Corporate Presentation Pilot Investor Deck_E_2020022… · • Upon receipt of sales orders, the Group commences manufacturing of the products under the customers’own ... 2000 Commenced

SMC Electric Limited蜆壳電業有限公司

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 2381.HK

February 2020

Corporate Presentation

SMC Electric Limited

Offering Summary

Corporate Overview

Industry Overview

1 Financial Highlights

Future Plan2

3

4

5

6

Agenda

Corporate Presentation2


Disclaimer

Corporate Presentation3

(a) Taking no account of any Shares which may be taken up or acquired under the Share Offer and any options which may be granted under the Share Option Scheme, our Directors are

not aware of any person (not being a Director or chief executive of our Company) who immediately following the completion of the Capitalisation Issue and the Share Offer will have an

interest or a short position in the Shares and underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the Securities and

Futures (“SFO”) (Chapter 571 of the laws of Hong Kong) or who will, either directly or indirectly, be interested in 10% or more of the nominal value of any class of shares or share capital

carrying rights to vote in all circumstances at general meetings of any other member of our Group;

(b) none of our Directors or the chief executives of our Company has any interest or short position in any of the shares, underlying shares or debentures of our Company or any

associated corporations within the meaning of Part XV of the SFO, which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the

SFO (including interests and short positions which any of them is deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be

entered in the register referred to therein or which will be required to be notified to our Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by

Directors of Listed Issuers, in each case once the Shares are listed;

(c) none of our Directors has been interested in the promotion of, or has any direct or indirect interest in any assets which have been, within the two years immediately preceding the date

of this prospectus, acquired or disposed of by or leased to our Company or any of the subsidiaries of our Company, or are proposed to be acquired or disposed of by or leased to our

Company or any other member of our Group nor will any Director apply for the Offer Shares either in his own name or in the name of a nominee;

(d) none of our Directors is materially interested in any contract or arrangement subsisting at the date of these slides which is significant in relation to business of our Group;

(e) save in connection with the Underwriting Agreements, none of the parties:

(i) is interested legally or beneficially in any securities of any member of our Group; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group; and

(f) none of our Directors, their respective close associates or Shareholders of our Company is interested in more than 5% of the issued share capital of our Company has any interests in

the five largest suppliers and/or customers.

Offering Summary01



Offering Details

Offering Summary5

Listed OnMain Board of The Stock Exchange of Hong Kong Limited

Stock Code2381.HK

Offer Structure

- No. of Offer Shares Offering 375,000,000 Shares

- No. of Public Offer Shares187,500,000 Shares (subject to reallocation)

- No. of Placing Shares187,500,000 Shares (subject to reallocation)

(comprising 187,500,000 Sale Shares)

Offer Price Per ShareHK$ 0.335 to HK$ 0.380

Board Lot Size6,000 Shares

Nominal ValueHK$ 0.01 each

Sole SponsorRed Sun Capital Limited

Joint Bookrunners Futu Securities International (Hong Kong) Limited, CMBC Securities Company Limited, Essence International Securities (Hong Kong) Limited, First Shanghai Securities Limited, Guosen Securities (HK) Capital Company Limited, Guotai JunanInternational Limited, Red Sun Capital Limited and Shanxi Securities International Limited

Public Offer 9:00 a.m. Saturday, 29 February 2020 to 12:00 noon Friday, 6 March 2020

Announcement of Allotment ResultsMonday, 16 March 2020

Listing DateTuesday, 17 March 2020

Issuer SMC Electric Limited

Corporate Overview


02


About SMC Electric

Corporate Overview

▪ SMC Electric engages in the:

(i) manufacturing and selling of rechargeable electric tools ; and

(ii) sourcing and selling of electric fans.

▪ The Group is headquartered in Hong Kong with its manufacturing operations in the PRC.

▪ SMC Electric sells a range of products including fans, work lights, vacuum cleaners and

other electric tools.

7


Business Model

Corporate Overview

Manufacturing Operations Sourcing and Selling of Electric Fans

• The Group develops, manufactures and it sells rechargeable

electric tools according to the requirements of the customers

such as the requirements of fulfilling particular quality

standards or restrictions on hazardous materials.

• The Group then develops custom-made prototypes for the

customers’ selection.

• The customers place orders after they decide on the design

and specifications of the products.

• Upon receipt of sales orders, the Group commences

manufacturing of the products under the customers’ own

brands.

• Electric fans are sold under the Group’s own brand, namely,

‘‘SMC’’ to the Asian and African markets and under an

Australian customer’s own brand to the Australian market.

• The Group outsources to suppliers in the PRC.

• For electric fans sold under the ‘‘SMC’’ brand, the customers would

provide the Group with an indicative price range of fans they

would be willing to purchase

• The Group would offer models that include different functionalities

for the electric fans whilst maintaining a certain level of profit

margin or specific models of electric fans they want to order.

• Once customers confirm their orders for the electric fans,

production is outsourced to the Group’s suppliers.

8


Corporate Milestones

Corporate Overview

Commenced development,

manufacturing and marketing

of electric fans in Hong Kong

1950’s 1987

Established the first co-operative joint venture

Sien Hua for electric fan production in the PRC

1995

Established 佛山市順徳區蜆華多媒體製品有限公司 (Shunde SMC

Multi-Media Products Company

Limited*)

2000

Commenced production of electric tools

Commenced the business

relationship with the U.S.

Customer, which is a U.S.

based customer that the

Group produces electric tools

for, including cordless fans,

work lights and vacuum

cleaners

2003 2008

Commenced the business

relationship with an Australian

customer

Established 廣東蜆壳家電有限公司 (SMC

Electric (China) Limited*)

2017

9

*For identification purpose only


Shareholding Structure after Completion of the Capitalisation Issue and Share Offer

10

Corporate Overview

Note: The remaining 71.08% equity interest in Sien Hua is held by 佛山順德旭華電器實業有限公司(Foshan Shunde District Xuhua Electric Company Limited) , an Independent Third Party.

75%

80.4%

100%

100%

100%

100%

25%

100% 100%100%

28.92%

Mr. Kwok Kee Billy Yung

Red Dynasty Investment Limited

(BVI)

Shell Electric Holdings Limited

(Bermuda)


(Cayman Islands)

SMC Electric Holdings Limited

(BVI)

Public

SMC Electric (HK) Limited

(HK)

廣東蜆壳家電有限公司(SMC Electric (China) Limited)

(PRC)

Shell Electric Mfg (China)

Company Limited

(BVI)

廣東蜆華電器製品有限公司(Guangdong Sien Hua Electrical Appliance Manufacturing Company Limited∗)𝑵𝒐𝒕𝒆

(PRC)

Quanta Global Limited

(BVI)Speed Power Limited

(HK)

*For identification purpose only

Industry Overview03



Industry Overview12

Market Overview

Retail sales value of the electric fans industry

in the United States, Australia and Middle-East

Retail sales value of

electric fans

2013 2014 2015 2016 2017 2018 CAGR

13-18

United States

(US$ million)

2,194.4 2,284.4 2,361.1 2,416.1 2,491.1 2,611.5 3.5%

Australia

(AUD million)

270.3 276.6 285.7 293.8 299.3 299.4 2.1%

Middle-East

(AED million)

444.1 446.6 445.0 453.4 458.2 471.1 1.2%

The Global Electric Appliances & Tools Industry

Grown steadily due to the increasing demand brought by the rising

urbanised lifestyle worldwide.

Source: Ipsos research and analysis

Revenue of the Electric Fans and Electric Vacuum

Cleaners Manufacturing Industry in China

31.9

34.636.3

39.2

42.744.6

21.7

25.227.0

32.8

41.3

47.0

0

5

10

15

20

25

30

35

40

45

50

2013 2014 2015 2016 2017 2018

RM

B B

illio

n

Electric fans Vacuum cleaners


Industry Overview13

Market Overview

In FY2018, the Group recorded a revenue

of

❑ Approximately HKD128.048 million in

the fans manufacturing industry


the vacuum cleaner manufacturing

industry


the portable lights manufacturing

industry

❑ Well-established relationship between

existing manufacturers and their

customers

❑ Large initial capital investment is

required to set up a manufacturing

service i.e. different production

methods, manufacturing techniques

and quality checking methods that

require large investment commitment

Made In China 2025

published by the PRC government

❑ A series of policies and initiatives, such as

VAT reduction as well as the

establishment of manufacturing innovation

center, have been implemented to

modernize China’s manufacturing

industry.

Reduce the overall manufacturing

costs and improve overall product

quality of BNR.

The belt and road initiative (BNR)

❑ Domestic suppliers can advertise their

home appliances in the foreign markets,

and improve their brand awareness

among the overseas consumers

❑ The trade cooperation between China and

other countries along the routes of BNR

become closer

Electric appliances suppliers in China

might obtain the opportunity that

exports their products to wider areas at

lower tariffs.

Opportunities Entry Barriers of

Tools Manufacturing Industry

in China

Competitive Landscape

of the Electric Appliances and Tools

Manufacturing Industry in China

Entry Barriers Of

Tools Exporting Industry

In China

❑ A time-lag between when the

order is placed and when the

customer settles the outstanding

payment

❑ The exporting industry of electric

appliances and tools is highly

fragmented, with fierce competition

The Group accounted for

approximately 0.5% , 0.3% and 0.2%

of total market share in the fans,

vacuum cleaners and portable light

exporting industries, respectively.

Competitive Landscape

of The Electric Appliances And Tools

Exporting Industry In China


Industry Overview14

Market Overview

2,638.8 2,681.2 2,710.3

2,920.6

3,164.7

3,402.7

0.0

1,000.0

2,000.0

3,000.0

4,000.0

2013 2014 2015 2016 2017 2018

US

$ M

illio

n

Total export value of electric fans

(2013 – 2018)



Industry Overview15

Market Overview

1,057.0 1,081.2

1,219.6 1,240.2

1,358.31,429.2

599.1567.2

603.1

697.6 673.4

757.8

1,294.2

1,511.8

1,671.91,621.2

1,896.6

2,281.4

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

2013 2014 2015 2016 2017 2018

US

D M

illio

n (

$)

Electric fans Electric Portable Lights Electric Vacuum Cleaners

The United States import value of electric fans, electric portable lights

and electric vacuum cleaners from China (2013 – 2018)

CAGR

13-18

Electric Fans 6.2%

Electric Portable Lights 4.8%

Electric Vacuum Cleaners* 12.0%

Over 2013 to 2018, the U.S demand for electric fans, electric portable lights and electric vacuum cleaners from China was stable. Notably,

following the upsurge of robotic vacuum cleaners, the import value of electric vacuum cleaners from China has grown significantly.


*Note: Under ideal situation


Industry Overview16

Market Overview

1,294.2

1,511.81,671.9 1,621.2

1,896.6

2,281.4

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

2013 2014 2015 2016 2017 2018

US

D M

ILL

ION

($

)

Under ideal situation Under trade war situation

The United States import value of electric vacuum cleaners from

China from 2013 to 2018

Notes:

Under trade war situation, a 10% tariff was imposed on vacuum cleaners imported from China in September 2018.


CAGR

13-18

Under ideal situation 12.0%

Under trade war situation 12.0%

Financial Highlights04




(HK$’000)

Revenue Analysis

119,293 118,460 128,04892,986

117,942

49,294 64,10275,411

59,510

63,503

43,859

59,718

54,333

42,809

43,1894,664

8,7028,264

5,956

4,074

0

50,000

100,000

150,000

200,000

250,000

FY2016 FY2017 FY2018 9M2018(unaudited)

9M2019

Fans Vacuum cleaners Work lights Others

Revenue contributing application for FY2016 to FY2018 and 9M2018 to 9M2019

Notes:

1. Fans comprise electric fans and cordless fans.

2. Others include hearing aids devices.

Year ended 31 December 9 months ended 30 September

228,708

201,261

266,056250,982

217,110

Revenue by Products Type Revenue by Business Model

97,817

140,341165,447

122,517150,836

119,293

110,641

100,609

78,744

77,872

0

50,000

100,000

150,000

200,000

250,000


9M2019

Manufacturing operations Sourcing and selling of electric fans

Year ended 31 December 9 months ended 30 September

228,708

201,261

266,056250,982

217,110

(HK$’000)


23,91731,206

34,628 31,027

42,066

1

11.0%

12.4%13.0%

15.4%

18.4%

0

15,000

30,000

45,000


9M2019

Net Profit Net Profit Margin (%)


Cost and Profit Analysis(HK$‘000)

Gross Profit and Gross Profit Margin

60,49771,055

80,739

59,34971,826

27.9%28.3%

30.3% 29.5%

31.4%

0

20,000

40,000

60,000

80,000


9M2019

Gross Profit Gross Profit Margin (%)

(HK$‘000)

Year ended 31 December

Net Profit and Net Profit Margin

Comparison of FY2016 to FY2018 and 9M2018 to 9M2019

Year ended 31 December Nine months ended 30 September

Nine months ended 30 September

75,15096,011

108,56082,276

95,916

72,723

73,89964,120

50,327

49,830

8,740

10,017 12,637

9,310

11,136

0

50,000

100,000

150,000

200,000


9M2019

Raw materials Finished goods Other direct costs

Cost of revenue primarily comprise:

(i) raw materials, which mainly represent plastics, electric components, metal,

packaging materials, switch, motor, copper wire, and other materials;

(ii) finished goods, which are mainly electric fans; and

(iii) other direct costs, which represent labour costs, depreciation expenses,

water and electricity and miscellaneous direct costs.

Year ended 31 December Nine months ended 30 September

156,882 141,912

185,317 179,927

156,613

Cost of Revenue

5.6%

46.4%

48.0%

5.5%

41.1%

53.4%

6.8%

34.6%

58.6%

6.5%

35.5%

58.0%

7.1%

31.8%

61.1%

(HK$‘000)

The profit of the Group for the year of 2019 profit estimate is not less than HK$44.5 million.



Key Financial Ratios

As at/ For the year ended 31 December As at/ For the nine

months ended

30 September 2019FY2016 FY2017 FY2018

Current Ratio1 (times) 2.0 2.4 2.9 2.7

Quick Ratio2 (times) 1.7 2.2 2.7 2.6

Gearing ratio3 (%) 35.6 25.9 9.4 12.7

Return on total assets4 (%) 19.3 19.5 16.9 N/A

Return on equity5 (%) 38.4 33.0 25.7 N/A

Net debt to equity ratio6 (%) 28.1 22.6 6.0 6.8

Interest coverage7 (times) 55.9 98.2 63.8 110.5

Comparison of FY2016 to FY2018 and nine months ended 30 September 2019

Notes:

1. The current ratio is calculated by dividing current assets with current liabilities as at the end of the respective year/period.

2. Quick ratio is calculated by dividing total current assets net of inventory with current liabilities as the end of the respective year/period.

3. The gearing ratio is calculated by dividing interest-bearing liabilities with total equity as at the end of respective year/period multiplied by 100%.

4. Return on total assets is calculated by the net profit for attributable to Shareholders divided by the total assets as at the end of the respective year/period multiplied by 100%.

5. Return on equity equals the net profit attributable to Shareholders divided by the total equity as at the end of the respective year/period multiplied by 100%.

6. Net debt to equity ratio is calculated by dividing bank borrowings and amount due to ultimate holding company net of cash and cash equivalents at the end of the year/period by total equity at the end of the respective year/period and expressed as a percentage.

7. Interest coverage is calculated by dividing profit before interest and tax with interest expenses for the respective year/period.

Future Plan05



22

❖ Improve the efficiency of the Group’s daily operations

❖Strategically expand the Group’s manufacturing capabilitiesthrough vertical integration, including investing in themanufacturing process for DC motors, battery packs and LEDlights packaging production

❖Devoting resources on new products and applications

Growth Strategies21

Future Plans


23

Use of ProceedsGrowth Strategies22

For devoting

resources on new

products and

applications

~HK$10.3 million

For strategically expanding

the Group’s manufacturing

capabilities

~HK$28.9 million

For the

improvement of

the Group’s

efficiencies in

its daily

operations

~HK$6.3 million

Use of Proceeds

63.5%13.9%

22.6%

Thank You.

Documents

Corporate Presentation Pilot Investor Deck_E_2020022… · • Upon receipt of sales orders, the Group commences manufacturing of the products under the customers’own ... 2000 Commenced