ECS Corporate Presentation · 2014. 11. 6. · •ECS ICT Berhad was awarded MSC status by MDeC...
Transcript of ECS Corporate Presentation · 2014. 11. 6. · •ECS ICT Berhad was awarded MSC status by MDeC...
ECS Corporate Presentation 3Q14 Financial Results Update
6 November 2014
Preferred Supplier of Choice for ICT Products & Value-added Services
CONTENTS
3Q14 Operations Highlights
3Q14 Financial Results
Growth Strategies
Investment Merits
Appendix
2
3Q14 OPERATIONS HIGHLIGHTS
3
Stronger consumer spending driving ICT Distribution
segment…gross margins impacted by slowdown in
Enterprise Systems segment
3Q14 OPERATIONS HIGHLIGHTS
• ICT Distribution continues to be driven by higher consumer
spending
– Improved sales on PCs and notebooks
– Smartphone sales continue to be robust
• Enterprise Systems sees slower sales in 3Q14
– Slower sales of servers, storage and software products
– Margins impacted due to product mix
4
3Q14 FINANCIAL RESULTS
5
Double digit growth in top and bottomline in 3Q14…
GP margin dip from product mix mitigated by lower
distribution expenses and gain from other income
Revenue & Profit Analysis 6
+13.9%
+27.0%
+37.9%
+18.1% +11.0%
+14.1%
7 3Q14 Segmental Revenue
+30.3%
YoY -22.7%
YoY
+384.2%
YoY
(RM’mil) Revenue Gross Profit
3Q13 3Q14 3Q13 3Q14
ICT Distribution 213.7 278.5 7.4 9.5
Enterprise Systems 127.4 98.5 11.0 7.1
ICT Services 3.1 15.0 1.1 2.2
Total 344.2 392.0 19.5 18.8
3Q14 Revenue: RM392.0 mil
+27.2%
YoY
-35.0%
YoY
+106.8%
YoY
3Q14 Gross Profit: RM18.8 mil
ICT Distribution Enterprise Systems ICT Services
ICT Services
Enterprise Systems
ICT Distribution
3Q14 Gross Profit Margin Breakdown
ICT Distribution segment recording fifth consecutive
quarters of growth year-on-year… Enterprise Systems note
decline on slower implementations of projects
8 9m14 Segmental Revenue
+29.6%
YoY -9.4%
YoY
+269.8%
YoY
(RM’mil) Revenue Gross Profit
9m13 9m14 9m13 9m14
ICT Distribution 611.2 792.0 23.8 31.4
Enterprise Systems 344.0 311.5 30.1 23.7
ICT Services 9.8 36.1 3.0 5.7
Total 965.0 1,139.6 56.9 60.8
9m14 Revenue: RM1.1 bil
+32.2%YoY -21.3%
YoY
+89.2%
YoY
9m14 Gross Profit: RM60.8 mil
ICT Distribution Enterprise Systems ICT Services
ICT Services
Enterprise Systems
ICT Distribution
9m14 Gross Profit Margin Breakdown
9m14 revenue boosted by higher sales of PCs, notebooks
and smartphones… mitigating slower sales of Enterprise
Systems products
9 Operations Statistics
Cash conversion cycle back to normal after 2Q14…
10 Revenue Trend
Group topline set to reach new heights with expanded smartphone distribution channel…
+13.9% yoy
+29.8% yoy
11 Profit Trend
FY13 ROE: 13.7% (FY12: 16.6%)
FY13 ROA: 7.9% (FY12: 9.1%)
+37.9% yoy
+36.7% yoy
4Q seasonally the strongest quarter for Group… FY2014
prospects also buoyed by smartphone sales which are
expected to double that of tablets
12
Balance sheet continues to strengthen…3Q14 cash per share at RM0.40 sen
Balance Sheet
(RM’mil) As at 30.09.14 As at 31.12.13 Comments
Plant & Equipment 3.4 4.0 -
Other Non-Current Assets 2.2 2.1 -
Current Assets 383.9 342.6 Increase mainly from receivables and
inventories with higher revenue
Current Liabilities 169.9 144.2 -
Non-Current Liabilities 0.0 0.0 -
Total Shareholders Equity 219.6 204.6 Increased retained earnings
Total Borrowings - - No borrowings
Cash & Cash Equivalents 72.7 83.7 Cash per share of 0.40 sen as at 3Q14
Gearing (net of cash) (x) Net cash Net cash Net cash position allows the Group to
undertake future expansion plans
Net Assets/share (RM)* 1.22 1.14 -
*Based on total number of shares of 180.0 mil shares of RM0.50 par
#Adjusted for 1-for-2 bonus issue *To be paid on 11 Dec 2014
Dividend History 13
Consistently distributing dividends higher than 30%
dividend policy… interim dividend of 3.0 sen to be paid on
11 December 2014
GROWTH STRATEGIES
14
15
Impending GST and Budget 2015 announcement to spur ICT industry’s growth…
Sector Opportunities
• ICT spending anticipated to grow 13% by year-end
(Source: Pikom– Sept 2014)
Growth pace revised upwards from 10-12% as reported earlier this year
ICT sales improving as consumers prepare for the upcoming GST implementation
• Emerging smartphone brands benefitting from last-mile accessibility to end-
users (Source: IDC)
Lenovo remains #2 player in terms of smartphone sales in 2Q14 (versus #4 in 4Q13);
ahead of Huawei, Sony and Microsoft
ASUS’ impressive smartphone sales elevates it to #7 in 2Q14 from #16 in 1Q14
• Budget 2015 – Tech Assistance for GST and Increasing High Speed Broadband
Capacity to spur ICT industry (Source: Various media)
Accelerated Capital Allowance to aid in the purchase of ICT equipment and software
RM2.7 billion allocated to boost HSSB is expected to increase the need for more data
centres
16 Growth Strategies
• To continue growing ICT Distribution portfolio with emerging and established brands
– Recently appointed by BenQ to distribute its new range of smartphones (F5 & T3) to the Malaysian market
– Currently in talks with other smartphone brands to further expand smartphone portfolio
• To enhance Enterprise Systems segment
– Recently began providing SoftwareONE with the full suite of IBM software for the last-mile delivery to enterprise market
– Working with System Integrators and vendors to enhance segment further
• To identify strategic opportunities to grow ICT Services segment
– On the lookout for opportunities to grow ICT Services segment; organically or inorganically
Continue to strengthen ICT Distribution and Enterprise
Systems segments…on the lookout for growth
opportunities in ICT Services
INVESTMENT MERITS
17
18 Valuation
Single digit valuation with high dividend yield…
Share Price (@ 31 Oct 2014) RM1.39
Market Cap (@ 31 Oct 2014) RM250.2 mil
Trailing PE Ratio 8.5x
Trailing PE Ratio (net of cash) 1 6.1x
Trailing EV/EBITDA 4.5x
Price to book ratio 2 1.1x
FY13 Net Dividend Yield 3 4.0%
1 Net of cash per share of RM0.40 per share (as at 30 Sep 2014)
2 Based on Net Assets per share of RM1.22 (as at 30 Sep 2014)
3 Based on total dividend of 5.5 sen per share in respect of FY13, translating into RM9.9 million dividend
payout or 36.8% of net profit (above the dividend policy of distributing minimum 30% of net profit)
19
Market leadership, growth catalysts and dividend policy underpin ECS’ investment case...
Investment Merits
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
THANK YOU Bursa Code: 5162
Bloomberg: ECS:MK www.ecsm.com.my
Appendix
21
CORPORATE PROFILE
22
23 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, personal computers, smartphones, tablets, 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, Lenovo, Asustek, Dell, Oracle, Cisco, Microsoft, Apple, Samsung and IBM.
• ECS has a nationwide distribution network of more than 4,000 resellers consisting of retailers, system integrators and corporate dealers.
24 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
25 Milestones
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 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, Samsung smartphones (for enterprise systems segment), Microsoft Surface RT and Surface Pro
2014 • Appointed distributor for ASUS smartphones, Zebra printing solutions, Seagate storage solutions and BenQ smartphones.
26 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
27 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
28 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
Servers
Network Systems
Data Centers
Enterprise Software
Cloud Services
Volume Products
Notebooks
Personal Computers
Smartphones
Tablets
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
29 Product Portfolio
Principals are the “who’s who” of brands in the ICT industry...
30 Products and Services
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
ICT Services
• More than 40 engineering
personnel providing support for
ICT products
• Over 200 certifications from 15
principals
31 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 RM5 mil to RM6 mil with 500-600 invoices/deliveries
32 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 FY2013
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
Time-tested Distribution Infrastructure
• Extensive network of more than 4,000
resellers
• Timely delivery supported by an
integrated ERP system
Strong Technical Support Team
• Team of 40 certified service personnel
with certifications from leading ICT
principals
Established Name in ICT Industry
• In business for 30 years since the
introduction of personal computers
1 2
3 4
5 6
33 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
of 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 of ICT products, and sales staff management
• 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, 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
34 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%
35 Future Growth Strategies
The four strategic thrusts for the next 3 years…
Mobility Cloud
Computing E-Commerce
ICT Services
Making good progress in smartphone distribution
• Group currently distributing emerging brands, namely Lenovo & ASUS
• To add more brands to strengthen portfolio
Expanding beyond mobility devices into other supporting components
• To expand into mobile applications, mobile security and Enterprise mobility solutions
36 Future Growth - Mobility
Setting a strong foothold in mobility products market… confident of capitalizing on rising smartphone demand
Source: On Device Research
Malaysia Mobile Phone Penetration
37 Future Growth – Cloud Computing
Investing in the Cloud Computing evolution… corporations moving from evaluation to implementation
Setting up an ECS Cloud Computing platform
• To be an aggregator and distributor of cloud computing services and products
• For our resellers to provide solutions to their customers
Source: IDC
38 Future Growth – E-Commerce
Harnessing the power of e-commerce for greater efficiency to enhance user experience…
To enhance existing B2B services
• To optimize existing platform to be low cost, efficient, user-friendly and integrated with ERP system for real-time accuracy
• Retailers and resellers will be able to purchase products and make payments seamlessly without human intervention
• Target to launch enhanced platform in 2H14
Looking to set up B2C services
• To build a B2C platform to enable selected retailers to sell ECS’ products online directly to their customers (consumers)
39 Future Growth – ICT Services
ICT Services potentially next growth market…
ICT Services spending to reach USD 2.6 billion in 2014, from
USD 2.3 billion in 2013 (Source: IDC)
• Intend to move beyond product support services into outsourcing and project oriented services
• Currently looking for M&A opportunities within the ICT Services sector
Source: IDC (July 2014)
40 Industry Statistics
Industry Statistics show growing market potential…
Source: IDC report published in July 2014 Data : Total Hardware and Software excluding Services