DCH Acquires Li & Fung s Asia Distribution Business

Transcription

1 DCH Acquires Li & Fung s Asia Distribution Business May 3,

2 Table of Contents PAGE 1. Transaction Overview 4 2. Transaction Rationale 9 3. DCH Post Transaction 16 2

3 Disclaimer Certain statements contained in this presentation maybe viewed as forwardlooking statements. Such forward-looking statements represent the Company s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. 3

4 Transaction Overview 4

5 Transaction Overview Terms DCH to acquire Li & Fung s Asia distribution business - LF Distribution Holding Limited Consideration US$350 million in cash Financing Internal resources and banking facilities Conditions Approval from DCH s shareholders Target Company restructuring Completion Expected to close by 30 June

6 Dah Chong Hong Leading integrated trading and distribution company in Asia 2015 Results 2015 Revenue Revenue EBITDA NPAT HK$44,803m HK$1,744m HK$648m By business segment Consumer 24% Motor & motor related 76% By geography Hong Kong & Macao 28% Others (1) 6% Mainland China 66% (1) Includes Japan, Singapore, Taiwan and Myanmar Key brands in motor Key brands in consumer 65+ years of experience Represent over 30 renowned motor brands and over 200 consumer brands in Asia with a focus on Greater China 6

7 Target Company World-class healthcare and consumer products distributor in Asia 2015 Results (1) 2015 Revenue Revenue HK$9,077m By business segment By geography EBITDA HK$162m Singapore 5% Taiwan 2% Philippines & Indonesia 2% NPAT HK$87m Healthcare 36% Contract manufacturing services ( CMS ) 9% Consumer 55% Thailand 8% Malaysia & Brunei 16% Mainland China 23% Hong Kong & Macao 44% Key brands in consumer Key brands in healthcare 40+ years of experience Relationships with more than 400 key consumer and healthcare brands (1) Exchange rate: 1 USD to 7.75 HKD 7

8 Target Company - Long History as Leading Distribution Platform in Asia Inchcape acquired J.D. Hutchison Trading IDS Group Limited listed on the Hong Kong Stock Exchange IDS Group Limited acquired by Li & Fung Entered Macao Healthcare market by acquiring Four Star Group, a leading distributor of healthcare products in Macao Entered Indonesia market 1989 and Before Li & Fung acquired the Inchcape Pacific Marketing & Distribution operations and restructured it into IDS Group Limited Entered Macao Consumer market Entered Taiwan Consumer market Entered the Philippines Healthcare market 8

9 Transaction Rationale 9

10 Transaction Rationale 1 Better balances DCH s motor and consumer businesses expands the consumer business adds a broad range of leading food, personal care and healthcare brands 2 Extends DCH s geographic reach enhances position in rapidly-growing markets in Southeast Asia leverages increased distribution and logistics to further enhance services 3 Gains strong foothold in the high-growth Asian healthcare market an immediate position in fast-growing healthcare market in Asia increases ability to capture growth 4 Enhances DCH s earnings profile diversifies revenue streams earnings accretive 10

11 1 Balances DCH s Motor and Consumer Businesses Enlarged consumer business 2015 Revenue (HK$'m) Pre-acquisition FY15 Revenue: HK$44,803 m +85% 19,786 Consumer 24% Motor & motor related 76% 10,709 Post-acquisition (1) FY15 combined revenue (1) : HK$53,880 m Healthcare 6% Pre-acquisition Post-acquisition (1) Consumer 31% Motor & motor related 63% (1) The combined numbers are for reference only. They are not pro forma numbers and no reliance should be placed on them for any purposes. The circular on the transaction to be issued will contain financials and pro form financials of LF Distribution and the enlarged DCH as required by the Listing Rules. Please refer to the circular as and when available 11

12 2 Extends DCH s Geographic Reach MAINLAND CHINA JAPAN Strengthens coverage in Mainland China deepens distribution network in Mainland China with 19 additional operating centres opportunity to share logistics facilities and optimise capacity in Greater China MYANMAR HONG KONG & MACAO TAIWAN THAILAND PHILIPPINES DCH LF Distribution MALAYSIA SINGAPORE INDONESIA BRUNEI Enhances position in rapidly-growing markets in Southeast Asia extends entry into high-growth markets in Southeast Asia - Thailand, Malaysia, Indonesia and the Philippines 62 additional operating centres 12

13 Southeast Asia Greater China 3 Gains Strong Foothold in Asian Healthcare Market Utilises LF Distribution s network of healthcare customers to capture growth Significant opportunity in the fast-growing healthcare market in Asia Average CAGR ( ): 11% Gilead Market leader in HIV/AIDS and liver diseases Healthcare Distribution CAGR ( ) Healthcare Distribution Market Size in 2019 (US$m) China 12% 110, ,000 Abbott Diversified portfolio covering nutrition and diagnostics Hong Kong Taiwan 5% 7% 2,000 6,000 Average CAGR ( ): 10% Sanofi Core strengths in diabetes and oncology Healthcare Distribution CAGR ( ) Healthcare Distribution Market Size in 2019 (US$m) Indonesia 15% 6,000 Johnson& Johnson Broad range of products covering over-the-counter ( OTC ) medicines and diagnostics Malaysia Philippines Singapore 9% 7% 5% 3,000 3,000 1,000 Thailand 9% 5,000 Source: Roland Berger (2015) 13

14 4 Enhances DCH s Earnings Profile Economies of scale will enable growth from existing relationships, as well as ability to capture new opportunities Leverages expanded sales channels and customer base Brings synergy to the business (1) 2015 Combined Financials Revenue EBITDA HK$ m 44, % 53,880 HK$ m 1,744 +9% 1,906 Pre-acquisition Post-acquisition Pre-acquisition Post-acquisition NPAT (2) EPS HK$ m % 735 HK$ cents % 36 Pre-acquisition Post-acquisition Pre-acquisition Post-acquisition (1) The combined numbers are for reference only. They are not pro forma numbers and no reliance should be placed on them for any purpose. The circular for the transaction to be issued will contain financials and pro form financials of LF Distribution and the Enlarged Group as required by the Listing Rules. Please refer to the circular as and when it is available (2) Without adjustments (i.e. transaction expenses, interest expenses and amortisation of intangible assets) 14

15 Valuation 2015 NPAT (HK$ m) P/E multiple Valuation 87 31x Average P/E of Comparable Companies: Hong Kong Global Consumer 18x 26x Healthcare 18x 20x Source: Capital IQ as at 29 April 2016 Valuation fair and reasonable based on the following considerations : Non-recurring / one-off losses in 2015 Potential revenue and cost synergies Rare opportunity to become the largest imported food distributor in Greater China Immediate strong foothold in the high-growth Asian healthcare market Aligns with DCH s direction to better balance motor and consumer businesses 15

16 DCH Post Transaction 16

17 Our Business - Post Transaction Dah Chong Hong Consumer Motor Gilman Goodwell HK & Macao Mainland China Taiwan Singapore DCH Food Trading DCH Electrical Appliances LF Distribution 17

18 A Powerhouse of Brands and Channels Customers Selected Consumer Customers Service Offerings Market intelligence Marketing Selling Merchandising Sales operations management Distribution & logistics services Channels Selected Consumer Channels DCH + LF Distribution Selected Healthcare Customers Value Proposition for Customers Scale & scope with pan- Asian footprint Speed to market Compliance with international standards Customised solutions Deep knowledge of consumers O2O services Selected Healthcare Channels DCH s Customers and Channels LF Distribution s Customers and Channels 18

19 The Way Forward 1 To grow a balanced portfolio of motor and consumer businesses with dedicated management team 2 To maximise potential of LF Distribution with: strong financial support from DCH geographic expansion through existing platform deepening of healthcare business through widening of products and regional representation leveraging on talent pool in various segments 3 To sustain leading position and improve profitability through group synergy and economies of scale 4 To enhance shareholder value through investment and expansion of high growth healthcare segment 19

20 Thank you