Chlitina Holding Limited. Group Introduction

Transcription

1 Chlitina Holding Limited Group Introduction 1

2 Connecting People Everybody on this planet is separated by only six other people. The President of the United States, a gondolier in Venice, just fill in the names. -- Six Degrees of Separation 2

3 Disclaimer The information contained in this document was verified by an independent third party. Chlitina does is not responsible for the accuracy, fairness, and completeness of any information contained in this document. You should not assume any information in this document to be accurate, fair, nor complete. The information or opinions contained in this document is provided on a specified date, which Chlitina reserves all right to update. Chlitina has no obligation to notify you of any updates after a specific date or any development of information in the documents. Chlitina will not accept any liability for any loss resulting from the use of this document or its contents or for other reasons related to this document. This document does not constitute an offer or solicitation of an offer of purchase or acquisition to sell or issue shares of Chlitina or any of its subsidiaries or related parties in any jurisdictions, does not serve as a part an offer or incentive, nor should be interpreted as such. Any part thereof or distribute the facts does not constitute the basis of any contract or commitment, and should not be relied upon in respect of any contract or commitment. Your acceptance of this document constitutes your agreement that the information contained in the document is kept strictly confidential, securities researchers should have eligibility of the securities research and follow any relevant securities laws and regulations and restrictions of the appropriate jurisdiction before publishing research results on Chlitina. This document is provided for the securities researchers for use as their research reference only. Any part of the document cannot be photocopied, copied, forwarded, or in any manner, directly or indirectly transferred to any other person or for public announcement and for any other purpose. 3

4 Agenda Company Information Executive Summary CHLITINA Value Creation Future Growth Drivers Outstanding Financial Performance 4

5 Leader in Greater China Skincare Salon Chain Market Capitalization: US$ 388 mn (as of Dec ) NT$ 2.7 bn in sales (11M2014) NT$ 2.0 bn net cash (As of 3Q14) 82.5% Gross Margin (3Q2014) 24.2% ROE (3Q2014, annualized) franchise 145 SKUs 50% Revenue Breakdown by Product Segment Revenue Breakdown by Geography 40% 37.7% 40.9% 30% 3Q2014 HK & TW, 4.0% 20% 10% 4.0% 10.6% 6.9% China, 96.0% 0% At-Home Skincare Salon Products Body Products Food Others 5

6 Executive Summary We are one of Greater China s leading skincare brands, operating China s largest franchise-based chain of skincare salons. Our 3,400+ exclusive franchise stores offer a fully-integrated line of beauty products and services to female consumers. Through our unique business model and through joint-efforts with our extensive network of franchisees, CHLITINA seeks to penetrate even more deeply into our target client base. We aim to build a 5,000+ franchise fleet in 3-5 years. CHLITINA continues to grow despite strong competition and economic headwinds as a result of our core competence in connecting people, reaching new customers and expanding pocket share with a highly disciplined low capex/low leverage strategy. In 2015, a new O2O model initiative, extending our physical channel, will be integrated into our sales system. We expect the new channel to contribute an additional NT$150 mn in 2015 and NT$1 bn in We aim to deliver steady, high-quality earnings growth to investors. We have maintained an operating margin above 30% since 2012, and have consistently produced strong cash flows, as evidenced by our net cash position of NT$2.0bn as of 3Q

7 CHLITINA Value Creation Franchise Expansion Management Philosophy Brand & Product Channel Innovation 7

8 CHLITINA Value Creation Franchise Expansion Management Philosophy Brand & Product Channel Innovation 8

9 Not Your Everyday Retail Model Lower execution risk CHLITINA is a large franchise with over 3400 stores, and low cost store count expansion ( net store increase/year) will provide a solid foundation for earnings growth and mitigate downside during an economic decline. Higher return to capital CHLITINA s asset light, low capex and low leverage model provides substantial ROE of over 24% and ROA of 17% in 3Q2014. Strong adaptability to ever-changing China market CHLITINA s franchisee model of connecting people and transforming these connections into its CHLITINA family, is flexible enough to adapt to changes in policy, regulations and the competitive landscape in China. Affordable growth with safe cash reserve With NT$2.0 bn cash (16% of market capitalization) and minimum liability, CHLITINA is able to support franchise expansion, channel and product innovation in the coming years. High cash return to shareholders CHLITINA paid out 71% of 2013 earnings in cash to shareholders with 2.6% cash yield (2014 ex-dividend price) and the management plans to maintain a high payout ratio. Leadership in product innovation CHLITINA has proprietary product innovation capabilities and collaborates with a research center in France to create skincare products for all skin needs from cleansing, exfoliating to moisturizing and treatment. 9

10 Channel Effective Management A Clear Strategy to Realize Franchise Value Asset-light, franchise-based model to capture growth opportunity in the China beauty industry 25 well-established branch offices to ensure business strategy is effectively carried out to each region and store cover up to 70% of China s population Pleasing our customers is our top priority, but we place equal emphasis on our franchisees. We strive to develop a franchise model that inspires entrepreneurship among franchisees increases franchisee and customer stickiness Resilient Store Portfolio >50% >30% Source: company data > 3 yrs > 5 yrs Store Age 10

11 Our 25 Regional Branch Offices Ensure a Uniform Level of Service Across Our Franchisee Network Inner Mongolia Beijing Dalian Hebei Tianjin Shandong Our Branch Offices Provide Franchisees with: Timely advice and supervision for existing franchise stores Strategies for business development and expansion Basic storefront management courses for new franchisees Training in basic & advanced skincare Basic & advanced knowledge on new and existing products Chengdu Shaanxi Chongqing Hubei Hunan Anhui Guangzhou Hangzhou Jiangxi Shenzhen Nanjing Fujian Suzhou Shanghai Ningbo Wenzhou Taipei Taichung Kaohsiung 11

12 Building a Stable Foundation of Franchise Stores Chlitina training scheme/facility: Accommodates up to 2,000 trainees and is supported by a highly-qualified teaching staff Has provided training to 90%+ of incumbent beauticians In 2014, we conducted two separate training sessions totaling 9,028 attendees joining from over 2,000 franchisees. We will shift our centralized training to distributed model leveraging 25 branch office to increase training capacity. 12

13 CHLITINA Value Creation Franchise Expansion Management Philosophy Brand & Product Channel Innovation 13

14 CHLITINA The Most Scalable Skincare Franchise in China with 3,400+ Exclusive Stores, and Still Growing Northeast China North China East China Southeast China Northwest China Southwest China Taiwan Xinjiang Uyghur Autonomous Region 7 locations Tibet Autonomous Region 7 locations Inner Mongolia Autonomous Region 102 locations Ningxia Hui Autonomous Region 7 locations Gansu Province 4 locations Hebei Province Shanxi 105 locations Province 84 locations Shaanxi Province 46 locations Sichuan Province 86 locations Chongqing City 57 locations Yunnan Province 14 locations Guizhou Province 44 locations Liaoning Province 87 locations Beijing City 215 locations Tianjin City 111 locations Henan Province 43 locations Hubei Province 199 locations Hunan Province 199 locations Guangxi Zhuang Autonomous Region 27 locations Hainan Province 5 locations Anhui Province 119 locations Jiangxi Province 111 locations Guangdong Province 354 locations Shandong Province 111 locations Heilongjiang Province 33 locations Jilin Province 30 locations Jiangsu Province 362 locations Shanghai City 364 locations Zhejiang Province 479 locations Fujian Province 60 locations Taiwan 156 locations 14

15 Scale Penetration 4,000 There is Still Substantial Untapped Potential in Lower Tier Cities Store Count 5,000 3,500 3,000 2,687 3,004 3,086 3,472 2,500 2, Q14 No of Cities Penetrated Q2014 Total Q14 # of Stores % of Total Sales (NT$ K) % of Total Tier 1 Cities % 572, % Tier 2 Cities % 375, % Tier 3 Cities % 275, % Tier 4 & 5 Cities % 733, % Franchisee sales % 1,957, % Other* 195,976 Total 2,153,050 * Other include HK/Taiwan sales, sales from related party, and franchise fees 15

16 CHLITINA Value Creation Franchise Expansion Management Philosophy Brand & Product Channel Innovation 16

17 Rise with the Tail Wind of China s Online Market The largest online shopping platform in the world In 2013, China s internet sales amounted to US$295.8 bn, compared to US$263.3 bn in the US. From 2003 to 2013, internet sales CAGR>100% Simultaneous acceleration of technology and increase in online shoppers 3G/4G increased the number of people utilizing online platforms Growing spending by high income earners, and their shift towards online channels Development of logistics facilities expanded the number of online users China = the future of internet sales by international brands Considering the market s expansion rate up to 2020, entering the internet channel now ensures a threefold growth Extreme high spenders (average spending over the internet >10,000 RMB) are only 7% of the market, yet their online purchases amount to 40% of total sales. 17

18 18 Offline-to-Online 3 Year Strategy 2015 Revenue exceed NT$150 mn 2016 Revenue exceed NT$600 mn 2017 Revenue exceed NT$1 bn

19 Not Only Shopping Online Online platform Customer Timely and easy access to all product information Online platform represents an innovative and powerful channel to CHLITINA Online Offline Physical stores Service Our unique O2O model turns plain vanilla online shopping into 360 complete integrated service and sales channels Customer Physical stores provide the customer with a more intimate experience and the opportunity to learn first-hand about CHLITINA and its services Powerful CRM system allows CHLITINA to increase customer consumption in physical stores Customer Product specialist provides 1-on-1 consulting to customers Sales force costs remain low by utilizing profit sharing mechanism. 19

20 CHLITINA Value Creation Franchise Expansion Management Philosophy Brand & Product Channel Innovation 20

21 Brand Precise Positioning Benefiting from Brand Positioning & Investment The Chlitina brand is positioned at the affordable luxury level, targeting rising middle-class consumers in China. Chlitina focuses on fast-growing market segments: high-end skincare & high-end beauty products. 1,200 1, Million 1,042 Surging Middle-Incomers in China -4% 725 Source: Euromonitor (May 2012). +28% CAGR E +16% < $7,500 $7,501-80,000 > $80,000 9 Annual Income (US$) 21

22 Diverse Product Portfolio Established a Full Spectrum of Products to Win Ahead Aesthetic Medicine Products for before-during-after surgery Salon Product Products and service for semi-aesthetic medicine Enhance training program to improve service Home Product Develop concrete loyalty through internet Increase brand awareness through classic products 22

23 Future Growth Drivers Key Initiatives Franchise Expansion Further penetration in targeted area Steady store expansion, 5,000 franchise in 3-5 years Add 400,000 new customers in the next 3-5 years Enhancement of store management (SAP, ipad, cloud, e-learning) Channel Innovation Introducing Chlitina O2O model New product & new revenue Source Targeting NT$150 mn revenue by 2015 Brand & Product Product innovation Marketing campaign to enhance brand recognition Improvement in brand value Management Philosophy Low cost, low leverage, low risk High cash reserve to back future growth High cash return to shareholders Training Leveraging 25 branch offices to increase training capacity From centralized training model to distributed model 23

24 2015 Outlook Growth: We target 2015 revenue to grow more than 15% YoY driven by franchise expansion, new channels and new products. Marketing/Branding: Chlitina will invest further in our brand image and brand awareness in 2015, through TV commercials and additional marketing campaigns in order to reach our target customers. 24

25 OUTSTANDING FINANCIAL PERFORMANCE 25

26 Steady Growth & Rising Profitability Gross Margin % Net Margin % 54.40% 58.60% 82.70% 78.40% 2, % 7.2% 14.1% 24.5% 25.7% % 2, , ,954 1, Y2010 Y2011 Y2012 Y2013 3Q2014 Revenues NTD$ million Y2010 Y2011 Y2012 Y2013 3Q2014 Net Profit NTD$ million 26

27 Outstanding EPS Records NT$ EPS (NTD) Y2010 Y2011 Y2012 Y2013 3Q2013 3Q2014 9M2013 9M2014 Note: EPS based on shares issued on June 30, 2014 (79,492) Y2010 Y2011 Y2012 Y2013 3Q Q M M 2014 Net Income (K NT$) 2014Q3 shares balance 114, , , , , , , ,306 79,492 79,492 79,492 79,492 79,492 79,492 79,492 79,492 Basic EPS(NTD) EPS of shares issued (NTD)

28 High Payout Ratio ( NTD Million ) 2013 Net income 693 Cash dividend 492 Dividend p/s (NT$) 6.5 Cash yield (%) 2.6 *1 Payout ratio (%) 71 Notes: yield is based on CHLITINA s closing share price on July 18, 2014; the day before ex-dividend day. 28

29 Income Statement Summary NTD$ million Q14 Sales Revenue 1,588 1,954 2,409 2, Gross Profit 864 1,146 1,992 2, OP Profit Income before Tax Net Income EPS (NTD$) YOY (%) Q Gross Margin 54.4% 58.6% 82.7% 78.4% 82.5% OP Margin 11.1% 19.8% 32.8% 30.0% 29.6% Net Margin 7.2% 14.1% 24.5% 25.7% 24.4% 29

30 Balance Sheet Summary NT$ million Q14 Total Assets 812 1,494 1,952 4,338 3,971 Cash ,646 2,060 AR & Other Receivables Inventory Fixed Asset ,109 1,108 Total Liabilities 648 1, , Bank Loans AP & Other Payables Total Equity ,966 3,027 ROA 15.2% 23.9% 34.3% 22.0% 16.9% ROE 98.1% 90.1% 82.0% 35.0% 24.2% Net cash* ,397 2,267 YOY (%) Q (8.5) (22.2) (12.0) (37.1) (19.1) (22.6) (0.1) 61.4 (8.3) 42.9 (31.2) (25.0) (100.0) 51.4 (18.7) *Net cash = cash & cash equivalents + other current financial assets (time deposits, money market fund and government bond related) bank loans 30