analyst & investor presentation
TRANSCRIPT
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ANALYST & INVESTOR
PRESENTATION
Monday, 5 July 2021
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AGENDA
By Moving forward and thinking forward,Serial System helps its partners to be more competitive in the marketplace,
today and in the future
1Q2021 Performance Highlights & Stock Price Chart
Three Strategies for Recovery & Growth Post-COVID-19
Financial Highlights
Investment Holdings
Outlook
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1Q2021 PERFORMANCE HIGHLIGHTS
& STOCK PRICE CHART
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1Q2021 NPAT of US$2.7 million vs loss of US$6.5 million in 1Q2020 sharp reversal underpinned by
economic rebound in Asia (especially China) after COVID-related shutdowns and growth/recovery
strategies, including:
• Widening supplier and customer base for electronic components
• Resetting cost structure and streamlining internal efficiencies
• Growth of computer peripherals business in SE Asia (amid stay-home notices)
1Q2021 performance extends momentum of strategic shift and FY2020 performance (1Q2021 Revenue
increased 44% vs 1Q2020)
1Q2021 PERFORMANCE HIGHLIGHTS
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SERIAL SYSTEM STOCK PRICE CHART
FY2020
Results
COVID-19 outbreak
in China
1H2020
Results3Q2020 Performance,
Corporate & Business
Update
Share Purchases
by Derek Goh on:
11, 15, 16, 21, 22,
24, 28 June 2021
1Q2021
Performance
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One of the largest electronic component distributors in Asia; dealer for a variety of consumer
products. Serial System has also invested Healthcare, 3D Printing and other businesses.
SGX Stock Code: SGX:S69 Bloomberg SERL:SP
Total shares in Issue: 895,841,914
Treasury shares: 9,946,000 (1.1% of total shares)
Free float: 38.5%
Major shareholders
Derek Goh Bak Heng: 40.7%
Sam Goi Seng Hui/Tee Yih Jia: 16.5%
SERIAL SYSTEM AT A GLANCE
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Supporting a network of global brands, Serial System is a leading distributor of electronic components in Asia and a dealer
for a variety of consumer products. It is also a strategic investor in businesses in healthcare, managed print services and fast moving
consumer products.
EXTENSIVE NETWORK & DIVERSIFIED BUSINESS
Electronic ComponentsDistribution
Consumer ProductsDistribution
Managed PrintServices and 3D Printing
Hospitality and Healthcare Solutions
Medical DevicesAssemblyand Distribution
Fast Moving Consumer Products
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RESPONDING TO TWIN CHALLENGES –OUR STRATEGIC SHIFT
Faced two major challenges since end of FY2018 – cessation of relationship with a major supplier, Texas Instruments (“TI”) and COVID-19.
TI had accounted for over 50% of Serial System’s revenue before cessation.
COVID-19 forced all enterprises to re-think their value proposition and cost structures.
Pandemic came amid the ‘tech war’ which affected availability of semiconductors in China.
On 21 December 2020 we announced three strategies to respond to the challenges.
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THREE STRATEGIES FOR RECOVERY
GROWTH POST COVID-19
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Implications of ‘Tech War’ & Chip Shortage
• China continues to build up technology & semiconductor manufacturing capabilities
• Even as China promotes local foundries, its industries still need foreign-made semiconductors; hence, ‘tech war’
plays out to Serial System’s advantage in view of its track record
Expanded Product Portfolio
• Deepen penetration in 5G infrastructure, EVs and data centres
• Continue to expand product portfolio in these technologies by working closely with suppliers as well as
customers
New Supplier Relationships
• Signed on new distributorships directly or formed joint venture partnerships with top semiconductor
companies in the world
STRATEGY #1 - EXPAND PRODUCT PORTFOLIO & SUPPLIER RELATIONSHIPS
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Catalyst to Improve Internal Efficiencies
Changing workflow practices, reduction of travel-related expenses
• Implemented work-from-home measures and rotating shifts in offices
• Adopted teleconferencing, which significantly reduced travel and accommodation costs
Reduced office/warehouse footprint (-20%) and manpower (-30%)
Will build on early fruits of productivity gains to improve efficiencies even further
GPM improved in 1Q2021
STRATEGY #2 – RESPONSE TO COVID-19
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Increased activities in Malaysia during pandemic
• Business momentum improved due to new product launches from Intel, AMD and Gigabyte
• Benefited from work-from-home measures and Movement Control Order in Malaysia
Expanded Managed Print Services, foray into 3D-Printing
• Entered Thailand MPS market (in addition to Singapore and Indonesia)
• Signed up an Asia-wide franchise with Netherlands-based 3D-Printing leader, Ultimaker
STRATEGY #3 – EXPANSION OF COMPUTER PERIPHERALS & PRINT SERVICE BUSINESSES
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CONSUMER PRODUCTS DISTRIBUTION
• The Group’s 100%-owned subsidiary: Achieva Technology Sdn. Bhd.
• Major suppliers include AMD, Intel and Gigabyte.
• Achieva Technology works closely with partner brands to both fulfil their distribution needs and to create a one-stop solution for their customer needs in both end-user and enterprise markets.
• In the modern e-commerce market, Achieva Technology already maintains key channels on online platforms such as Qoo10 and Lazada.
Achieva Technology Group
• The Group’s 100%-owned subsidiary: Swift-Value Business Pte. Ltd.
• Major suppliers include Hewlett-Packard (HP), Epson and Canon. Also the authorized reseller of products from major brands such as Fuji Xerox, Samsung and Panasonic.
• Swift-Value is the largest HP printer supplies distributor, having captured over 45% of the Singapore market. They keep their top spot by maintaining close relationships with hundreds of customers, ranging from heartland operators to large retail superstores such as Popular.
• Providing fast and value-added service and having the ability to retain customer loyalties help Swift-Value offers an extensive and consistent network for their suppliers and partner brands.
Swift-Value Business Pte. Ltd.
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• Started in 2014, Singapore-based Print-IQ is 91.43% owned by Serial System
• Provides managed print services and maintains and distributes copiers and printers
• Premier partner for HP copiers
• Partner for top 3D printer brand, Ultimaker
CONSUMER PRODUCTS DISTRIBUTIONManaged Print Services
Under the managed print services business model, companies outsource their printing, scanning and copying functions, as well as the management of the equipment, to external service providers like Print-IQ and PT SMI. This reduces their operating costs and wastage.
• Set up in 2008, PT SMI is 20% owned by Serial System since November 2018
• Listed on Development Board of Indonesia Stock Exchange
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OTHER BUSINESSESPart of Group’s diversification into investment holding of high-margin companies
• Core businesses: Hospitality and Healthcare solutions
• Hospitality solutions: Built based on a core venue management application suite known asVenue360.
• Leading edge modules within Venue360: Electronic meal ordering system (eMOS), IntelligenceRoom Infotainment Solution, Digital Media Content Management System, and Incident Trackingand Reporting System.
• Clients: Khoo Teck Puat Hospital, Ng Teng Fong General Hospital, Jurong Community Hospital,Changi General Hospital, Institute of Mental Health, St Andrew’s Hospital, Gleneagles Hospital,Mount Elizabeth Orchard, Parkway East Hospital, Parkway Mount Elizabeth Novena, YishunCommunity Hospital, Sengkang Hospital, Sengkang Community Hospital, Alexandra IntegratedHealth, Bright Vision Community Hospital, Ang Mo Kio Thye Hwa Kwan Hospital and the newWoodlands Health Campus.
Serial MultiVision Pte. Ltd. (100%-stake)
• Assembly and distribution of medical devices
• Offers full range of standard and customised perfusion tubingpacks marketed over the Asia-Pacific region:
• Customized Heart Lung Pack• Blood Cardioplegia Set• Angio Pack• Sterile Procedural Pack • SurgiAid ® Collagen Wound Dressing
• Company is ISO 13485-certified and its perfusion products bear the coveted CE certification mark.
Contract Sterilization Services Pte Ltd (100%-stake)
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FINANCIAL HIGHLIGHTS
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1Q2021 FINANCIAL HIGHLIGHTSSnapshot of 1Q2021 Performance
* ppt – Percentage Points ^ NM- Not meaningful
US$’000 1Q2021 1Q2020 Change (%)
Sales 223,332 154,692 44
Gross Profit 17,295 9,159 89
Gross Profit Margin (%) 7.7 5.9 1.8 ppt*
Net Profit After Tax(Attributable to shareholders)
2,699 (6,460) NM^
EPS - fully diluted (US cents)(1) 0.30 (0.72) NM^
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FY2020 FINANCIAL HIGHLIGHTSSnapshot of FY2020 Performance
US$’000 FY2020 FY2019 Change (%)
Sales 731,400 791,637 (8)
Gross Profit 45,896 54,191 (15)
Gross Profit Margin (%) 6.3 6.8 (0.5) ppt
Net Profit After Tax(Attributable to Shareholders)
261 8,032 (97)
EPS - fully diluted (US cents)(1) 0.03 0.90 (97)
NAV per share (US cents)(2) 31/12/2020: 15.81 31/12/2019: 15.55
(1) Earnings per ordinary share on a fully diluted basis are computed by dividing net profit attributable to equity holders of the Company by the weighted average number of shares in issue during the period of 895,841,914 after adjusting assumed conversion of all potential dilutive ordinary shares.
(2) Net assets value per ordinary share as at 31 December 2020 and 31 December 2019 is calculated based on the net assets value attributable to the equity holders of the Company as at the end of the respective period and the respective aggregate number of ordinary shares of 895,841,914.
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Revenue of US$731.4M in FY2020, a decrease of 8% from US$791.6M in FY2019• Revenue for 2H2020 was 33% higher than 1H2020• Improvement in 2H2020 was due to recovery in business activities, particularly in China where economy has rebounded.• Turnover for electronic components distribution business is recovering from the termination of supplier relationship with
Texas Instruments (“TI”).• Excluding impact due to TI termination, turnover for the segment increased by 2%, despite the impact from COVID-19. • Consumer products distribution business sales increased 44% amid higher demand for tele-conferencing and computer
accessories due to movement control order imposed by the Malaysian government.• Turnover for other businesses more than doubled to US$9.6 million (FY2019: US$4.7 million), mainly due to contribution
from two Singapore subsidiaries in the distribution and trading of global fast-moving consumer goods.
Gross profit margin declined to 6.3% in FY2020• Mainly due to lower margins achieved by all business divisions as a result of keen market competition in a challenging
environment as a result of the COVID-19 pandemic.
Net profit of US$0.3M in FY2020 compared to NPAT of US$8.0M in FY2019
• Net profit of US$4.8M in 2H2020 reversed net loss of US$4.5 million in 1H2020.
FY2020 HIGHLIGHTS
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REVENUE TREND
-
200
400
600
800
1,000
1,200
1,400
1,600
44 92
186 184 183 228
315 354
382
545
616 658
817
1,036
1,222
1,403
1,492 1,527
792 731
431.3
360.4 314.5 417.1
Revenue (US$' million)
2%
-48%
-8%
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PROFITABILITY
33.4
50.7
57.5
62.6
73.5
90.4 91.5 97.4 105.1
118.6
54.2 45.9
30.1 24.1
19.3
26.6
8.7%
9.3% 9.3% 9.5%
9.0%8.7%
7.5%6.9% 7.0%
7.8%
6.8%6.3%
7.0%6.7%
6.1%
6.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1H19 2H19 1H20 2H20
Gross Profit & Gross Profit Margin(US$' million)
GP GP%
17%
1%
6% -54%
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PROFITABILITY
5.1
12.0
10.1
7.9
11.2 16.1
11.0
4.6
9.6
17.7
8.0
0.3
5.4
2.6
(4.5)
4.8
1.3%
2.2%
1.6%
1.2%1.4%
1.6%
0.9%
0.3%
0.6%
1.2%1.0%
0.0%
1.3%
0.7%
-1.4%
1.1%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1H19 2H19 1H20 2H20
Net Profit & Net Profit Margin(US$' million)
Net Profit Net Profit Margin (%)
-21%
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PROFITABILITY
8.8
20.2 19.9 18.9
22.0
30.8
26.0 24.4
27.4
44.8
23.7
13.214.0
9.6
0.5
12.7
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1H19 2H19 1H20 2H20
EBITDA (US$' million)
-5%
17%
40%
-15%
-6%
12%
64%
-47%
-44%
-2%
130% -96%
32%
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FINANCIAL POSITION
173.8
218.3 211.5
277.0
347.8 382.6
430.6
468.6 458.5
332.2 340.8
120.7
147.5 147.0
218.7
295.6
324.1
372.0
397.5
371.5
230.7 234.0
1.4 1.5
1.4
1.3
1.2 1.2 1.2
1.2
1.2
1.4 1.5
-
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
-
100.0
200.0
300.0
400.0
500.0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Maintaining Healthy Current Ratio
Current Assets Current liabilities Current Ratio
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FINANCIAL POSITION
86.5
98.7 104.5
110.0
122.2 119.4
124.8
145.0 144.5 147.2
151.7
37.6
71.2
56.3
97.9
120.2
138.0 139.3
166.5
155.9
82.3
72.6
43%
72%
54%
89%
98%
116%112% 115%
108%
56%
48%
0%
20%
40%
60%
80%
100%
120%
140%
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Net Gearing Ratio
Shareholders' Equity Net Borrowings Net Gearing Ratio
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FINANCIAL POSITION
38
55 61
62
67
53
49
51 54
87
72
31 36
33
32 33
33 33 35
29
40
37
44 51 41
30 32
38 40 42
41
66
61 51
70
69
60
66 58 56
58
66
113
96
25
35
45
55
65
75
85
95
105
115
125
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Cash Conversion Cycle (days)
Trade Receivable Turnover (days) Trade Payable Turnover (days) Inventory Turnover (days) Cash Conversion Cycle (days)
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- 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
0.33
0.13
0.28
0.30
0.22
0.24
0.30
0.35
0.18
0.29
0.40
0.22
0.16
0.25
1.00
0.25
0.38
0.67
0.33
0.30
0.30
0.75
0.50
0.17
0.46
0.46
0.13
0.11
Interim Special Final
DIVIDEND YIELD
6.1%
8.5%
8.9%
7.9%
5.0%
6.3%
8.0%
6.3%
2.4%
4.6%
21.9%
4.3%
1.3%
Singapore
Cents
Total Dividend Payout
(In Cent (SGD))
(Interim & Final) each year
Dividend Yield is calculated based on dividend per share over the Company’s share price as at the end of each respective year. For FY2020, the Company’s share price is SGD 8.3 cents.
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INVESTMENT HOLDINGS
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SERIAL SYSTEM GROUP STRUCTURE
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OUTLOOK
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INDUSTRY OUTLOOK
• Post-COVID recovery of economic and manufacturing activity in China
expected to continue.
• China accelerating its semiconductor production, deployment of 5G,
EVs and data centres.
• Serial System to benefit from semiconductor shortages, product
portfolio expansion and new customers & suppliers.
• Continued demand in Malaysia for computers, printers and accessories
due to work-from-home measures in compliance with the Movement
Control Order.
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GROUP OUTLOOK
• In view of business volatility and ongoing supply chain disruptions, the
Group remains cautiously optimistic.
• Barring unforeseen circumstances, revenue for the coming months is
expected to improve
• The Group will continue its growth strategies outlined in its 21
December 2020 announcement, on a much leaner operating cost
structure.
• Expects its business recovery strategies to contribute to higher revenue
and overall better financial performance in FY2021 compared to
FY2020.
• Improved cost structure will allow Group to capture economies of scale
as revenue improves.
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The presentation herein may contain forward-looking statements by the management of Serial System Ltd (“Serial System”) that pertain to expectations for financial performance of future periods versus past periods.
Forward–looking statements involve certain risks and uncertainties because they relate to future events. Actual results may vary materially from those targeted, expected or projected due to several factors. Such factors are, among others, general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures as well as changes in tax regimes and regulatory developments. Such statements are not and should not be construed as management’s representation on the future performance of Serial System. Therefore, the actual performance of Serial System may differ significantly from expressions provided herein.
This presentation does not constitute an invitation or an offer to sell, or solicitation of an offer to buy any securities in connection with, any contract or commitment whatsoever.
This presentation has been prepared exclusively for the parties presently being invited for the purposes of discussion. Information contained in this presentation does not constitute a prospectus or offering circular in whole or in part.
Thank YouMedia and Investor Contact Information:
WeR1 Consultants Pte Ltd
1 Raffles Place#02-01 One Raffles Place MallSuite 332Singapore 048616Tel: (65) 6721 7161
Isaac Tang, [email protected]