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20 August 2003
HG METAL MANUFACTURING LIMITED
PLANT TOUR
Moving Up the Value Chain Competitive Strengths Financial Highlights Growth Prospects and Future Plans Industry Comparison Comparison between HG Metal & AnnAik
PRESENTATION OUTLINEPRESENTATION OUTLINE
We Custom Manufacture to your Satisfaction
MOVING UP THE VALUE CHAIN
We Custom Manufacture to your Satisfaction
Mr Wee PiewChief Executive OfficerHG Metal Manufacturing Limited
Established partnership HGC - small retailer of steel products
1971
Became a stockist for steel products
1973
Acquired Almech
1984HG Metal incorporated
Expanded warehouse storage area
1988
1998Moved to current premise 30 Jalan Buroh
Acquired OMPCommenced steel product mfg New 3 storey factory plus w/house Acquired JHL
2000
GROWTH PATHGROWTH PATH
We Custom Manufacture to your Satisfaction
HG METAL
Jin Heng Li Hardware Sdn Bhd
(Malaysia)
Oriental Metals Pte Ltd
(S’pore)
59.2%100%
(Our Manufacturing Arm)
CURRENT GROUP STRUCTURECURRENT GROUP STRUCTURE
We Custom Manufacture to your Satisfaction
RetailerSmall Stockist Post-IPO
Enlarged Manufacturing Capabilities
THE STEEL VALUE CHAINTHE STEEL VALUE CHAIN
Major Stockist
Increased Profit Margin
Custom Manufacturer
We Custom Manufacture to your Satisfaction
Reinforcement Bars
Pipes
I Beams
Hollow Sections
Ship Plates
Angle Bars
TRADING TRADING Our Wide Range of Products
Flat Bars
We Custom Manufacture to your Satisfaction
Steel Plates
Hollow Channels
Pipes Mild Steel Lip Channels
H-Beams
A One-Stop Supermarket for Steel Products
TRADING TRADING
We Custom Manufacture to your Satisfaction
The Manufacturing Process
SlittingMachine
Forming Rolls
Slitting Slitted Steel Coils
Raw Materials – Mother Hot Rolled Coil
Final Manufactured Products
MANUFACTURING-Growth DriverMANUFACTURING-Growth Driver
Forming Line
Tailor According to Customers’ Specific RequirementCore Productsi) Mild Steel Lip Channels
(Local Market Size: Estimated S$ 10 million) ii)Flat Barsiii)Steel Pipes (Local Market Size: S$50million per year)
MANUFACTURING-Growth DriverMANUFACTURING-Growth Driver
We Custom Manufacture to your Satisfaction
Production Capacity
i) 600 MT/month for MSLC currently
ii) Can easily increase to 1000 MT/month
Diversified Industry ApplicationsEnd-users Ship Building / Ship Repair Industrial and Steel Fabrication Oil and Gas Construction (Building, etc) Engineering Major Infrastructure and more…
We are NOT dependent on any single industry!
APPLICATIONS OF STEELAPPLICATIONS OF STEEL
We Custom Manufacture to your Satisfaction
COMPETITIVE STRENGTHS
We Custom Manufacture to your Satisfaction
Custom Manufacturing Capability
First Mover Advantage - Stock availability
- Short delivery time Better Customer Fulfillment
- ability to manufacture according to clients’ strict requirements or commercially unavailable
(vs competitors- NO manufacturing facility ) One-stop service provider Enhanced Profit Margins
Dominant Market Share in Mild Steel Lip Channels
COMPETITIVE STRENGTHSCOMPETITIVE STRENGTHS
We Custom Manufacture to your Satisfaction
High Barriers to Entry
First mover competitive advantage Heavy initial investment Large working capital Established brand name and reputation Skilled management and staff – difficult to find Strong knowledge and understanding of the industry
It’s Not Easy to duplicate our Business Model nor acquire our Manufacturing Capabilities
COMPETITIVE STRENGTHSCOMPETITIVE STRENGTHS
We Custom Manufacture to your Satisfaction
COMPETITIVE STRENGTHSCOMPETITIVE STRENGTHS
Established Customer Base > 400 customers = Diversified customer base Solid and long working relationships
Reliable and Established Suppliers Long term relationships with established steel mills or
their representatives and/or agents Diversified supplier base = Best quality steel at the most competitive price
We are NOT reliant on any single supplier!
We are NOT dependent on any singlecustomer / industry!
We Custom Manufacture to your Satisfaction
Our Sales Network (Mainly South East Asia)
Our Suppliers
MyanmarMyanmar
Ukraine
Turkey
Russia
Sri LankaSri Lanka BruneiBrunei
IndonesiaIndonesia
ThailandThailand
MalaysiaMalaysia SingaporeSingapore
Other eastern European countries
We Custom Manufacture to your Satisfaction
COMPETITIVE STRENGTHSCOMPETITIVE STRENGTHS
COMPETITIVE STRENGTHSCOMPETITIVE STRENGTHS
Extensive Range of Steel ProductsWe carry > 2,000 different steel productsCustomised or commercially available products
All dimensions available
“You name it, we have it!”
We Custom Manufacture to your Satisfaction
Hands On & Passionate Mgmt Team Most of our executive directors have
> 20 years experience in the steel industry Supported by professional management team
Our Men of Steel
COMPETITIVE STRENGTHSCOMPETITIVE STRENGTHS
We Custom Manufacture to your Satisfaction
FINANCIAL HIGHLIGHTS
We Custom Manufacture to your Satisfaction
Group Turnover
For the financial year ended 31 October
S$ m
illio
ns
2001
77.277.2
74.4
2.8
2002
90.390.3
81.9
8.4
Trading and othersManufacturing
FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
We Custom Manufacture to your Satisfaction
1H2003
40.2
2001
82.482.4
75.3
7.1
5.445.645.6
For the financial year ended 31 October
S$ m
illio
ns
2001
2.62.6
2.6
2002
3.73.7
2.1
1.6
Trading and othersManufacturing
FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
We Custom Manufacture to your Satisfaction
1H2003
1.1
2001
3.13.1
2.4
0.7
0.81.91.9
Profit Before Taxation
For the financial year ended 31 October 2001 2002
perc
ent
PBT Margin: Manufacturing vs Trading
4.1
19
2.6
TradingManufacturingOverall
FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
We Custom Manufacture to your Satisfaction
3.72.4
9.5
Shipping5.0%
Construction4.6%
Engineering10.4%
Stockist and retailers80.0%
Who We Sell To
FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
We Custom Manufacture to your Satisfaction
Update??
Others5.3% Indonesia
22.9%
Malaysia28.0%
Singapore43.9%
Breakdown by Geographical Region
Other countries include Thailand, Brunei, Myanmar, Sri Lanka and South Korea
FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
We Custom Manufacture to your Satisfaction
Update??
GROWTH PROSPECTSand FUTURE PLANS
We Custom Manufacture to your Satisfaction
100
300200
400
500
600
700
800
1994 1995 1996 1997 1998 1999 2000 2001(F) 2002(F)
World
Asia
Mill
ion
met
ric to
ns
Source: International Iron and Steel Institute, Oct 2001
Steel Consumption
GROWTH PROSPECTS GROWTH PROSPECTS
We Custom Manufacture to your Satisfaction
Steel Product Manufacturing Business Expand manufacturing product range to
include steel pipes Current demand for steel pipes approx. 5 times
more than mild steel lip channels Higher margins derived from manufacturing
Versatile manufacturing capability
GROWTH PROSPECTS - MFGGROWTH PROSPECTS - MFG
We Custom Manufacture to your Satisfaction
Enhancement of our Return on Invested Capital (“ROIC”)
Expected increase in utilisation rate will reduce our production cost and enhance our ROIC
New Steel pipes(rectangular, round, etc) Current
MSLC, flat bars
GROWTH PROSPECTS - MFGGROWTH PROSPECTS - MFG
We Custom Manufacture to your Satisfaction
Expand Manufacturing OperationBroaden Product Mix Steel pipes (round and rectangular pipes) Enlarge market share in steel pipes (Estimated 35% of market share) Fully operational in 2003
Material impact in FY04
FUTURE PLANS - MFGFUTURE PLANS - MFG
Broaden Product MarketLeverage on established trading network in
region to distribute manufactured steel products
We Custom Manufacture to your Satisfaction
INDUSTRY COMPARISONINDUSTRY COMPARISON
* source: Business Times 15 August 2003
We Custom Manufacture to your Satisfaction
Company Revenue (S$’000)
Net Earnings (S$’000)
Market Cap*
(S$’ million)
PE Ratio*
HG Metal 90,291 2,792 22.2 6x
Lee Metal 119,950 2,072 39.6 19.6x
Nam Lee Metal
48,876 1,406 80.2 26.5x
Hup Seng Huat
48,826 1,910 51.1 26.6x
Average -- -- -- 19.7x
Results are extracted from Company Annual Reports
* source: AnnAik Prospectus on Opera, MAS
We Custom Manufacture to your Satisfaction
Company HG METAL1H2003 Results
ANNAIK* FY2002 Results
Revenue (S$’000) 45,615 26,843
PBT (S$’000) 1,928 2,836
Net Earnings (S$’000) 1,314 2,018
Business Manufacture customized steel products like flat steel bars, mild lip channels and steel pipes. Distribution business in steel products.
Manufacture stainless steel flanges and distribute stainless steel products, which are used mainly in piping systems. Distribution business in stainless steel products.
NTA 25.55 cents 12.21 cents
HG METAL Vs ANN AIKHG METAL Vs ANN AIK
HG METAL MFG LIMITEDHG METAL MFG LIMITEDMoving up the Steel Value Chain… Manufacturing towards Customer Satisfaction and Higher Profits
We Custom Manufacture to your Satisfaction