bothhand: A Leader in LAN Transformer Bothhand at a Glance...
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Provide the Best Integrated Module Inspiring the Ubiquitous & Colorful Network
BOTHHAND
Company Presentation
November 2016
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Disclaimer
• The information contained in this confidential document ("Presentation") has been prepared by Bothhand (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 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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Bothhand: Small Parts Drive the World
� Founded in 1992, we specialize in production of Ethernet electronic components. We are the world’s largest discrete LAN transformer manufacturer with 15% market share in terms of revenue.
� With 24 years of industry experience, we are committed to provide customers the highest quality and most reliable products through our excellent R&D team and advanced technology.
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� We view China as our major growth driver, and we are ready to gain market share with our high-end focused product offerings, a new FAE team in Guangzhou, and our proprietary T1+T2 automated wiring technology.
� Our continued effort in lean operations (increase in automation and supply chain integration) has achieved initial desired results. We strive to maintain our cost leadership and achieve profitable growth.
� We strive to grow our revenue by double digits for the next 5 years. We also commit to a stable dividend payout, backed by our solid cash position. Furthermore, we aim to achieve sustainable ROE at 20%.
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```````````````````````````````` Company BackgroundCompany BackgroundCompany BackgroundCompany Background
Industry Industry TrendsTrendsIndustry Industry TrendsTrends
Our Growth Our Growth StrategyStrategyOur Growth Our Growth StrategyStrategy
4
Our Growth Our Growth StrategyStrategyOur Growth Our Growth StrategyStrategy
Our Our GoalsGoalsOur Our GoalsGoals
Financial SummaryFinancial SummaryFinancial SummaryFinancial Summary
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提供最佳網通元件模組化整合服務 讓客戶創造更精彩的網路世界
BOTHHAND
Company Background
Positive · Persistence · Responsibility
Company Background
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Bothhand: A Leader in LAN Transformer
Bothhand at a Glance Revenue by Product
Ticker 3299 TT
Revenue NT$2.7 bn in 2015
Employee 858 at the end of 2015
Establishment 1992
ROE
85% 97%97% 97%
97%500
1,000
1,500
2,000
2,500
3,000
NT$ mn LAN Transformer Other
Revenue by Application
Enterprise Networking
Switch Server VoIP Phone Router
Smart Home
Wi-Fi Router Smart TV
Web Camera
Access Point
Game Console
Blue-ray DVD Player
Cable Modem STB
ROE 20% in 2015
6
0 2012 2013 2014 2015 1H16
21% 27% 29% 34%38%
41% 49%52%
50%
50%
21% 17%
13%12%
9%
0
500
1,000
1,500
2,000
2,500
3,000
2012 2013 2014 2015 1H16
NT$ mn Enterprise Networking Smart Home
NB Other
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Major Functions of LAN Transformer
Ethernet Cable
• LAN transformer is the essential component of copper-based Ethernet device.
• Major functions include: impedance matching, signal
7
LAN Transformer
NB, Hub, VoIP, Switch, Router,Wireless AP, etc.
impedance matching, signal filtering, and voltage isolation
Switch Wireless AP Cable Modem
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Hidden Champion in a Niche Market
Bothhand LAN transformer target market
Copper|
Copper
• Bothhand is the world’s largest discrete LAN transformer manufacturer. It enjoys ~15% global market share in terms of revenue.
• LAN transformer industry growth drivers include:
8
Eth
ern
et
|Connector
|Lan
Transformer
Copper|
MagJack
Fiber|
Fiber Connector
drivers include:
• Advanced networking applications and improved networking technologies to drive upgrades
• LAN transformer may gain market share from MagJack due to cost consideration
• Increasing Power over Ethernet (PoE) adoption
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Company Milestones
1992 1996 1999 2001 2002 2016• Founded
• 10 BASE-T
• 100 BASE-T
transformer
• Entered South
Korea market
• Entered Japan
market
• PoE product
• Entered China
market
2004 2005
• Public on OTC
market
2013
• Vice Chairman and
President Mr. Pan
assumed the role of
Chairman
• 2.5G BASE-T
transformer
2015
• Founder passed
away
2010
• 10G Base-T
transformer
• 10 BASE-T
transformer
Korea market
• 1G BASE-T
transformer
marketaway
• Acquired 45% stake
of Deyang Shisheng
Electronics
0.9 0.91.1
1.4 1.5 1.6 1.7
2.32.6 2.6
2.32.5 2.7
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Revenue (NT$ bn)
8%6% 6% 5%
10%5%
13%
20%17%
11%13%
18% 20%
ROE (%)
9
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Manufacturing Facilities
Deyang Factory
• In operation: 2006
• Employee: 300
• Western China
manufacturing center
Changzhou Office
• In operation: 2002
• Greater China marketing
and service center
DeyangChangzhou
Kaiping
Deyang Shisheng
• In operation: 2013
• Employee: 100
• Front-end process
automation Kaiping Factory
• In operation: 2000
• Employee: 200
• Main products: Ethernet
components
• R&D and QA center in China
Guangzhou Factory
• In operation: 1998
• Employee: 250
• Professional plant for
DC/DC converters
10
Guangzhou
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Global Presence
Europe
Israel
USA
Japan
Korea
Hong KongTainan, Taiwan Headquarter
China
IndiaTaoyuan, Taiwan Sales Office
Hong Kong
Singapore
Agent
Taiwan Bothhand
Note: Based on the location where customers place orders
11
67% 72% 69% 69%
70%
8% 13%12%
15%
17%
0
500
1,000
1,500
2,000
2,500
3,000
2012 2013 2014 2015 1H16
NT$ mn Revenue by Geography
Taiwan China Japan Korea Other
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提供最佳網通元件模組化整合服務 讓客戶創造更精彩的網路世界
BOTHHAND
Industry Trends
Positive · Persistence · Responsibility
Industry Trends
12
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The Application Spaces of BASE-T
DATA CENTER
0m
ENTERPRISE FLOOR
Office space, for example
Floor or Room-based
Rea
ch
BASE-T is the foundational technology for Ethernet Enterprise Access
Bothhand’s focus
5m
30m
100m
10
00
BA
SE
-T
10
GB
AS
E-T
2.5
/5G
BA
SE
-T
25
GB
AS
E-T
40
GB
AS
E-T
based
Row-based (MoR/EoR)
Rack-based (ToR)
Data RateSource: George Zimmerman, CME Consulting 13
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Smart Home (50% of Bothhand 1H16 revenue)
Bothhand’s Asia focus will allow it to enjoy higher growth than the global market
Worldwide Home Router/Gateway/Access Point Shipments By 2020, More Than 40 Percent of Connected Flat-Panel TV Sets Will Be 4K
Increasing penetration for Connected 4K TV will also drive the use of LAN transformer
200
250
2014 2015E 2016E 2017E 2018E 2019E
+5% CAGR
14Source: Broker Reports, IDC, October 2015 Source: Cisco VNI Global IP Traffic Forecast, 2015–2020
0
50
100
150
200
US Asia-Pac Western Europe
ROW Worldwide
-7% CAGR
+10% CAGR
+2% CAGR
+1% CAGR
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Enterprise Networking (38% of Bothhand 1H16 revenue)
分離式設計(Discrete)
• Compared to integrated design, LAN transformer’s cost advantage will allow it to expand market share
• In addition, Bothhand’s high-end focus and strong PoE capability are expected to drive further market share gain
15
網路交換機 (Switch)
整合型設計(Integrated)
(Discrete)
30% Cost Saving
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Growth of PoE
Power Sourcing Equipment (PSE)
The Ethernet cable not only transports data, but also provides power so that connected PoE capable devices do not need separate power supplies.
Power over Ethernet (PoE) L2 + L3 PoE Shipments
16
Powered Device(PD)
LAN Transformer
Power Module
PoE IC
Integrate or separate power and network signal
Key Components for PoE
Source: Dell'Oro, July 2016
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提供最佳網通元件模組化整合服務 讓客戶創造更精彩的網路世界
BOTHHAND
Our Growth Strategy
Positive · Persistence · Responsibility
Our Growth Strategy
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Core Competence
• Considering product quality, price, delivery, and services
Most Competitive Solution Provider
18
• With expertise in multi-ports/ Gigabit and PoE products and a strong FAE team
Leading Technology
• Automation and supply chain integration
• e-Management platform to improve operating efficiency and accelerate decision-making
Lean Operation Structure
• With new Chairman (former Vice Chairman and President) leading a new culture
Stable Management Team
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Strategy to Drive Shareholder Value
China Growth Strategy Lean Operation Structure Strong Cash Position
19
Committed to Profitable Growth
Stable Cash Dividend Payout
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China to be the Major Growth Driver
20%
25%
30%
300
350
400
450
NT$ mn China revenue China as % of total revenue
20
195 291 304 397 200
8%
13%12%
15%
17%
0%
5%
10%
15%
20%
0
50
100
150
200
250
300
2012 2013 2014 2015 1H16 2017 2018 2019 2020
Note: Based on the location where customers place orders
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China Growth Strategy
Benefit from product upgrades by customers:
Major customers are upgrading their products to high-end from mid-to low-end.
Increase automation to reduce costs:
We are the only manufacturer which is ready to offer T1+T2 automated wiring technology. Customer response has been very enthusiastic about this technology.
Sources
2121
New FAE team in China to strengthen relationships with customers:
We are setting up a new FAE team in Guangzhou to offer enhanced services. We aim to gain larger order allocation from customers and add new customers.
Consolidate Kaiping capacity into Guangzhou to optimize costs:
The capacity consolidation not only reduces manufacturing costs but also increases our competitiveness for additional orders.
Cost down effort
Sources of
revenue growth
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Customer Win Strategy
Patented high-endproducts
Market leader in
PoE
Continued R&D for new
products
Quality. Price. Delivery. Services
Comprehen-sive FAE services
22
Deep engagement with existing customers
Penetrate into new customers/ new products
Strong alliance with local
agents
Focus on China opportunities
Quality. Price. Delivery. Services
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Strong End Customers
NotebookEnterprise Networking & Smart Home
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Lean Operation Structure
Wiring (T1+T2)
Assembly
• T1 wiring has been fully automated: 1 machine = 7-8 workers• T2 wiring is outsourced, with stringent control on manufacturing
process and product quality
11
22
Lab
or
Inte
nsiv
e
Current:
• Fully automated: Automated wiring of T1 plus T2
Future:
• Outsourced, with stringent control on manufacturing process
Current:
24
Automatic Tinning
Automatic Gluing
Automatic Printing
Automatic Pins Adj.
Automatic Check/Packing
Process is semi-automated as it requires a human operator to feed a product and remove the product after a process completed. Plan to further optimize the processes.
33 44 55 66 77
Lab
or
Inte
nsiv
e
• Outsourced, with stringent control on manufacturing process and product quality
• Fully automated
Future:
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Lean Operation has Achieved Initial Desired Results
Less direct labor and higher GM through increasing automation and supply chain integration
Core OPM has also been improving
13.8%14.2%
15.7%
14.0%
18.0%
400
600
OPM (%)Op profit (NT$ mn)
Core op profit Other op profit
Core OPM%
32.5%
34.9%31.6%
32.7%
34.9%
40.0%
800
1,000
GM %Direct Labor
Direct Labor Gross Margin%
Core GM%
25
11.0% 10.2%
-2.0%
2.0%
6.0%
10.0%
14.0%
-400
-200
0
200
400
2012 2013 2014 2015 1H16
854 637 488 455 325
20.6%
24.9%
31.3%32.5%
26.1%27.9%
0.0%
10.0%
20.0%
30.0%
0
200
400
600
800
2012 2013 2014 2015 1H16
Note: Core GM = GM excluding E-HENG TECH (燦元) Note: Core OPM = OPM excluding E-HENG TECH (燦元)
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Strong Cash Position
Free Cash Flow Improving Solid Net Cash Position
500
600
NT$ mn Cash flow from operations Capital expenditures
44%
60%
50%
60%
70%
1,000
1,200
%NT$ mn Net cash Net cash/Common equity
26
-200
-100
0
100
200
300
400
2012 2013 2014 2015 1H16
-7% -7%
17%
44%
-20%
-10%
0%
10%
20%
30%
40%
50%
-400
-200
0
200
400
600
800
2012 2013 2014 2015 1H16
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提供最佳網通元件模組化整合服務 讓客戶創造更精彩的網路世界
BOTHHAND
Our Goals
Positive · Persistence · Responsibility
Our Goals
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Five-year Goals (2016-2020)
Target to grow revenue to NT$4 bn by 2020
Aim to be the No. 1 supplier to top 3 China networking firms
Strive to achieve sustainable ROE at 20%
Maintain dividend payout at 80%+
28
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提供最佳網通元件模組化整合服務 讓客戶創造更精彩的網路世界
BOTHHAND
Financial Summary
Positive · Persistence · Responsibility
Financial Summary
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Five-Year Financial Highlights
23.7%20.6%
24.9%
31.3% 32.5%34.9%
7.4%10.9%
12.8%15.5%
Gross margin (%) Op margin (%)
$3.82
$2.57 $3.08
$4.71
$5.75
$2.48
Unadj. Basic EPS (NT$)
30
7.4%
1.3%3.0%
2011 2012 2013 2014 2015 1H16
2,580 2,569
2,259 2,547
2,672
1,185
2011 2012 2013 2014 2015 1H16
Revenue (NT$ mn)
192
129 155
237
295
145
2011 2012 2013 2014 2015 1H16
Net income (NT$ mn)
2011 2012 2013 2014 2015 1H16
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Five-Year Income Statement
NT$ million 2011 2012 2013 2014 2015 1H16YoY (%)
2011 2012 2013 2014 2015 1H16
Revenue 2,580 2,569 2,259 2,547 2,672 1,185 11.2 (0.4) (12.1) 12.7 4.9 (7.8)
Gross Profit 611 530 563 797 868 413 1.4 (13.2) 6.2 41.5 8.9 0.5
Operating Expenses 419 497 496 520 525 230 5.8 18.5 (0.2) 4.8 1.1 (7.0)
Operating Profit 192 33 67 277 343 183 (7.0) (82.6) 101.5 312.4 23.6 11.8
Non-Op Income/(Loss) 19 4 13 47 91 32
Income before Tax 211 37 80 324 433 215 (7.7) (82.3) 114.4 305.8 33.5 5.8
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Income before Tax 211 37 80 324 433 215 (7.7) (82.3) 114.4 305.8 33.5 5.8
Tax Expenses 56 43 26 107 101 58
Net Income to Parent 192 129 155 237 295 145 (5.3) (32.5) 19.8 53.0 24.5 (0.2)
EPS (NT$) 3.82 2.57 3.08 4.71 5.75 2.48
Key Financial Ratios (%)
Gross Margin 23.7 20.6 24.9 31.3 32.5 34.9
Operating Expense Ratio 16.2 19.3 22.0 20.4 19.7 19.4
Operating Margin 7.4 1.3 3.0 10.9 12.8 15.5
Effective Tax Rate 26.8 116.1 32.3 33.0 23.4 27.1
Net Margin 7.4 5.0 6.9 9.3 11.1 12.2
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Five-Year Balance Sheet
NT$ million 2011 2012 2013 2014 2015 1H16YoY (%)
2011 2012 2013 2014 2015 1H16
TOTAL ASSETS 2,664 2,317 2,592 2,819 3,010 2,872 15.4 (13.0) 11.9 8.7 6.8 0.3
Cash 339 339 377 289 443 377 (33.8) (0.1) 11.0 (23.2) 53.2 (60.5)
Marketable Securities 46 191 363 634 809 876 446.9 315.5 90.2 74.7 27.7 1,591.4
NR & AR 816 587 701 691 688 655 36.1 (28.1) 19.5 (1.5) (0.4) (8.7)
Inventories 373 305 283 369 356 324 37.6 (18.2) (7.3) 30.4 (3.4) (21.1)
Fixed Assets 857 725 687 613 512 481 19.3 (15.3) (5.3) (10.8) (16.4) (13.7)
TOTAL LIABILITIES 1,219 1,094 1,323 1,376 1,257 1,274 18.8 (10.2) 20.9 4.0 (8.6) (17.3)
Short-term Debt 397 399 702 642 313 234 57.6 0.5 76.0 (8.4) (51.3) (62.7)
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Short-term Debt 397 399 702 642 313 234 57.6 0.5 76.0 (8.4) (51.3) (62.7)
Curr. of Long-term Debt 223 194 13 51 0 0
NP & AP 426 366 364 422 404 332 24.8 (14.1) (0.4) 15.8 (4.1) (7.6)
Long-term Debt 0 14 111 0 219 100
TOTAL EQUITY 1,446 1,223 1,269 1,444 1,754 1,599 12.8 (15.4) 3.8 13.7 21.5 20.7
Common Equity 1,202 1,120 1,224 1,372 1,645 1,527 8.2 (6.8) 9.3 12.1 19.8 24.6
Non-controlling Interests 244 103 46 71 109 71 42.1 (57.7) (55.8) 56.0 53.0 (27.5)
Key Financial Ratios
A/R Turnover Days 100 100 104 100 94 103
Inventory Turnover Days 60 61 63 68 73 80
A/P Turnover Days 71 71 79 82 84 87
ROE (%) 16.6 11.1 13.2 18.3 19.6 18.2
ROA (%) 7.7 5.2 6.3 8.8 10.1 9.8
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Five-Year Cash Flow Statement
NT$ million 2011 2012 2013 2014 2015 1H16
Beginning Balance 513 339 339 377 289 443
Depreciation & Amortization 92 98 87 94 67 30
Cash from Operating Activities 31 261 24 465 516 223
Capital Expenditures (152) (53) (103) (89) (25) (13)
Cash from Investing Activities (262) (69) (153) (334) (198) (130)
Cash from Financing Activities 29 (146) 142 (259) (167) (137)
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Cash from Financing Activities 29 (146) 142 (259) (167) (137)
FX Impact 29 (46) 25 41 3 (22)
Change in Cash (174) (0) 37 (87) 154 (66)
Ending Balance 339 339 377 289 443 377
Free Cash Flow (121) 208 (79) 376 491 210
Note: Free cash flow = Cash from operating activities – Capital expenditures
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2011-2015 Dividend Payout
( NT$ million ) 20112011 20122012 20132013 20142014 20152015
Net income 192 129 155 237 295
Cash dividend (Earnings + Capital)
176 116 141 227 285
Dividend p/s (NT$) 3.5 2.3 2.8 4.5 4.8
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Cash yield (%) 9.8% 7.8% 4.9% 8.0% 8.8%
Payout ratio (%) 92% 90% 91% 96% 97%
Notes: 1. 2011 yield is based on Bothhand's closing share price on July 25, 2012; the day before ex-dividend day. 2. 2012 yield is based on Bothhand's closing share price on July 29, 2013; the day before ex-dividend day.3. 2013 yield is based on Bothhand's closing share price on July 30, 2014; the day before ex-dividend day.4. 2014 yield is based on Bothhand's closing share price on July 16, 2015; the day before ex-dividend day.5. 2015 yield is based on Bothhand's closing share price on June 30, 2016; the day before ex-dividend day.
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