SGOCO Investor Presentation

Report
2014 Investor Presentation
May 2014
1
Safe Harbor Statement
•
This presentation contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. These statements are made under the "safe harbor" provisions of
the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including,
without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those
preceded by or that include the words "believe," "expect," "anticipate," "future," "will," "intend," "plan," "estimate" or
similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation,
the effectiveness of the Company's multiple-brand, multiple channel strategy and the transitioning of its product
development and sales focus and to a "light-asset" model, Although the Company's management believes that such
forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These
forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to
differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or
factors not all of which are known to the Company, which may include, without limitation, requirements or changes
adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally;
our success in promoting our brand of LCD and LED products in China and elsewhere; our ability to have effective internal
control over financial reporting; our success in designing and distributing products under brands licensed from others;
management of sales trend and client mix; possibility of securing loans and other financing without efficient fixed assets as
collaterals; changes in government policy in China; the fluctuations and competition in sales and sale prices of LCD and LED
products in China; China's overall economic conditions and local market economic conditions; our ability to expand through
strategic acquisitions and establishment of new locations; compliance with government regulations; legislation or regulatory
environments; geopolitical events, and other events and/or risks outlined in SGOCO's filings with the U.S. Securities and
Exchange Commission, including its annual report on Form 20-F and other filings. All information provided in this press
release and in the attachments is as of the date of the issuance, and SGOCO does not undertake any obligation to update
any forward-looking statement, except as required under applicable law.
2
Agenda







Company Overview
Competitive Advantages
Industrial Overview & Emerging Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
3
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
4
Sgoco At a Glance
As of May 31, 2014
Stock Ticker: SGOC
Stock Price: $2.17
Market cap: $37.8 M
Share outstanding: 17.4M
5
A Company in Transformation ….
Capturing enormous opportunities from China’s urbanization
•
Wide range from Smart displays and PCs, AIO and PIO computers, ASPs to LCD/LED
monitors
•
•
Develop and distribute products co-branded with top-tier brands
Own in-house product development capabilities
2012
•
•
A multi-brand strategy supported by wide distribution network
Target at China’s fast-growing Tier 3 and 4 cities
2011
•
•
Business model transformation in November 2011
Sold manufacturing facilities and shifted focus to branding and distribution
2010
•
Listed in NASDAQ with an offering of 1.3M ordinary shares at $5.00 per share.
2005
•
Founded in China as a leading display products supplier and a OEM partner of choice.
6
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
7
An Integrated “Channel” Solution Model
TRADITIONAL
LCD/ Monitor
• Product design
• Procurement
• R&D
OEM
Distribution
Retailer
Consumers
• Co-brand product
design
• Procurement
OEM
Distribution
Retailer
Consumers
Distribution
Retailer
Consumers
BRAND
SOLUTION
or
• Find target
corporate
customers
DISPLAY
SOLUTION
• Product design
• Co-brand partnership
• Procurement
• R&D
OEM
Corporate
customers
or
• Find target
industry verticals
• Design solution based
services and products
• Co-brand partnership
• Procurement
OEM
Industry
Verticals
8
A Multiple Brand Strategy
The company's flagship brand
A leading brand in Tier 3 and Tier 4 markets
A leading brand in Tier 3 and Tier 4 markets
9
An Extensive Channel Network in Tier 3 & 4 Markets
Liaoning
Beijing | Sales Office
Shandong
Shaanxi
Henan
Jiangsu
Hubei
Chongqing
Guizhou
Shanghai
Zhejiang
Hunan
Jiangxi
Fujian | Product center
Guangdong
Shenzhen | Operating office
Hong Kong | Headquarter
Self-managed province-level distributors covering 16 provinces in China
A Market Driven Product & Solution Offerings
FUTURE GROWTH FOCUS:
Application: Specific products and services
target at industry verticals
Touch
Screen
E-board
Advertising LCD
CCTV Monitor
ADDITIONAL GROWTH BUSINESS:
Smart Display Products
Tablet PC
All-in-ones (AIO)
Part-in-ones (PIO)
TRADITIONAL BUSINESS:
LCD/LED Monitors, LCD/LED TVs
LED Monitor
LCD Monitor
LED/LCD TV
3D TV
Touch-screen
Monitor
A Distinctive SGOCO Competencies
 Low AP risk : Direct control and billing to few distributors
 First-hand market information : Localized sales and CRM
teams in key sales points
Low Credit Risk Business Model
4-Pronged Sales Strategy




Top tier licensing brands focus
Continue to expand distribution networks
High growth industries focus
Continue to expand product and solution offerings
Rural Market Knowledge
Highly Integrated Channel
 Strong presence in rural display market
 Product development team owns market-know-how
 Cross-connected sales and product development team
sharing market knowledge




Successful early development in high margin products
Big opportunities ahead in commercial
International expansion through distribution
Optimize Cross-channel synergies
12
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
13
Expanding Addressable Display Market in China – Industry Verticals
• Travel & Leisure
• Transportation & Infrastructure
• Education
 Fast-growing demand for domestic
travel.
 Intensive infrastructure investments in
China, encouraged domestic travel and
the growth of budget hotels.
Domestic Tourism Expenditure
per Capita Growth in China
National Enrolment Breakdown 2012
Approx. 509.6 million students
RMB
 By the end of 2013, 37% of classrooms
in China will have an interactive display.
Source: Futuresource.
Source: Ministry of Education of China
Source: China National Tourism Administration
14
Emergence of Solutions Driven Demand from Retail and Commercial
•
•
•
Household ASP
Commercial ASP
Younger generation’s need on sophisticated electronic devices
Touchscreen Penetration in Desktop PCs
Interactive panel displays are gaining
popularity:
For 2013, sales of interactive
whiteboards & interactive flat panel
displays in the education and corporate
reached 1.3 million units Source:
Futuresource
Asia still dominates the market with
2013 sales and is forecast to remain the
largest region for the next five years, with
China being the driving force with sales of
700,000.
Source: KDB Daewoo Securities Research
The “Screenager” Era: Touch panels are in increasingly
widespread use in a variety of applications, including
mobile phones, tablets, notebook PCs,
and in-car technology... (Nomura)
15
Exponential Growth in Lower Tier Cities
•
•
•
TV
PC
Mobile/ Handheld
Disposable Income of Urban Households 2008 ~ 2013 (2)
35
In China:
9.8%
8.4%
25
PC shipment to have double-digit growth until
2016. Lower tier cities are growth drivers. (1)
Disposable income per capita of urban
households up 9.6% to nearly RMB 25K. (2)
15.8
17.2
2008
2009
7.8%
19.1
8.4%
9.6%
21.8
24.6
2011
2012
7.0%
27.0
15
5
(5)
2010
Annual Disposable Income Per Capita
Urbanization rate at 53.7% in 2013 (3). 390
million people will move to urban areas by 2030.
2013
Annual Growth
China Target Broadband Internet-access
Penetration Rates
Internet population to reach ≈ 800 mil by 2015.
Mobile internet users up 19% yoy to 500 mil in
2013. (4)
Network type
Fixed-line
networks
270 mil fixed-line broadband subscribers by
2015 end, 400 mil by 2020 end
By end of 2015 By end of 2020
Urban areas
65%
Rural areas
30%
Overall
50%
70%
32.5%
85%
3G and LTE
Source: China State Council, compiled by Digitimes, August 2013
(1)
(2)
(3)
IDC, June 2012
National Bureau of Statistics of China
National Bureau of Statistics of China
4.
5.
China Internet Network Information Center
China’s Sate Council – 2013-2020 Broadband Development Plans
16
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
17
Transformative Business Model Moves Up the Value Stack
SGOCO
Brand
PRODUCTS
Channels
Multi-brands:
- Sgoco
- Povizon
- No. 10
Display Solution
Channels
e-commerce
Others ….
Sector Driven : Education??
Market Driven : Media Display
Channel Play = Combining products and display solution
18
Transformation in 4-Pronged Strategies
 Leverage on strong distribution network to sign up top
tier brands
 Increase overall brand awareness for SGOCO and clients
to capture additional market share
Strengthen brand & product portfolio
Expand distribution channel
 Continue to expand in the traditional distribution
network
 Look into emerging channels such as e-commerce to
capture the shift of consumer behaviors in the market
Focus on high-growth industries
Develop solution based services
 Identified high growth industries, such as budget hotel
chains - provide them with tailored display products for
their boutique size
 Self-develop and partner with brand clients to develop
niche products
o All-in-one PCs
o Parts-in-one PCs
19
Product Driven Short-Term Growth Catalysts
All-in-One / Part-in-One PCs
Design and Price is King!
Worldwide All-in-one Desktop PC Forecast

Features: Touch-screen, Built-in to a
flat screen monitor, Multifunctional, Slim design. PIO also
provides flexibility for users to
configure and build their own PC
system

Target markets: Retail and
Commercial use e.g. Budget hotels
DisplaySearch
20
Solution & Channel Driven Mid to Long-Term Growth Catalysts

Target markets: High growth
industries in China
 Infrastructure
 Travel and Leisure
Flexibility and Diversification is King!
Products
Marketing
Display
Solution
Brands
Distribution
21
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
22
Revenue Growth Traction Returned
Total Revenue
US$ Millions
Breakdown : % of Total Revenues
65.0%
58.0%
38.7%
-8.1%
64.7%
-30.3%
85.1%
-50.1%
-63.6%
-60.3%
63.4
54.5
34.5
1Q
59.2
43.0
42.7
44.2
26.0
2Q
3Q*
4Q
2012
Total Revenue
1Q
2Q
3Q
4Q
2013 2013
SGOCO Brand and
Licensed Brands
Key Accounts
sales
4Q12
4Q13
64.7%
85.1%
35.3%
14.9%
Annual Growth Rates
3Q 2012:
• SGOCO was experiencing the transition to a “light-asset” business model. Therefore, the revenues were negatively
impacted.
23
Profitability Focused
Income from Operations & Operating Margin
4.8%
5.6%
4.8%
4.9%
-2.9%
6.8%
5.7% 4.3%
US$ Millions
4.1
0.20
0.19
3.5
US$ Millions
2.7
1.7
Earnings per share
2.4
2.1
0.12
1.9
0.10
0.07
0.07
0.05
1Q
2Q
(0.8)
3Q
4Q
1Q
2012
Income from Operations
2Q
3Q
4Q
2013
Operating Margin
(0.06)
1Q
2Q
3Q
4Q
2012
1Q
2Q
3Q
4Q
2013
24
Stabilized Cash Position to Fuel Growth
Cash and Cash Equivalents
Inventories
US$ Millions
US$ Millions
14.2
13.7
25.7
13.5
11.5
16.4
12.3
7.0
6.8
5.7
6.7
4.4
1.7
1.0
1Q
6M
7.0
5.7
9M
FY
2012
1Q
6M
9M
FY
2013
1Q
6M
9M
FY
2012
1Q
6M
9M
FY
2013
25
Working Capital & Current Ratio
US$ Millions
6.84
6.12
6.97
6.18
3.86
74.8
76.0
74.9
1Q
6M
9M
3.01
78.1
79.9
FY
2012
1Q
Working Capital
2.56
3.49
83.6
85.7
6M
9M
87.6
FY
2013
Current Ratio
26
Shareholders’ Return Focused
Return on Invested Capital
Return on Equity
Per Quarter
3.73%
Per Quarter
1.22%
3.74%
2.21%
1.24%
1.61%
1.87%
1Q
2Q
3Q
-1.45%
4Q
2012
1Q
2Q
4.05%
4.03%
3Q
4Q
2013
2.51%
1.22%
1Q
1.61%
1.34%
2.15%
2Q
3Q
4Q
-1.45% 2012
1Q
2Q
3Q
4Q
2013
27
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
28
A Dynamic Management Team
Mr. Tin Man Or
Chairman
•
•
•
Over 35 years of experience in the investment and marketing of the display and trading industries
Previously worked in various private companies incorporated in Hong Kong that were engaged in
investments and general trading business
Served as a director of the Board since April 1, 2010
Mr. David Xu
Director, President and CEO
•
•
•
Nearly 20 years of finance and accounting experience in both Asia and North America
Previous employers include General Electric and Yum! Brands
MBA from the University of Illinois at Chicago, and a BA in English and American Literature from Beijing Normal
University
Mr. Johnson Lau
Chief Financial Officer
•
•
•
•
CPA in Hong Kong and Australia
Started with Deloitte in Hong Kong and Beijing from 1997, Mr. Lau has over 17 years of experience in the accounting
profession
Previous worked in various public companies in the US and England as Director of Finance and CFO for nine years
Bachelor degree in commerce from Monash University, Australia
29
Mr. Shi-bin Xie
Vice President of Sales
•
•
•
More than 15 years of experience in sales and marketing, specializing in Chinese display products
Served as Vice President of Sales in Shenzhen Dongqiao Huahan Technology Co., Ltd from 2010 to 2012
Bachelor of Science in Engineering from the East China Institute of Technology
Mr. Jin-feng Li
Vice President of Product Development
•
•
•
Over 15 years' experience in the design and engineering of electronic products
Served several engineer and product development manager roles in various companies in China
Diploma in Applied Electronics Technology from Central South University
30
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
31
P&L – Selected Items
$ in thousands except shares and per share
data
Years Ended
December 31,2013
Years Ended
December 31, 2012
2013
2012
Revenues
200,974
166,701
Cost of Goods Sold
185,045
154,221
15,929
12,480
Selling expenses
1,073
670
General and administrative expenses
3,802
5,322
Total operating expenses
4,875
5,992
Income from Operations
11,054
6,488
Income before Provision for Income Taxes
10,995
6,380
Provision for Income Taxes
2,551
2,167
Net income
8,444
4,213
Comprehensive Income
9,249
4,154
0.49
0.25
17,193,189
17,059,575
Gross Profit
Earnings per Share – basic & diluted
Weighted Average Number of Common
Shares – basic & diluted
32
Balance Sheet – Selected Items
$ in thousands except shares and
per share data
As of
December 31, 2013
As of
December 31, 2012
Cash
13,497
11,548
Accounts receivable
48,063
59,355
7,017
5,725
33,824
28,511
Total Current Assets
104,512
105,386
Total Assets
104,735
105,647
Short-term loan
6,734
6,230
Accounts payable
2,052
12,038
999
1,155
6,126
7,147
Total Current Liabilities
16,925
27,314
Total Liabilities
16,946
27,332
Retained earnings
61,080
53,044
Total Shareholders’ Equity
87,789
78,315
104,735
105,647
Inventories
Advances to suppliers
Customer deposits
Taxes payable
Total Liabilities and Shareholders’ Equity
33
Cash Flow Statements – Selected Items
$ in thousands of U.S. dollars
Net cash provided by (used in) operating
activities
Years Ended
December 31, 2013
Years Ended
December 31, 2012
1,384
(13,887)
Net cash (used in) provided by investing
activities
(32)
18,628
Net cash provided by (used in) financing
activities
229
6,230
1,949
11,013
CASH, beginning of period
11,548
535
CASH, end of period
13,497
11,548
Increase in cash
34
Investor Relations Contact
Kathy Ko
SGOCO Group, Ltd.
Direct Line: +852 2501 0128
Email: [email protected]
35

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