Corporate Presentation March 2015
World s trusted tailored-made metal precision manufacturer IPE Group, a leading OEM/ODM manufacturer, is principally engaged in the manufacture of high precision metal components, subassemblies and finished parts for use in automobiles, hydraulic equipment and hard disk drivers. IPE provides a vertically integrated one-stop solution to customers. All production processes are inhouse, with involve a wide range of technologies and the most up-to-date CNC and other equipment over 2500 separate pieces of equipment in total, of which some 2000 are CNC machines. IPE s customer are includes the leading companies in the industry sectors that it serves. IPE Group has long lasting strong relationships with several global high-tech manufacturing enterprises and has been evaluated as Excellent Supplier on various occasions by its customers. With its own research and development team and state-of-the-art automated manufacturing systems, expertise, innovation and ability to achieve the high specification quality standards required by its customers, IPE has established itself as a reliable supplier to industries in need of quality precision products at a fair and competitive price. 2
Company Overview
Shareholding Structure *Number of shares in issue : 932,454,135 (updated : 28/2/2015) Chui Siu On // Tottenhill Limited Other Directors DJE Investment Limited China Angel Investment Management Ltd Public 25.3% 8.1% 6.8% 5.5% 54.3% 99.99% 100% 100% 61% 15% 100% IPE (Thailand) IPE (Hong Kong) IPE (Macau) Cullygrat Surface & Deburring Treatment (Hong Kong) Hydraulic Technologies Italian Joint Venture International Precision Thailand Bangkok Plant China Dongguan Plant China Guangzhou Plant China Guangzhou Plant China Jiangsu Koda Plant (completed construction of Phase 1) 4
Map of Plants Location China Guangzhou Plant Site area: 167,000 sq.m Segment: Hydraulic equipment Automotive China Changshu Plant Site area:167,000 sq.m Segment: Hydraulic equipment Automotive Thailand Bangkok Plant Site area: 11,000 sq.m Segment: HDD, Automotive components China Dongguan Plant Site area: 11,000 sq.m Segment: HDD 5
Corporate Milestones 1990 Established in Singapore 1994 Established IPE (Hong Kong) in Hong Kong Established Dongguan Koda in Guangdong Province, The PRC 1997 Established IPE (Thailand) in Thailand 2002 Established Guangzhou Xin Hao in Guangdong Province, The PRC 2007 Guangzhou Xin Hao was accredited TS16949 certification automotive certification 2006 Participated in the Sino-Italian JV, Hydraulic Technologies and Guangzhou Bushi Hydraulic, which is engaged in assembly of hydraulic valves and devices in China. 2004 Listed on the Main Board of SEHK on 1 November 2004 2010 Guangzhou Xin Hao was accredited AS9100 Certification -- aerospace certification 2011 Established Jiangsu Koda in Jiangsu Province, The PRC, purchased 166,631 sq m of land in Changshu 2014 Jiangsu Koda completed construction of Phase 1 of the development of our Changshu site which will provide 40,000 sq.m of production area 6
Our Business High volume high precision, vertically integrated machining services: Provides precision machining services to a wide range of industries. Our volume sales are mainly to companies involved in the manufacture of: - Hard Disk Drives Components; - Hydraulic Equipment Components and - Automotive Components. 7
Summary of Our Precision Machining Services Quality Certifications ISO 9001 TS 16949 ISO 14001 AS 9100 With our a vertically integrated one-stop solution, we are able to implement new projects of assured quality and precision in short lead time as all production processes, including mould making which are in-house. 8
Main Products: 1) HDD Components Pivot shafts and pivot housings have been the mainstay of the Group's products over the years, with a worldwide market share of approximately 20%. Fluid Dynamic Bearings (FDB) spindle motors, a new form of bearing technology used in the production of high-end HDDs, are being increasingly adopted by the Group's customers as it meets with the tough criteria which required extra-high rotational speed and accuracy, greater shock resistance and near-zero operating noise. Our Products Application Customer Base Pivot Housing Pivot Shafts Hub Housing Shaft Hard Drive Disk 9
Main Products: 2) Hydraulic Equipment Components Industrial hydraulic components are widely applicable in the following industries: Machines tools, Automotive, Plastics, Steel & rolling, Foundries, Wood and paper, and General machinery. Our customers are mainly specialists in the manufacture of hydraulic pumps, motors, valves, gear boxes, mobile electronics and accessories. A huge market where IPE is now recognized as a manufacturer of quality components at a competitive price Our Products Application Used In Customer Base Relief Valve Sleeves Cardan Spool Check Valve Piston Balance + Amortisseu Guide + PushRod + Sealing 10
Main Products: 3) Automotive Components the Group has commenced production and delivery of high precision Automotive parts since 2003. With our auto-components now fully accepted by our customers as being of good quality at a competitive price from a reliable supplier, we expect continued strong growth in our sales of automotive components. By leveraging on its extensive experience and strong brand awareness of the Group in high precision component manufacture industry, IPE is confident of becoming one of the leading precision metal components suppliers of the Automotive industry in the world. Injector seat Application Our Products Customer Base Alberino (Assembly) Our automotive components can be applied in in Gasoline Injector, Diesel Injector, Sensors, Steering System, Power Brake System, ABS System, Throttle of Engine, etc. Sensor carrier Air valve 11
Main Products: 4) Others IPE LED lighting products are a range of end use products manufactured by the Group. We have successfully dealt with problems associated with heat dissipation, the design of the electronic controls, the light distribution and the design and manufacture of the product itself so that our LED product can be energy efficient and very long lasting. The Group also manufactures precision components for use in telecommunication products, consumer products, electronic equipment and others applications. Products Customer Base 12
Related Global Markets Hydraulic Equipment Components: The analysts forecast the Global Hydraulic Equipment market to grow at a CAGR of 4.86 percent over the period 2013-2018. One of the key factors contributing to this market growth is the increasing growth in the Construction industry. 1 Automotive Components: The global light vehicle sales presents 5.38% year-of-year growth from 2013 to 2014, China at 24 million to account for over ¼ of global sales and the U.S. to research 16 million mark, but the market in Europe will still be challenging. What s more, the economic recovery in markets such as China and North America, and the improvement in EU MD-HD truck market will lead to a 3.7% growth in truck sales in 2014. 3 Size of the global construction equipment market from 2008 to 2010 with projections through 2015 (in billion U.S. dollars) 2 Global light vehicle sales and medium and heavy truck sales in 2013-2014 3 1 Global Hydraulic Equipment Market 2014 2018: http://www.researchandmarkets.com/research/v33fcr/global_hydraulic 2 Source from staticta.com: http://www.statista.com/statistics/280344/size of the global construction machinery market/ 3 2014 Auto Industry Outlook: Bold Predictions and Trends: http://www.slideshare.net/frostandsullivan/2014 automotive outlook 2 1214 13
Investment Merits
Core Competence High entry barriers give us strong competitive edge, particularly as we have already established a list of blue chip clients which are world leaders in their sectors. 15
Growth Strategies 16
Financial Highlights
Turnover Breakdown by Segments 1,054 992 975 994 582 791 862 696 878 406 282 18
2014 Annual Results Highlights *Year ended 31 December (HK$ mln) Revenue + 13.2% HK$994 mln 878 994 975 992 1,054 Profit 2013 (2) 2 96 +4,700% HK$96 mln 50 70 133 19
Profit & Loss Account HK$ mln FY2014 FY2013 Change (%) Revenue 994 878 +13.2 Gross profit 278 165 +69.2 Gross profit margin 28.0% 18.7% +9.3pt Net profit 96 2 +4700.0 Net profit margin 9.6% 0.3% +9.3pt Earnings per share fully diluted (HK cents) 10.15 0.20 +4975.0 Dividend per share (HK cents) 5.0 - N/A 20
Key Statistics FY2014 FY2013 Change (%) Gross profit margin 28.0% 18.7% +9.3pt EBITDA margin 30.8% 23.4% +7.4pt Net profit margin 9.6% 0.3% +9.4pt Current ratio 2.10 2.41-0.31pt Inventory turnover (days) 116 119-2.5% Debtor turnover (days) 94 91 +3.3% Net cash to equity ratio 0.14 0.03 +366.7% 21
Turnover Breakdown by Segments FY2014 FY2013 HK$ mln FY2014 FY2013 Change (%) HDD 320 273 +17.2 Hydraulic equipment 307 267 +15.0 Automotive 301 275 +9.5 Others 66 63 +4.8 Total 994 878 +13.2 22
Turnover Breakdown by Regions FY2014 FY2013 FY2014 FY2013 HK$ 000 % HK$ 000 % Thailand 100,875 10 68,337 8 Malaysia 204,375 21 175,270 20 PRC and Hong Kong 211,235 21 191,200 22 North America 248,245 25 238,420 27 Europe 191,140 19 153,280 17 Others 38,153 4 51,573 6 Total 994,023 100 878,080 100 23
Cash Flow HK$ mln FY2014 FY2013 Change(%) Net cash flows from operating activities 218 211 3.3 Net cash flows from /(used in) investing activities Net cash flows (used in) / from financing activities 39 (207) N/A (188) 229 N/A Cash at beginning of the period 604 355 70.1 Non-pledged time deposit at end of period 99 151-34.4 Cash and cash equivalents at end of period 754 755-0.2 24
Financial Position HK$ mln FY2014 FY2013 Change (%) Total equity 1,488.6 1,442.5 +3.2 Net assets per share (HK$) 1.60 1.58 +1.3 Net current assets 679 767-11.5 Total interest-bearing borrowings 541 707-23.5 Cash & cash equivalents 754 755-0.1 Net Cash 213 49 N/A Net cash to equity ratio 14.3% 3.4% 10.9pt 25
Disclaimer This presentation is not an investment advice, nor an offer or solicitation for the purchase or sale of any financial instrument. Past performance is not indicative of future results. Investors should make their own investment decisions without totally relying on the information contained herein. Only investors with sufficient knowledge and experience in financial matters to evaluate merits and risks should consider an investment in the Company. Other persons should not take any action on the basis of this presentation. *Additional information is available upon request 26
Q & A IR Contact: Financial PR (HK) Limited Dawn Lee/Morning ZHU Tel: 852 2610 0846 Fax: 852 2610 0842