BOTHHAND - AsianNet...2016/11/01 · Bothhand: A Leader in LAN Transformer Bothhand at a Glance Revenue by Product Ticker 3299 TT Revenue NT$2.7 bn in 2015 Employee 858 at the end

Provide the Best Integrated Module Inspiring the Ubiquitous & Colorful Network

BOTHHAND

Company Presentation

November 2016

Disclaimer

• The information contained in this confidential document ("Presentation") has been prepared by Bothhand (the "Company"). It has not been fully verified and

is subject to material updating, revision and further amendment.

• While the information contained herein has been prepared in good faith, neither the Company nor any of its shareholders, directors, officers, agents,

employees or advisers gives, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy,

reliability or completeness of the information in this Presentation, or any revision or supplement thereof, or of any other written or oral information made or

to be made available to any interested party or its advisers (all such information being referred to as "Information") and liability therefore is expressly

disclaimed. Accordingly, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers takes any responsibility for, or will

accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness or

injury of the Information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the

use of this Presentation or the information.

• Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any

transaction and the right is reserved by the Company to terminate any discussions or negotiations with any prospective investors. In no circumstances will the

Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. In furnishing this

Presentation, the Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this

Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent.

• This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents,

employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making

such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained herein necessarily

involve significant elements of subjective judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters.

• This Presentation includes certain statements that may be deemed “forward-looking statements”. All statements in this discussion, other than statements of

historical facts, that address future activities and events or developments that the Company expects, are forward-looking statements. Although the Company

believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future

performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to

differ materially from those in forward-looking statements include market prices, continued availability of capital and financing, general economic, market or

business conditions and other unforeseen events. Prospective Investors are cautioned that any such statements are not guarantees of future performance and

that actual results or developments may differ materially from those projected in forward-looking statements.

2

Bothhand: Small Parts Drive the World

� Founded in 1992, we specialize in production of Ethernet electronic components. We are the world’s largest discrete LAN transformer manufacturer with 15% market share in terms of revenue.

� With 24 years of industry experience, we are committed to provide customers the highest quality and most reliable products through our excellent R&D team and advanced technology.

3

� We view China as our major growth driver, and we are ready to gain market share with our high-end focused product offerings, a new FAE team in Guangzhou, and our proprietary T1+T2 automated wiring technology.

� Our continued effort in lean operations (increase in automation and supply chain integration) has achieved initial desired results. We strive to maintain our cost leadership and achieve profitable growth.

� We strive to grow our revenue by double digits for the next 5 years. We also commit to a stable dividend payout, backed by our solid cash position. Furthermore, we aim to achieve sustainable ROE at 20%.

```````````````````````````````` Company BackgroundCompany BackgroundCompany BackgroundCompany Background

Industry Industry TrendsTrendsIndustry Industry TrendsTrends

Our Growth Our Growth StrategyStrategyOur Growth Our Growth StrategyStrategy

4

Our Growth Our Growth StrategyStrategyOur Growth Our Growth StrategyStrategy

Our Our GoalsGoalsOur Our GoalsGoals

Financial SummaryFinancial SummaryFinancial SummaryFinancial Summary

提供最佳網通元件模組化整合服務讓客戶創造更精彩的網路世界

BOTHHAND

Company Background

Positive · Persistence · Responsibility

Company Background

Bothhand: A Leader in LAN Transformer

Bothhand at a Glance Revenue by Product

Ticker 3299 TT

Revenue NT$2.7 bn in 2015

Employee 858 at the end of 2015

Establishment 1992

ROE

85% 97%97% 97%

97%500

1,000

1,500

2,000

2,500

3,000

NT$ mn LAN Transformer Other

Revenue by Application

Enterprise Networking

Switch Server VoIP Phone Router

Smart Home

Wi-Fi Router Smart TV

Web Camera

Access Point

Game Console

Blue-ray DVD Player

Cable Modem STB

ROE 20% in 2015

6

0 2012 2013 2014 2015 1H16

21% 27% 29% 34%38%

41% 49%52%

50%

50%

21% 17%

13%12%

9%

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015 1H16

NT$ mn Enterprise Networking Smart Home

NB Other

Major Functions of LAN Transformer

Ethernet Cable

• LAN transformer is the essential component of copper-based Ethernet device.

• Major functions include: impedance matching, signal

7

LAN Transformer

NB, Hub, VoIP, Switch, Router,Wireless AP, etc.

impedance matching, signal filtering, and voltage isolation

Switch Wireless AP Cable Modem

Hidden Champion in a Niche Market

Bothhand LAN transformer target market

Copper|

Copper

• Bothhand is the world’s largest discrete LAN transformer manufacturer. It enjoys ~15% global market share in terms of revenue.

• LAN transformer industry growth drivers include:

8

Eth

ern

et

|Connector

|Lan

Transformer

Copper|

MagJack

Fiber|

Fiber Connector

drivers include:

• Advanced networking applications and improved networking technologies to drive upgrades

• LAN transformer may gain market share from MagJack due to cost consideration

• Increasing Power over Ethernet (PoE) adoption

Company Milestones

1992 1996 1999 2001 2002 2016• Founded

• 10 BASE-T

• 100 BASE-T

transformer

• Entered South

Korea market

• Entered Japan

market

• PoE product

• Entered China

market

2004 2005

• Public on OTC

market

2013

• Vice Chairman and

President Mr. Pan

assumed the role of

Chairman

• 2.5G BASE-T

transformer

2015

• Founder passed

away

2010

• 10G Base-T

transformer

• 10 BASE-T

transformer

Korea market

• 1G BASE-T

transformer

marketaway

• Acquired 45% stake

of Deyang Shisheng

Electronics

0.9 0.91.1

1.4 1.5 1.6 1.7

2.32.6 2.6

2.32.5 2.7

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Revenue (NT$ bn)

8%6% 6% 5%

10%5%

13%

20%17%

11%13%

18% 20%

ROE (%)

9

Manufacturing Facilities

Deyang Factory

• In operation: 2006

• Employee: 300

• Western China

manufacturing center

Changzhou Office


• Greater China marketing

and service center

DeyangChangzhou

Kaiping

Deyang Shisheng


• Employee: 100

• Front-end process

automation Kaiping Factory


• Employee: 200

• Main products: Ethernet

components

• R&D and QA center in China

Guangzhou Factory


• Employee: 250

• Professional plant for

DC/DC converters

10

Guangzhou

Global Presence

Europe

Israel

USA

Japan

Korea

Hong KongTainan, Taiwan Headquarter

China

IndiaTaoyuan, Taiwan Sales Office

Hong Kong

Singapore

Agent

Taiwan Bothhand

Note: Based on the location where customers place orders

11

67% 72% 69% 69%

70%

8% 13%12%

15%

17%

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015 1H16

NT$ mn Revenue by Geography

Taiwan China Japan Korea Other


BOTHHAND

Industry Trends


Industry Trends

12

The Application Spaces of BASE-T

DATA CENTER

0m

ENTERPRISE FLOOR

Office space, for example

Floor or Room-based

Rea

ch

BASE-T is the foundational technology for Ethernet Enterprise Access

Bothhand’s focus

5m

30m

100m

10

00

BA

SE

-T

10

GB

AS

E-T

2.5

/5G

BA

SE

-T

25

GB

AS

E-T

40

GB

AS

E-T

based

Row-based (MoR/EoR)

Rack-based (ToR)

Data RateSource: George Zimmerman, CME Consulting 13

Smart Home (50% of Bothhand 1H16 revenue)

Bothhand’s Asia focus will allow it to enjoy higher growth than the global market

Worldwide Home Router/Gateway/Access Point Shipments By 2020, More Than 40 Percent of Connected Flat-Panel TV Sets Will Be 4K

Increasing penetration for Connected 4K TV will also drive the use of LAN transformer

200

250

2014 2015E 2016E 2017E 2018E 2019E

+5% CAGR

14Source: Broker Reports, IDC, October 2015 Source: Cisco VNI Global IP Traffic Forecast, 2015–2020

0

50

100

150

200

US Asia-Pac Western Europe

ROW Worldwide

-7% CAGR

+10% CAGR

+2% CAGR

+1% CAGR

Enterprise Networking (38% of Bothhand 1H16 revenue)

分離式設計(Discrete)

• Compared to integrated design, LAN transformer’s cost advantage will allow it to expand market share

• In addition, Bothhand’s high-end focus and strong PoE capability are expected to drive further market share gain

15

網路交換機 (Switch)

整合型設計(Integrated)

(Discrete)

30% Cost Saving

Growth of PoE

Power Sourcing Equipment (PSE)

The Ethernet cable not only transports data, but also provides power so that connected PoE capable devices do not need separate power supplies.

Power over Ethernet (PoE) L2 + L3 PoE Shipments

16

Powered Device(PD)

LAN Transformer

Power Module

PoE IC

Integrate or separate power and network signal

Key Components for PoE

Source: Dell'Oro, July 2016


BOTHHAND

Our Growth Strategy


Our Growth Strategy

Core Competence

• Considering product quality, price, delivery, and services

Most Competitive Solution Provider

18

• With expertise in multi-ports/ Gigabit and PoE products and a strong FAE team

Leading Technology

• Automation and supply chain integration

• e-Management platform to improve operating efficiency and accelerate decision-making

Lean Operation Structure

• With new Chairman (former Vice Chairman and President) leading a new culture

Stable Management Team

Strategy to Drive Shareholder Value

China Growth Strategy Lean Operation Structure Strong Cash Position

19

Committed to Profitable Growth

Stable Cash Dividend Payout

China to be the Major Growth Driver

20%

25%

30%

300

350

400

450

NT$ mn China revenue China as % of total revenue

20

195 291 304 397 200

8%

13%12%

15%

17%

0%

5%

10%

15%

20%

0

50

100

150

200

250

300

2012 2013 2014 2015 1H16 2017 2018 2019 2020

Note: Based on the location where customers place orders

China Growth Strategy

Benefit from product upgrades by customers:

Major customers are upgrading their products to high-end from mid-to low-end.

Increase automation to reduce costs:

We are the only manufacturer which is ready to offer T1+T2 automated wiring technology. Customer response has been very enthusiastic about this technology.

Sources

2121

New FAE team in China to strengthen relationships with customers:

We are setting up a new FAE team in Guangzhou to offer enhanced services. We aim to gain larger order allocation from customers and add new customers.

Consolidate Kaiping capacity into Guangzhou to optimize costs:

The capacity consolidation not only reduces manufacturing costs but also increases our competitiveness for additional orders.

Cost down effort

Sources of

revenue growth

Customer Win Strategy

Patented high-endproducts

Market leader in

PoE

Continued R&D for new

products

Quality. Price. Delivery. Services

Comprehen-sive FAE services

22

Deep engagement with existing customers

Penetrate into new customers/ new products

Strong alliance with local

agents

Focus on China opportunities

Quality. Price. Delivery. Services

Strong End Customers

NotebookEnterprise Networking & Smart Home

23

Lean Operation Structure

Wiring (T1+T2)

Assembly

• T1 wiring has been fully automated: 1 machine = 7-8 workers• T2 wiring is outsourced, with stringent control on manufacturing

process and product quality

11

22

Lab

or

Inte

nsiv

e

Current:

• Fully automated: Automated wiring of T1 plus T2

Future:

• Outsourced, with stringent control on manufacturing process

Current:

24

Automatic Tinning

Automatic Gluing

Automatic Printing

Automatic Pins Adj.

Automatic Check/Packing

Process is semi-automated as it requires a human operator to feed a product and remove the product after a process completed. Plan to further optimize the processes.

33 44 55 66 77

Lab

or

Inte

nsiv

e

• Outsourced, with stringent control on manufacturing process and product quality

• Fully automated

Future:

Lean Operation has Achieved Initial Desired Results

Less direct labor and higher GM through increasing automation and supply chain integration

Core OPM has also been improving

13.8%14.2%

15.7%

14.0%

18.0%

400

600

OPM (%)Op profit (NT$ mn)

Core op profit Other op profit

Core OPM%

32.5%

34.9%31.6%

32.7%

34.9%

40.0%

800

1,000

GM %Direct Labor

Direct Labor Gross Margin%

Core GM%

25

11.0% 10.2%

-2.0%

2.0%

6.0%

10.0%

14.0%

-400

-200

0

200

400

2012 2013 2014 2015 1H16

854 637 488 455 325

20.6%

24.9%

31.3%32.5%

26.1%27.9%

0.0%

10.0%

20.0%

30.0%

0

200

400

600

800

2012 2013 2014 2015 1H16

Note: Core GM = GM excluding E-HENG TECH (燦元) Note: Core OPM = OPM excluding E-HENG TECH (燦元)

Strong Cash Position

Free Cash Flow Improving Solid Net Cash Position

500

600

NT$ mn Cash flow from operations Capital expenditures

44%

60%

50%

60%

70%

1,000

1,200

%NT$ mn Net cash Net cash/Common equity

26

-200

-100

0

100

200

300

400

2012 2013 2014 2015 1H16

-7% -7%

17%

44%

-20%

-10%

0%

10%

20%

30%

40%

50%

-400

-200

0

200

400

600

800

2012 2013 2014 2015 1H16


BOTHHAND

Our Goals


Our Goals

Five-year Goals (2016-2020)

Target to grow revenue to NT$4 bn by 2020

Aim to be the No. 1 supplier to top 3 China networking firms

Strive to achieve sustainable ROE at 20%

Maintain dividend payout at 80%+

28


BOTHHAND

Financial Summary


Financial Summary

Five-Year Financial Highlights

23.7%20.6%

24.9%

31.3% 32.5%34.9%

7.4%10.9%

12.8%15.5%

Gross margin (%) Op margin (%)

$3.82

$2.57 $3.08

$4.71

$5.75

$2.48

Unadj. Basic EPS (NT$)

30

7.4%

1.3%3.0%

2011 2012 2013 2014 2015 1H16

2,580 2,569

2,259 2,547

2,672

1,185

2011 2012 2013 2014 2015 1H16

Revenue (NT$ mn)

192

129 155

237

295

145

2011 2012 2013 2014 2015 1H16

Net income (NT$ mn)

2011 2012 2013 2014 2015 1H16

Five-Year Income Statement

NT$ million 2011 2012 2013 2014 2015 1H16YoY (%)

2011 2012 2013 2014 2015 1H16

Revenue 2,580 2,569 2,259 2,547 2,672 1,185 11.2 (0.4) (12.1) 12.7 4.9 (7.8)

Gross Profit 611 530 563 797 868 413 1.4 (13.2) 6.2 41.5 8.9 0.5

Operating Expenses 419 497 496 520 525 230 5.8 18.5 (0.2) 4.8 1.1 (7.0)

Operating Profit 192 33 67 277 343 183 (7.0) (82.6) 101.5 312.4 23.6 11.8

Non-Op Income/(Loss) 19 4 13 47 91 32

Income before Tax 211 37 80 324 433 215 (7.7) (82.3) 114.4 305.8 33.5 5.8

31

Income before Tax 211 37 80 324 433 215 (7.7) (82.3) 114.4 305.8 33.5 5.8

Tax Expenses 56 43 26 107 101 58

Net Income to Parent 192 129 155 237 295 145 (5.3) (32.5) 19.8 53.0 24.5 (0.2)

EPS (NT$) 3.82 2.57 3.08 4.71 5.75 2.48

Key Financial Ratios (%)

Gross Margin 23.7 20.6 24.9 31.3 32.5 34.9

Operating Expense Ratio 16.2 19.3 22.0 20.4 19.7 19.4

Operating Margin 7.4 1.3 3.0 10.9 12.8 15.5

Effective Tax Rate 26.8 116.1 32.3 33.0 23.4 27.1

Net Margin 7.4 5.0 6.9 9.3 11.1 12.2

Five-Year Balance Sheet

NT$ million 2011 2012 2013 2014 2015 1H16YoY (%)

2011 2012 2013 2014 2015 1H16

TOTAL ASSETS 2,664 2,317 2,592 2,819 3,010 2,872 15.4 (13.0) 11.9 8.7 6.8 0.3

Cash 339 339 377 289 443 377 (33.8) (0.1) 11.0 (23.2) 53.2 (60.5)

Marketable Securities 46 191 363 634 809 876 446.9 315.5 90.2 74.7 27.7 1,591.4

NR & AR 816 587 701 691 688 655 36.1 (28.1) 19.5 (1.5) (0.4) (8.7)

Inventories 373 305 283 369 356 324 37.6 (18.2) (7.3) 30.4 (3.4) (21.1)

Fixed Assets 857 725 687 613 512 481 19.3 (15.3) (5.3) (10.8) (16.4) (13.7)

TOTAL LIABILITIES 1,219 1,094 1,323 1,376 1,257 1,274 18.8 (10.2) 20.9 4.0 (8.6) (17.3)

Short-term Debt 397 399 702 642 313 234 57.6 0.5 76.0 (8.4) (51.3) (62.7)

32

Short-term Debt 397 399 702 642 313 234 57.6 0.5 76.0 (8.4) (51.3) (62.7)

Curr. of Long-term Debt 223 194 13 51 0 0

NP & AP 426 366 364 422 404 332 24.8 (14.1) (0.4) 15.8 (4.1) (7.6)

Long-term Debt 0 14 111 0 219 100

TOTAL EQUITY 1,446 1,223 1,269 1,444 1,754 1,599 12.8 (15.4) 3.8 13.7 21.5 20.7

Common Equity 1,202 1,120 1,224 1,372 1,645 1,527 8.2 (6.8) 9.3 12.1 19.8 24.6

Non-controlling Interests 244 103 46 71 109 71 42.1 (57.7) (55.8) 56.0 53.0 (27.5)

Key Financial Ratios

A/R Turnover Days 100 100 104 100 94 103

Inventory Turnover Days 60 61 63 68 73 80

A/P Turnover Days 71 71 79 82 84 87

ROE (%) 16.6 11.1 13.2 18.3 19.6 18.2

ROA (%) 7.7 5.2 6.3 8.8 10.1 9.8

Five-Year Cash Flow Statement

NT$ million 2011 2012 2013 2014 2015 1H16

Beginning Balance 513 339 339 377 289 443

Depreciation & Amortization 92 98 87 94 67 30

Cash from Operating Activities 31 261 24 465 516 223

Capital Expenditures (152) (53) (103) (89) (25) (13)

Cash from Investing Activities (262) (69) (153) (334) (198) (130)

Cash from Financing Activities 29 (146) 142 (259) (167) (137)

33

Cash from Financing Activities 29 (146) 142 (259) (167) (137)

FX Impact 29 (46) 25 41 3 (22)

Change in Cash (174) (0) 37 (87) 154 (66)

Ending Balance 339 339 377 289 443 377

Free Cash Flow (121) 208 (79) 376 491 210

Note: Free cash flow = Cash from operating activities – Capital expenditures

2011-2015 Dividend Payout

( NT$ million ) 20112011 20122012 20132013 20142014 20152015

Net income 192 129 155 237 295

Cash dividend (Earnings + Capital)

176 116 141 227 285

Dividend p/s (NT$) 3.5 2.3 2.8 4.5 4.8

34

Cash yield (%) 9.8% 7.8% 4.9% 8.0% 8.8%

Payout ratio (%) 92% 90% 91% 96% 97%

Notes: 1. 2011 yield is based on Bothhand's closing share price on July 25, 2012; the day before ex-dividend day. 2. 2012 yield is based on Bothhand's closing share price on July 29, 2013; the day before ex-dividend day.3. 2013 yield is based on Bothhand's closing share price on July 30, 2014; the day before ex-dividend day.4. 2014 yield is based on Bothhand's closing share price on July 16, 2015; the day before ex-dividend day.5. 2015 yield is based on Bothhand's closing share price on June 30, 2016; the day before ex-dividend day.


BOTHHAND

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Q&A

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BOTHHAND - AsianNet...2016/11/01 · Bothhand: A Leader in LAN Transformer Bothhand at a Glance Revenue by Product Ticker 3299 TT Revenue NT$2.7 bn in 2015 Employee 858 at the end