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


Table of Contents

1. Company Overview

2. Financial Highlight

3. Why Makalot

Agenda


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.


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)


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


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)


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


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


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%


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%


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


Capital Expenditure

2007 capex was about US$17.11 million (NT$ 521 million).

2008 capex was about US$ 16.47 million (NT$ 513 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$


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.


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$


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%


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


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


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


Q&A

Thank You

Thank You

Makalot Industrial Co., Ltd. EN.pdf · 2015-01-14 · Makalot Industrial Co., Ltd. 4 4 Key Trends 4...

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