Frencken-Roadshow Presentation 2014 (For...

Corporate Presentation

FRENCKEN GROUP LIMITEDINCORPORATED IN SINGAPORE

RHB OSK | DMG ASEAN & HONG KONG CORPORATE DAY10 JANUARY 2014

2FRENCKEN GROUP LIMITED

Business OverviewHigh-Tech Capital and Consumer Equipment Service Provider

MECHATRONICS DIVISIONMECHATRONICS DIVISION IMS DIVISIONIMS DIVISION

FRENCKEN GROUPFRENCKEN GROUP

CAPITAL EQUIPMENT

AUTOMOTIVE & CONSUMER EQUIPMENT

FRENCKEN EUROPE

ETLA L IMITED

PRECICO GROUP

JUKEN TECHNOLOGY

KEY OPERATING ENTITIESKEY OPERATING ENTITIES

Design, develop and manufacture complex, high

precision industrial machinery and capital

equipment for global OEMs

Design and integrated manufacturing services for components, modules and

complete box build products

MEDICAL

SEMICONDUCTOR

ANALYTICAL

INDUSTRIAL AUTOMATION

MEDICAL

SEMICONDUCTOR

ANALYTICAL

INDUSTRIAL AUTOMATION

AUTOMOTIVE

OFFICE AUTOMATION

CONSUMER & INDUSTRIAL

AUTOMOTIVE

OFFICE AUTOMATION

CONSUMER & INDUSTRIAL


Business OverviewGroup Operating Structure

Mechatronics Division

Europe

Frencken Group Limited

IMS Division

Changi, Singapore

ETLA Limited

Eindhoven, The Netherlands

Frencken Europe B.V.

Penang, Malaysia

Precico Group Sdn. Bhd.

Penang, Malaysia

Precico Electronics Sdn. Bhd.

Wuxi, China

ETLA Technologies (Wuxi) Co., Ltd.


Frencken Mechatronics B.V.


Machinefabriek Gebrs.Frencken B.V.

Reuver, The Netherlands

Optiwa B.V.

Bangi, Malaysia

Frencken Mechatronics(M) Sdn Bhd

America

Spokane, Washington

Frencken America Inc.

Singapore

Juken Technology Ltd


All Mepp Holding B.V.

Asia

Kuala Lumpur & Johor Bahru

Juken Technology Engineering Sdn Bhd

Thailand

Juken (Thailand) Co., Ltd

China

Juken (Zhuhai) Co., Ltd

Juken Micro-Air (Tianjin) Technology Co., Ltd

Indonesia

PT Juken Technology Indonesia

India

Juken Uniproducts Ltd

Switzerland

Juken Swiss Technology AG


Business OverviewGlobal scale of operations

••• Eindhoven and Reuver, The Netherlands

•Wuxi China

Penang Malaysia

Legend

Mechatronics Division IMS Division

o Anaheim, CA, USA

Paris, France o

• operating sites o sales representative office• operating sites o sales representative offices

• Spokane, WA, USA

Jakarta, IndonesiaSingapore

Bangkok, Thailand

Selangor, Malaysia

Noida, India• Zhuhai, China

• Tianjin, ChinaGrenchen, Switzerland

o Alabama, USA


Business OverviewKey Business Strengths

• OPERATIONS WITH BREADTH AND DEPTH • Global scale of operations

• Integrated design, engineering, manufacturing and assembly capabilities; backed by key advanced technological know-how in metal and plastics

• Outstanding track record

• BALANCED SPREAD OF CUSTOMERS• Established supplier to industry leaders from diverse industries

• ORGANIC AND ACQUISITIVE EXPANSION• Continually enhancing internal capabilities and capacities

• Capitalised on acquisitive opportunities to accelerate expansion

2009

Acquired ETLA Limited to expand Mechatronics footprint in Asia

2012

Acquired US Motion Inc. (Frencken America) to extend Mechatronics reach in the USA

2012

Acquired Juken Technology to accelerate expansion of IMS automotive business in Asia Pacific

2013

Acquired All MEPP in Europe to further enhance Mechatronics’ design and development capabilities

2009

Acquired ETLA Limited to expand Mechatronics footprint in Asia

2012

Acquired US Motion Inc. (Frencken America) to extend Mechatronics reach in the USA

2012

Acquired Juken Technology to accelerate expansion of IMS automotive business in Asia Pacific

2013

Acquired All MEPP in Europe to further enhance Mechatronics’ design and development capabilities

Mechatronics Division



Mechatronics DivisionOne-stop Outsourcing Solutions Provider

• Excellent global reputation in the manufacture of high-precision capital equipment

• Established track record in product development and One-Stop outsourcing solutions to suit specific requirements of customers worldwide

• Strategically located close to key customer markets in Europe and Asia

• Advanced mechatronics capabilities in the Netherlands

• Network of lower cost manufacturing bases in Singapore, Malaysia and China

• Customers are blue chip companies and leading players in their respective fields and markets

• Sole supplier status for key parts, modules and systems produced

Customer Mechatronics Division


Mechatronics DivisionOur Customers’ Profile

• Original Equipment Manufacturers that develop and supply High Tech Capital Equipment

• Customers typically operate in extremely competitive markets

• Customers’ priorities and focus shifting more towards development, marketing and streamlining of their core processes

• Customers’ requirements:

• Reduce the complexity of their operations

• Prefer suppliers with a strong global supply chain

• Improve time-to-market by partnering suppliers with a global presence

• Out-source product development and production on a strategic basis

• Sizeable partners that can accommodate significant projects on a global basis

• Provide continuous product cost management throughout the product life cycle

Our customers understand that partnering the right supplier creates the competitive advantage needed to be the No. 1 player in their respective m arkets


Mechatronics DivisionBarriers to Entry

• Long development and industrialization phase of at least two years before reaching mass production stage

• Lengthy audit and qualification processes to get facilities approved

• Highly challenging in order to establish track record to gain customer confidence in co-design and manufacturing partnership

• Usually the sole supplier over the products’ life cycles

• Complex products that involve significant investment in development costs and time

• Products are designed and developed based on our know-how and manufacturing processes which are optimised to our facilities

• Difficult to replicate products without customers incurring further development costs which are generally high

• Longstanding strategic partnerships with customers

• High capital investment and working capital required


Mechatronics DivisionGrowth Drivers

• OVERALL STABLE OUTLOOK FOR THE ANALYTICAL SEGMENT• Life sciences, semiconductor, material sciences and natural resources industries to drive

demand (especially the higher performance equipment)

• FRONT-END SEMICONDUCTOR EQUIPMENT DEMAND TO PICK UP• Foundry and logic industry gearing up for volume manufacturing of next generation chips that

translate to demand for lithography equipment

• CATALYST FROM NEW MEDICAL PRODUCTS• European and USA healthcare equipment markets currently experiencing slow conditions

• Continued growth for medical equipment in China and ASEAN healthcare markets

• Pathology scanner gained US FDA approval

– potential sales growth catalyst in the coming years


Mechatronics DivisionGrowth Drivers

• CHINA OPERATIONS TO BE A KEY GROWTH COMPONENT• Increasing proportion of European and USA OEMs’ products being sold to China

• Plan to build local-to-local business for our factory in Wuxi, in tandem with customers’ expansion plans in China

• Improve customers’ time-to-market

• Reduces foreign exchange risk

IMS Division



IMS DivisionIntegrated Manufacturing Services Provider

• Track record of providing integrated contract design and manufacturing services to automotive and consumer equipment industries

• Specialised niche in plastic micro gears & components, stepper motors & car clocks and assembled modules for car interiors

• Strategic operating presence in key growth markets for automotive products

• Customers are leading OEMs and Tier-1 suppliers

Plastic injectionmoulding parts/

components

Mechanical & electronics design/

engineering support

Prototyping

Tooling design and manufacturing

Supply chainManagement

Surface coating and secondary processes

Printed circuitboard assemblies

Box build to finaltest and assembly

Support ServicesManufacturing Services


IMS DivisionFocus on Automotive Products

• Manufacturing capabilities extend from plastic injection moulding to electronics and final test and assembly

• Single parts & modules for automotive –e.g. instrument cluster pointers, car clocks, stepper motors, plastic gears, centre stacks and switch modules for car interiors

• Automotive products have longer product life cycles – typically between 5 to 10 years

• Design and industrialisation phase prior to commercial production is typically 6 to 12 months for components and more than 2 years for modules and assemblies

PRECICO GROUPPRECICO GROUP JUKEN TECHNOLOGYJUKEN TECHNOLOGY

Plastics and Electronics Integrated

Manufacturing Services

Plastic Injection and Micro-Moulding

Stepper motor & car clock Design and Manufacture

AUTOMOTIVE CUSTOMERSAUTOMOTIVE CUSTOMERS AUTOMOTIVE CUSTOMERSAUTOMOTIVE CUSTOMERS

Expand service offering and productsCross-selling opportunities

Expand service offering and productsCross-selling opportunities


IMS DivisionAutomotive Business – Barriers to Entry

• Lengthy process to achieve qualified supplier status and TS16949 certification of manufacturing facilities

• Long development and industrialization phase of between two and three years before reaching mass production stage for modules and assemblies

• “Zero Defect” requirements

• High capital investment and working capital

• Customers usually do not switch to another supplier during the entire product life due to their high investment in upfront costs, coupled with the tedious and expensive requalification/validation process


IMS DivisionProduct Examples

CONSUMER EQUIPMENTCONSUMER EQUIPMENT

AUTOMOTIVE


IMS DivisionGrowth Drivers

• TARGETING THE AUTOMOTIVE GROWTH MARKETS IN THE ASI A PACIFIC REGION

• Automotive business in China, India and Asean region at the growth stage

• Low car ownership expected to result in New demand vs primarily Replacement demand in Europe and USA

• OPERATING PRESENCE IN KEY GROWTH REGIONS TO SUPPORT CUSTOMERS’ PENETRATION IN THESE MARKETS

• ENLARGED PRODUCT AND SERVICE OFFERING TO SERVE WIDE R BASE OF AUTOMOTIVE CUSTOMERS

Financial Review



Financial Performance9M13 Financial Highlights

Profit & Loss (S$ M) Nine months ended 30 Sep 2012

Nine months ended 30 Sep 2013

Year-on-Year Change

Group Revenue 265.6 335.3 +26%

Gross Profit 22.0 51.5 +134%

Gross Profit Margin 8.3% 15.4% +7.1ppt

EBITDA 11.1 36.9 +231%

Profit Attributable to Equityholders -1.0 13.9 n.m.

Net cash generated from operations 1.8 17.0 +837%

Balance Sheet 31 Dec 2012 30 Sep 2013Year-on-Year

Change

Shareholders’ Equity S$186.8 M S$200.5 M +7%

NAV per share 47.15 cents 50.36 cents +7%

Gross Gearing 47.4% 42.0% -5.4ppt

Net Gearing 20.5% 18.0% -2.5ppt


Financial PerformanceGroup Revenue By Customer Segments

Semiconductor18%

Medical19%

Analytical20%

Industrial Automation

13%

Others10%

Office Automation

7%Automotive

10%Tooling and Others

3%

MECHATRONICS – 80%IMS – 20%

9M12

Semiconductor11%

Medical14%

Analytical19%

Industrial Automation

10%

Others7%

Office Automation

7%

Automotive22%

Consumer and Industrial Electronics

6%

Tooling and Others

4%

MECHATRONICS – 61%IMS – 39%

9M13


351.8

335.5

361.0

335.3

17.6

7.3

-11.8

13.9

-20.0

-10.0

0.0

10.0

20.0

30.0

300.0

400.0

FY2010 FY2011 FY2012 9M13

Revenue

Profit After Tax and MI

Financial PerformanceGroup Revenue and Net Profit Trend (S$ million)

* Exceptional items comprised :-• Impairment of goodwill• Impairment of deferred development cost• Acquisition expenses

Impacted by :-• Customer product liability claim of

S$3.1M• Under utilised capacity due to

expansion of Wuxi and Bangiplants

• Learning curve of automotive segment

Impacted by:-• Exceptional items* and DTA

reversal totalling S$9.7M • Forex – Weak USD and EURO• Initial operational inefficiencies

of automotive segment

Turnaround


STOCK VALUATION

Price (3 Jan 2014) 27.0 cents

Market Capitalisation S$107.5 million

Price-to-Earnings (9M13) 7.7 times

Price-to-EBITDA (9M13) 2.9 times

Price-to-NAV (as at 30 Sep 13) 0.54 times

DIVIDEND HISTORY (cents per share)

7.6

4.8

2.6

4.7

2.0

-3.2

2.27 1.920.74

1.440.61 0.50

30%

40%

30% 30% 31%

-20%

-10%

0%

10%

20%

30%

40%

50%

-4

-2

0

2

4

6

8

10

FY07 FY08 FY09 FY10 FY11 FY12

EPSDPSDividend Payout Ratio

Stock FundamentalsFRKN SP / FREN.SIListed on SGX Main Board in May 2005

From Jan 2011 to 3 Jan 2014

Broken out of a downtrend

S$0.27


Safe Harbour for Forward-Looking Statements

This presentation contains certain statements that are not statements of historical fact, i.e. forward-looking statements. Investors canidentify some of these statements by forward-looking items such as ‘expect’, ‘believe’, ‘plan’, ‘intend’, ‘estimate’, ‘anticipate’, ‘may’,‘will’, ‘would’, and ‘could’ or similar words. However, you should note that these words are not the exclusive means of identifyingforward- looking statements. These forward-looking statements are based on current expectations, projections and assumptionsabout future events. Although Frencken Group Limited believes that these expectations, projections, and assumptions arereasonable, these forward-looking statements are subject to the risks (whether known or unknown), uncertainties and assumptionsabout Frencken Group Limited and its business operations.

Some of the key factors that could cause such differences are, among others, the following:

•changes in the political, social and economic conditions and regulatory environment in the jurisdictions where we conduct businessor expect to conduct business;

•the risk that we may be unable to realise our anticipated growth strategies and expected internal growth;

•changes in and new developments in technologies and trends;

•changes in currency exchange rates;

•changes in customer preferences and needs;

•changes in competitive conditions in our customers’ industries and our ability to compete under these conditions;

•changes in pricing for our products; and

•changes in our future capital needs and the availability of financing and capital to fund these needs.

Given these risks, uncertainties and assumptions, the forward-looking events referred to in this presentation may not occur andactual results may differ materially from those expressly or impliedly anticipated in these forward-looking statements. Investors areadvised not to place undue reliance on these forward-looking statements.

Investors should assume that the information in this presentation is accurate only as of the date it is issued. Frencken GroupLimited’s business, financial conditions, results of operations and prospects may have changed since that day. Frencken GroupLimited has no obligation to update or revise any forward-looking statement, whether as a result of new information, future events orotherwise, except as required by law.

Frencken Group Limited Contactc/o Precico Group Sdn BhdTel (60) 4 388 [email protected]

Investor Relations ContactOctant ConsultingTel (65) 6296 [email protected]@octant.com.sg

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