Makalot Industrial Co., Ltd. EN.pdf · 2015-01-14 · Makalot Industrial Co., Ltd. 4 4 Key Trends 4...
Transcript of Makalot Industrial Co., Ltd. EN.pdf · 2015-01-14 · Makalot Industrial Co., Ltd. 4 4 Key Trends 4...
Makalot Industrial Co., Ltd. 1
Makalot Industrial Co., Ltd.
April, 2013
Makalot Industrial Co., Ltd. 2
Table of Contents
1. Company Overview
2. Financial Highlight
3. Why Makalot
Agenda
Makalot Industrial Co., Ltd. 3
A Glance at Makalot Company Overview
Company Overview 2012 Production sites
A well known fashion manufacturer in the Asia Pacific region targeting
global and regional big apparel retailers.
China (11%)
Indonesia (37%)
Cambodia (24%)
Vietnam (20%)
The Philippines (8%)
Specialty Stores Mass Merchants Department Stores
Established in 1990 and listed on TWSE in 2003, Makalot is one of the most well-
known apparel ODM/OEM company in the Asia Pacific region.
Major customers include departmental stores (Kohl’s, JC Penney), mass merchants
(Target, Wal-mart) and apparel specialty stores (Gap, Old Navy, Hanesbrands,Carter’s,
Express, H&M ). Actively expanding into Asia market, like retailers in Taiwan, the
specialty store in Japan, RT-mart and Metersbonwe in China.
With its headquarters and R&D center in Taipei and production bases in five countries,
Makalot exports most of its products to the US, which accounted for 89% of revenue in
2012. ( In 2008, 97% revenue came from U.S market)
Pure apparel manufacture, Makalot produces both knitted and woven fabric clothing.
Makalot Industrial Co., Ltd. 4
4 Key Trends 4 Key Trends / Company Overview
Expanding into emerging markets Capturing the growth opportunity in emerging domestic markets
Many businesses still seem to regard expanding outside North America, Europe or Japan.
Zara, H&M, Uniqlo and GAP are growing fast in these economies, particularly in places such as China
where thriving domestic markets are helping them expand.
Shifting west inland or overseas With China economy growth, and its wage rises gradually, manufacturers are facing a squeeze.
Shifting Southeast Asia or China inland where wages are lower is a natural solution.
Consider relocating at least some of their production to countries with cheaper work forces.
Looking outside for garment production Less cost-efficient local players are squeezed out.
Not only US retailers but also Chinese retailers diverse production locations to mitigate China cost hike
Makalot could take more market share with its low-cost production sits in SE Asia.
Further consolidation Help buyers manage cost (Cut procurement cost)
Credit rating matters too (Avoid supply disruption)
Makalot Industrial Co., Ltd. 5
5 Key Growth Drivers and Dual-Core Mode Growth Drivers+ Dual core mode / Company Overview
Market penetration
- Focus on selling existing products into existing markets and customers
- US market recovery
- Buyers consolidate and reduce vendors (First tier and Second tier
customers)
- Increase the market share of current products (Horizontal Expansion )
Market development
- Seek to sell our existing products into new markets and new customers
- New geographical markets (China domestic market, Europe and Japan)
- New customers (Global market + Big apparel retailers)
- M&A and Strategic Alliance
Product development
- Aim to introduce new products into existing markets and customers
- Develop second core product line( Large size and basic items)
- Specialized in large-scale production mode ( Vertical integration ) V.S.
Multiple products and flexible production mode (core strengths)
Diversification
- market new products in new markets
In the next 5 years,
5 Key Growth Drivers = 3 N ( New markets, New customers, New products) + Economy Recovery + Vendor Consolidation
Dual-Core Growth Mode = Specialized in large-scale production mode + Multiple products and flexible production mode
Market
Penetration
Product
Development
Existing Products New Products
Market
DevelopmentDiversification
Ex
isti
ng M
ark
ets
New
Mark
ets
Makalot Industrial Co., Ltd. 6
Operating Highlight Company Overview
Revenue by Product Line 2012 Revenue by Customers 2012
Based on sales contribution, Kohl’s, Target, Gap , Walmart, Hanesbrands stand out as Makalot key customers.
Major products include pants(30%), knit top(22%),and sleepwear(19%).
Actively expanding into Asia market
Top clients revenue proportion diagram
Revenue by Country 2012
Makalot Industrial Co., Ltd.
0%
10%
20%
30%
40%
IND VIN CAB CHN PHL
2009
2010
2011
2012
2013 E
7
Global Network/Production Sites Company Overview
We can quickly adjust capacities among these sites to capture low-cost advantages.
Capacity Distribution Chart (Country / Production %)
Taipei, Taiwan Headquarters
Shanghai, China Office/ Sourcing Center
Indonesia Factory 3,380,000 37% 3,700,000 34% 300 14.7 15.1
Vietnam Factory 1,860,000 20% 2,900,000 26% 273 18.1 17.7
Cambodia Factory 2,200,000 24% 2,800,000 25% 158 13.4 14.3
China Factory 960,000 11% 820,000 8% 527 20.9 22.2
Philippines Factory 760,000 8% 780,000 7% 306 17.7 18.8
Total 9,160,000 100% 11,000,000 100%
Site Function2012 Capacity
(dozens)%
Month wages
(US$/person)
2013E total costs
(US$/dozen)
2013 Capacity
(dozens)%
2012 total costs
(US$/dozen)
Makalot Industrial Co., Ltd. 8
Overheads
10%
Accessories
16%
Fabrics
58%
Labor
16%
Cost Breakdown
Material 60%
Labor 13%
Overheads 7%
Gross Margin 20%
Cost structure based on ASP Cost of good sold breakdown
Company Overview
Makalot Industrial Co., Ltd. 9
Regional Peers Company Overview
Updated on Sep., 2012
Code Company Name Products Customers Prodction sites
1477.TW Makalot IndustrialPants(26%), Knit Top(21%), Sleepwear(19%),
Blouse(16%), FR Infant(4%), Others(14%)
Kohl's(28%), Target(25%), Gap(10%), JC
Penney(7%), Hanesbrands(5%),
Others(24%)
Indonesia(36%), Cambodia(25%),
Vietnam(20%), China(11%),
Philippines(8%)
1473.TW Tainan Enterprise
casual wear on OEM(50%) and OBM(50%) with
Tony Wear and Emely brands in Asia with over
900 stores
GAP, Mast, Ann Taylor, Macy, Talbots,
ESPIRT、Levis、Target、Sears、Macy’s
Cambodia(43%), Indonesia(38%),
China(15%), Taiwan(4%)
016450KS Hansae shirts, women's formal dress and casual wearsWal-mart,Target,Holister, NY&Co, A&F,
Federated, Kohl's
Nicaragua, Guatemala, Vietnam,
Indonesia, Cambodia, China
NA Sae-A swimwear, activewear, jacket,infantwear, pants
adidas、A&F、Banana Republic、
BCBG、Carter’s、Express、Gap、Kohl‘
s、Levi’s、Mango、Target、Tommy、
Uniqlo、Wal-Mart
Indonesia(39%),Vietnam(22%),
Chian(2%),Guatemala(24%),
Nicaragua(13%),Haiti
0311.HK Luen Thai
casual wear, ladies’ wear (career, intimate and
fashion wear), sports and activewear, sweaters,
outerwear, children’s wear and laptop bags,
luxury and fashionable bags
adidas, Coach, Dillard’s, Esprit, Fast
Retailing, Limited Brands, Polo Ralph
Lauren and Targus
China, Philippines, Indonesia, India
and Bangladesh
2313.HK Shenzhou
sport wear(55%), causal wear(34%), lingerie(9%)
and other knitting
products(2%)
Uniqlo, adidas, Nike, and PumaChina (Ningbo, Quzhou and
Anqing) and Cambodia
Makalot Industrial Co., Ltd. 10
Financial Highlight
Financial Highlight
NT$mn 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net Sales 8,283 8,565 10,377 12,556 14,845 13,185 13,311 14,135 15,123 15,867
Sales growth (%) 32.70% 3.40% 21.20% 21.00% 18.23% -11.18% 0.95% 6.19% 6.99% 4.92%
COGS 6,884 7,156 8,409 10,008 11,648 11,056 10,428 11,296 11,966 12,712
Gross profit 1,399 1,409 1,968 2,548 3,197 2,130 2,883 2,840 3,157 3,155
Operating profit 780 766 944 1,206 1,606 694 1,349 1,337 1,449 1,484
Net profit 535 581 590 821 1,104 291 881 918 1,112 1,177
Net profit growth (%) 33.90% 8.60% 1.50% 39.10% 34.49% -73.68% 203.11% 4.20% 21.21% 5.78%
Basic EPS (NT$) 4.70 4.81 4.85 6.66 7.86 1.96 5.80 5.91 6.92 7.17
Gross margin 16.90% 16.50% 19.00% 20.30% 21.53% 16.15% 21.66% 20.09% 20.88% 19.89%
Operating margin 9.40% 8.90% 9.10% 9.60% 10.82% 5.27% 10.13% 9.46% 9.58% 9.35%
Net margin 6.50% 6.80% 5.70% 6.50% 7.43% 2.20% 6.62% 6.49% 7.35% 7.42%
ROE 33.21% 31.57% 28.60% 32.77% 35.51% 9.16% 26.84% 24.78% 27.09% 25.88%
ROA 18.23% 17.02% 14.75% 17.36% 20.11% 5.53% 16.03% 14.43% 16.02% 15.00%
Makalot Industrial Co., Ltd. 11
ASP/ Shipment Financial Highlight
Shipment
(m’dz) ASP
0
10
20
30
40
50
60
70
80
-
5.00
10.00
15.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Shipment (million dozen) (LHS) ASP (US$/dozen) (RHS)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Shipment (million dozen) 3.33 3.68 5.16 6.50 7.51 7.02 7.20 8.12 8.16 9.16
Growth 11% 40% 26% 16% -7% 3% 13% 0% 12%
ASP (US$/dozen) 72.30 69.80 62.76 59.82 59.91 59.30 56.15 55.11 63.34 59.04
Growth -3% -10% -5% 0% -1% -5% -2% 15% -7%
Makalot Industrial Co., Ltd. 12
Debt Ratio
2012 Net Cash position = NT$ 2,529million = NT$ 3,216 million cash on hand - NT$ 687 million debts
Financial Highlight
0%
2%
4%
6%
8%
10%
2007 2008 2009 2010 2011 2012
Total debt / total assets
-29.77% -25.81%
-41.77% -48.05%
-31.48%
-54.08% -60%
-50%
-40%
-30%
-20%
-10%
0%
2007 2008 2009 2010 2011 2012
Net debt to equity
Makalot Industrial Co., Ltd. 13
Capital Expenditure
2007 capex was about US$17.11 million (NT$ 521 million).
2008 capex was about US$ 16.47 million (NT$ 513 million).
2009 capex was about US$ 3.02 million (NT$ 99 million).
2010 capex was about US$ 4.02 million (NT$ 127 million).
2011 capex was about US$ 13.73 million (NT$ 394 million).
2012 capex was about US$ 8.51million (NT$ 252 million).
Financial Highlight
521 513
99 127
394252
-
200
400
600
2007 2008 2009 2010 2011 2012Capex (NT$)
million NT$
Makalot Industrial Co., Ltd. 14
Financial Highlight
FX gain/loss
Hedging strategies
1. Put in place much more conservative FX budget forecasts for the upcoming year.
2. Cash flow hedges to reduce the exposure to variability in certain expected future cash flows.
Natural hedge = 80%, and net exposure position= 20%. Using USD/NTD forwards to hedge this
20% net position risk.
Makalot Industrial Co., Ltd. 15
Dividend Policy
2.80 3.70 3.10 3.74 4.70 5.97
2.00
5.17 4.60 6.10 6.20
21.5
0.5
0.5
0
2
4
6
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Cash Dividend Stock Dividend
Mainly cash dividend payout ratio will be maintained between 70% and 90%.
Financial Highlight
NT$
Makalot Industrial Co., Ltd. 16
Convertible Bond
In 2009, we issued 1 convertible bonds (CB3) with par value of NT$600mn.
CB3 potential dilution is 0.42%.
In 2012, we issued 1 convertible bonds (CB4) with par value of NT$700mn.
CB4 potential dilution is 4.67%.
Updated on 28, Mar, 2013
Financial Highlight
DurationIssue Amount
(NT$mn)
Outstanding
Amount (NT$mn)
Conversion Price
(NT$)
Potential Conversion
(mn shares)
Dilution
(%)
CB3 Jun. 22, 2009- Jun. 22, 2014 600 25.2 36.4 0.7 0.42%
CB4 Aug. 24, 2012- Aug. 24, 2017 700 660.5 85.2 7.8 4.67%
Makalot Industrial Co., Ltd. 17
2007- 2011 Business cycle
3Q is traditionally the strong season.
Financial Highlight
% to annual shipment volume
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1Q 2Q 3Q 4Q
Sales(NT$million)
2008 2009 2010 2011 2012
25% 23% 29%
23% 25% 26%
29% 20% 20% 22%
30%
28% 25%
22% 30% 24%
27% 24%
25%
24%
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
1Q 2Q 3Q 4Q
Dozens
2008 2009 2010 2011 2012
Makalot Industrial Co., Ltd. 18
Why Makalot
Strong management
Leadership position
Strong financial characteristics
Sound financial structure
Growing revenues and profit
Strong cash flow, ROE and ROA
High dividend payout policy
High cash dividend
Why Makalot
Makalot Industrial Co., Ltd. 19
Appendix: Surefire Ways to Recession Strategies 4 Strategies/ Company Overview
Focus on our core business (Concentrate on the 20 that produce the 80) Focus on selling necessity- based products and service
Offer outstanding customer service
Continue cost reduction and add profit
Minimize our full-time staff
Run a tight ship budget-wise
Consolidate fabric vendor bases
Increase large-size orders, drop small-size orders.
Monitor credit risk One year EDF> 1 /1.5/ 3 + Factoring
Ensure AR can be exchanged for Cash
By Non-Recourse Factoring, cut credit risk and improve AR days.
Diversify customers and markets Second tier and new customers
Global market/ Big apparel retailers
Look for M&A and Alliance opportunities Buy a business instead of starting one
Complement Product lines
Diversify clients and markets
Makalot Industrial Co., Ltd. 20
Q&A
Thank You
Thank You