``
BWI Int’l (2339 HK)
A Chinese-owned, Global Auto Parts Leader with a strong product
A premier chassis supplier Beijing West Industries (BWI Group), the parent of
BWI Int’l (2339 HK) is a premier chassis supplier that designs and manufactures
brake and suspension systems for the global transportation market. BWI Intl
plans to acquire the profitable European auto suspension business from the
parent company for a consideration of HK$997mn to be settled by the issuance of
HK$697mn worth of new shares priced at HK$0.39 plus HK$300mn in cash to be
settled via funds raised from the capital markets. On 13 Nov 2004, the company
successfully raised the first tranche of HK$96mn out of the required HK$300m by
way of a private placement of 300mn new shares at HK$0.33/ share. We expect a
further share issuance to follow to bring the acquisition to completion by the end
of the year.
Investment Highlights 1) BWI Group owns a technologically advanced
suspension system (MagneRide Control Suspension System) that has been used
by the leading luxury automakers such Jaguar Land Rover, Audi, BMW and
Mercedes Benz given its superior performance characteristics compared to the
conventional electro-mechanical valve-based suspension system. This means
that it has the potential of enjoying increasing adoption over time. 2) BWI Group,
although Chinese owned, is essentially a high quality global MNC rather than a
conventional domestic Chinese manufacturer given that it originates from a
leading Western auto parts unit within Delphi Group which was acquired by BWI
in 2009. 3) Chinese ownership will have beneficial impact on the operations as
the gradual shift of production to the mainland will help to reduce production costs,
improve profitability and open a very big and yet untapped market in China. 4)
The company is primarily focused the strongest part of the auto market which is
luxury segment. 5) Within the European luxury vehicle segment, BWI Group is a
leading premium suspension system supplier with a strong market share 6) BWI
Group is also in the after sales market, a steady and recurring business where it
sells shock absorbers under the de Carbon brand. 7) BWI Group is injecting the
profitable European business first into the listco; to be followed North American
and China businesses respectively once they have met a certain threshold. We
expect BWI North America to be injected in 2016 and BWI China in 2018.
Valuation Based on our preliminary estimates which assume the listco has no
major liabilities or continued losses from the legacy, BWI Intl’s is likely to achieve
RMB137mn/RMB150mn net profits or HK$0.034/HK$0.037 fully diluted EPS in
FY14/15E. The fair value of HK$0.56 per share at 15x FY15E PE or 25%
premium to peers, in our view, is justified by (1) potential further asset injections
from parent group to double its revenue scale, (2) leading market position in
global brake and suspension system market, and (3) strong shareholder
background.
Risks 1) Client concentration 2) Pricing pressure from OEMs 3) Slower than
expected new car sales 4) M&A execution risk
Wed, 26 Nov 2014
Equity Research
Automobile/ China
Vivien Chan
+852 2135 0248
OP Express
Not Rated
Close price: HK$0.35
Key Data
HKEx code 2339
12 Months High (HK$) 3.65
12 Month Low (HK$) 0.35
3M Avg Dail Vol. (mn) 10.99
Issue Share (mn) 2,518.92
Market Cap (HK$mn) 881.62
Fiscal Year 03/2012
Major shareholder (s) BWI Group (51.9%)
Source: Company data, Bloomberg, OP Research
Closing price are as of 25/11/2014
Price Chart
1mth 3mth 6mth
Absolute % -7.9 -10.3 -16.7
Rel. MSCI CHINA % -11.8 -7.4 -23.9
Company Profi le
Beijing West Industries (BWI Group) is
a premier chassis supplier that designs
and manufactures brake and
suspension systems for the global
transportation market.
Beijing West Industries Co., Ltd. is a
joint venture of Shougang Corporation,
and Beijing Fangshan State-Owned
Asset Management Co. Ltd.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Jan/14 Apr/14 Jul/14 Oct/14
HK$2339 HK MSCI CHINA
Wed, 26 Nov 2014
BWI (2339 HK)
Page 2 of 19
Europe; Part One of a Three-year plan
On 5 August 2014, parent co BWI announced that it would inject BWI Group's
European assets (BWI Europe) into BWI International (2339HK) listco for a
combination of shares and cash/convertible bonds. The transaction is valued at
HK$997mn to be satisfied by the issuance of 1.79bn news shares at 39cents per
share to the parent co and the remaining balance of HK$300mn to be paid for by
a combination of cash and convertible bonds, the ratio of which has yet to be
decided. Post the share issuance BWI parent co would end up with 75.47% of the
enlarged share capital of 2339 HK listco (before CB dilution). Upon conversion
of the CB, BWI’s stake will further increase to 79.18% and because BWI has
undertaken to ensure that the minimum public free float requirement is met, that it
would want to place out shares as an alternative to the issuance of the CBs.
On 13 Nov 2014, BWI International successfully raised net proceeds of HK$96mn
by a private placement of 300mn new shares at HK33 cents per share to
institutional investors. Post this round of fundraising BWI Group and associates
owned 51.88% of the listco, before the injection of BWI Europe.
BWI Europe is one of the leading automobile controlled and passive suspension
products manufacturers in Europe and according to an Ipsos Report, in 2013,
was the fifth largest automobile controlled and passive suspension products
manufacturer in Europe by revenue and accounted for approximately 3.4% of the
total revenue in the automobile controlled and passive suspension products
industry in Europe. BWI Europe principally engages in design, research and
development and manufacturing of automobile controlled and passive
suspension products for premium passenger vehicle manufacturers and the
provision of technical services for suspension products.
BWI Europe has three main facilities in Europe. The production centre in the
United Kingdom focuses on automobile controlled suspension products, the
production centre in Poland on both controlled and passive suspension products,
and a technical centre in France focuses on testing and research and
development of both automobile controlled and passive suspension products and
a technical centre in Poland which focuses on technical services. BWI Europe
also has four sales offices located in Poland, the United Kingdom, France and
Germany, each of which serves the respective customers allocated to them.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 3 of 19
The transaction background
Parent co BWI Group acquired Delphi Group’s automobile suspension business
for US$81mn in 2009. At the time, Delphi had filed for Chapter 11 citing high labor
costs as the main reason for its technology being deemed to be a non-core asset
and requiring significant investment in R&D and capex. Under BWI Group’s
leadership, the business turned around to positive profit, and the parent now
plans to inject the European part of the suspension business into the listco.
The European suspension business generated a net profit of HK$142mn in FY13
on a net asset value for HK$508mn. The consideration of the injection was
HK$997mn, which translates to 7x FY13 PE and 1.9x FY13 PB.
The transaction structure
According to the announcement on 5 Aug. the total consideration of HK$997mn
will be settled by (1) HK$697mn (70% of total consideration) consideration share
or 1.79bn new shares at HK$0.39 to the parent, plus (2) HK$300mn cash or 5
years zero coupon with exercise price of HK$0.39 or issue new shares, or
combination of all possibilities.
Part 1 completed: HK$96mn raised
On 13 Nov. 2014, BWI Int’l announced that it successfully raised HK$96mn via a
new share issuance of 300mn new shares to investors at HK$0.33 per share.
After the placement, parent company BWI Group’s stake was been diluted from
58.06% to 51.88%.
Exhibit 1: The details of new shares placement on 11 Nov.
Shareholders shareholdings before the placement Shareholdings after the placement
Number of shares (mn) Approximate % Number of shares (mn) Approximate %
BWI 1,462.5 58.06 1,462.5 51.88
Placees - - 300.0 10.64
Public shareholders 1,056.4 41.94 1,056.4 37.48
Total 2,518.9 100.00 2,818.9 100.00
Wed, 26 Nov 2014
BWI (2339 HK)
Page 4 of 19
Exhibit 3: The shareholding structure before and after the transaction
The asset injection background BWI Intl (listco) will pay a total consideration of HK$997nm to acquire the European suspension system asset from parent group, BWI, which is also the single largest shareholder
of the company with 58% equity stake based on 2.52bn total outstanding share
Total consideration BWI Intl will (1) pay HK$697mn (70% of total consideration) by 1.79bn new share at HK$0.39 to BWI and (2) HK$300mn cash or 5 years zero coupon CB with exercise price of
HK$0.39 or issue new shares to investors, or combination of all possibilities.
Scenario Analysis Before the asset injection Scenario (1)
HK$697mn new share @ HK$0.39 to
BWI
+ HK$300mn CB @ HK$0.39
(assuming fully converted)
Scenario (2)
HK$697mn new share @ HK$0.39 to
BWI
+ HK$300mn cash consideration
Scenario (3)
HK$697mn new shares to BWI Group +
HK$96mn new share @HK$0.33 to investors +
HK$204mn new shares @ HK$0.39 to investors
Shareholding structure
Number of shares Approximate % Number of shares Approximate % Number of shares Approximate % Number of shares Approximate %
BWI and its associates 1,462 58.06 4,019 79.18 3,250 75.47 3,250 63.36
Public shareholders 1,056 41.94 1,056 20.82 1,056 24.53 1,880 36.64
Total outstanding no of shares 2,519 100.00 5,075 100.00 4,306 100.00 5,129 100.00
OP Comments BWI, parent group, stakes in the listco
is likely over 75% min. public float
requirement
Given 1H14 interim results, the cash
on hand for listco was RMB4mn which
is unlikely to be enough to settle the
HK$300mn cash consideration,
indicating debt or equity financing may
require.
This is the most likely alternative given (1)
BWI’s, the largest controlling shareholder, stake
controlled below 75% or effectively 64% which
leaving room for further asset injection
opportunities and (2) meet the minimum 25%
public free float requirement.
Source: Company Data, OP Research
Wed, 26 Nov 2014
BWI (2339 HK)
Page 5 of 19
Exhibit 2: Shareholding structure before and af ter the t ransaction based on Scenario (3)
Source: Company Data, OP Research
Scenario (1) – HK$697mn new shares plus HK$300mn CB to BWI, BWI
Group’s (the current largest controlling shareholder) stake in the listco will
increase from 58% to 79% based a total share base of 5.1bn which would
contravene the 25% minimum public float requirement.
Therefore, we believe the transaction is more likely to be settled by Scenario (2)
HK$697mn new share plus HK$300mn cash to BWI, which leaves BWI Group
with a 75.5% equity stake in the listco based on a total share base of 4.3bn, and
allows room for the listco to undertake further asset injection opportunities in the
future.
However, given the listco only had RMB4.3mn cash balance as at the end of June
2014, we believe the listco is likely to raise debt from bank or equity financing
from the capital markets to pay for the HK$300mn cash consideration. We believe
that Scenario (3) HK$697mn new share to BWI + HK$96mn new share
@HK$0.33 to investors + HK$204 settled by fund raising in the capital
market will be the company’s preferred option given that (1) BWI Group’s
controlling stake will be well below 75% at 64% which leaves room for further
asset injection opportunities and (2) meets the minimum 25% public float
requirement.
Shougang
Corporation
Before the transaction
Fangshan District of
Beijing Municipality
BWI Group
BWI Int’l (2339 HK)
Public
55.45% 44.55%
58.06% 41.94%
Shougang
Corporation
After the transaction
Fangshan District of
Beijing Municipality
BWI Group
BWI Int’l (2339 HK)
Public
55.45% 44.55%
63.36% 36.64%
Wed, 26 Nov 2014
BWI (2339 HK)
Page 6 of 19
Parent Company Background – A premier chassis supplier
Beijing West Industries (BWI Group), the parent of BWI Int’l (2339 HK) is a
premier chassis supplier that designs and manufactures brake and suspension
systems for the global transportation market. The company started as Dayton
Engineering Laboratory Company (Delco), in Day- ton, Ohio. In 1927, Delco
Products was created as part of General Motors (GM) and focused on automotive
suspension products.
In 2009, BWI Group acquired Delphi Corporation’s (formerly Delco) suspension
and brake businesses (formerly known as Delphi Chassis Systems). Today, BWI
Group’s Controlled Suspensions business supplies to many global automotive
and motorcycle OEMs including General Motors, Jaguar-Land Rover, Audi, BMW
and Ferrari amongst others.
BWI Group is a company established in PRC with a registered capital of
RMB1.32bn. It is 55.45% is owned by Shougang corporation, a state-owned
enterprise under the State-Owned Asset Supervision and Administration
Commission of the People’s Government of the Beijing Municipality of the PRC
(北京市人民政府政府國有資產監督管理委員會). BWI Group’s remaining 44.55%
stake is held by Fangshan SOA Management, a company under the State-owned
Assets Supervision and Administration Commission of the People’s Government
of the Fangshan District of Beijing Municipality (北京市房山區人民政府國有資產
監督管理委員會 ). Shougang Corporation is one of China’s largest steel
corporations which intends to grow its auto parts footprint globally with BWI Intl
(2339 HK) as its flagship list co.
BWI Europe
BWI Europe is one of the leading automobile controlled and passive suspension
products manufacturers in Europe and according to an Ipsos Report, in 2013,
was the fifth largest automobile controlled and passive suspension products
manufacturer in Europe by revenue and accounted for approximately 3.4% of the
total revenue in the automobile controlled and passive suspension products
industry in Europe. BWI Europe principally engages in design, research and
development and manufacturing of automobile controlled and passive
suspension products for premium passenger vehicle manufacturers and the
provision of technical services for suspension products.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 8 of 19
Investment Highlights
Asset injection opportunities
BWI Group acquired Delphi’s global controlled and passive suspension assets in
2009 and believes that the time is right to inject the European business into the
listco. BWI Intl (2339 HK) is the only listed vehicle related to automobile parts
business for BWI Group and management has indicated that the parent company
will at the appropriate time inject the company’s North American and Chinese
suspension businesses into the listco.
BWI North America
With the exception of BWI Group’s production facility in Chihuahua, Mexico, the
Group’s headquarters, R&D and management centers are all located in the US.
The Mexican production plant manufactures passive suspension systems and
mainly supplies its products to GM, Chrysler and Ford, etc. According to
management, the North American business recorded an unaudited revenue of
roughly USD150mn and incurred a net loss of ~USD22mn in 2013.
Conservatively, management expects to be able to generate revenues of
USD175mn but still incur a net loss of between USD28mn-USD30mn in FY14,
which will mainly be attributable to high costs, and in particular, given that the
North American region bears R&D and management costs for China.
Going forward, BWI Group’s various divisions including production/sales and
R&D/management will be split by region. Management expects that will result in
higher profitability for BWI N. America by 2016 by which time the North American
suspension assets will be ready to be injected into the listco. Thereafter,
management expects the North American business to generate ~20% profit
growth per annum.
BWI China
BWI China is home to two facilities; a braking system production plant in
Shanghai and a newer suspension system production plant in Fangshan District,
Beijing. BWI China is a key supplier to domestic automobile OEMs such as Buick,
GM for their high-end vehicles. BWI China is currently loss making given low
utilization at the Shanghai facility, and as Beijing production has just begun
ramping up. Management expects to be able to turn this business around by 2017
on more rigorous cost controls and aggressive sales strategies. Management
plans to set up another production facility in Southern China to cater to local
demand once the production at the two existing facilities reaches an acceptable
threshold.
1) R&D localization Suspension system providers are involved in the initial
stages of R&D and design processes with the auto brand owners. BWI Group
plans to meaningfully reduce R&D costs going forward by localizing the
suspension system R&D process in China. The parent company will transfer
key R&D personnel from the US to China, who will be responsible for training
the local R&D employees. Management estimates that this initiative alone will
be able to save USD6mn – USD8mn in annual R&D expenses.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 9 of 19
2) Relocation from Shanghai Free Trade Zone BWI China’s Shanghai plant
which is currently located in the Shanghai Waigaoqiao Free Trade Zone will
be relocated to a more suburban area which will be able to result in annual
rental savings of USD5mn.
3) Untapped potential of domestic mid-end passenger vehicle brands BWI
Group is the only SOE in China which owns the intellectual property rights of
a high-end suspension manufacturing system in China. BWI Group is
therefore eligible to benefit from supportive domestic auto component
policies and has recently begun to raise their profile amongst the domestic
mid-end vehicle OEMs. BWI China currently supplies suspension systems to
30-40 domestic/JV auto OEMs, including Buick, Shanghai GM, Shanghai GM
Wuling, Dongfeng Yulon Motor, Beijing Auto Group and Changan Auto
amongst others and expects to further penetrate this market in the future.
4) Domestic M&A opportunities BWI Europe is also on the lookout for
domestic braking system M&A targets with reputable technology and market
share.
5) Expansion into after-market sales The NDRC’s recent initiatives to put a
stop to monopolistic behavior in spare parts by the major OEMs and open up
the market to other non-authorized spare parts makers will be a major
positive for the suspension systems division.
BWI China is expected to post revenues of USD240mn and a net loss of between
USD3-USD4mn in 2014. BWI Group conservatively has earmarked the next 3
years for major restructuring efforts and expects the business to turnaround by
2017, ahead of the injection of the China’s suspension business into the listco by
2018.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 10 of 19
Earnings growth supported by strong luxury vehicle sales
BWI Europe’s largest customer Jaguar/Land-Rover reported a 11%yoy growth in
global sales in 10M14 over 33,512 units, while 35% growth in China and 4%
sales up in North America and in Europe. Expecting strong growth in China, JLR
recently established a JV with local brand Chery Auto to manufacture Jaguar and
Land Rover vehicles in China. According to reports, the construction of the JV’s
first production facility in Changshu is now underway.
BMW which a/c for 11% of BWI Europe’s revenues, achieved global sales growth
of 7% yoy in 10M14 to 1.7mn units, and expects global sales of over 2mn units in
2014. BMW and MINI European sales rose 11% to 78,483 units in October. It also
saw double-digit growth in several European markets, such as France were up
25%; Italy also delivered a monthly rise of 20% compare to Oct. 2013. BMW’s
deliveries increased 4.1% in Europe for 10M14.
Separately, Mercedes-Benz recorded a sales growth of 11.5%yoy in 10M14
globally, and European sales growth of 7.8% yoy in 10M14.
The European auto market is expected to pick up this year after six years of
decline. And car makers expect European Union sales to growth 3% this year.
BWI Europe expects a 6.7% earnings CAGR growth from 2015 to 2019, which
will be facilitated by a new Czech production plant which is expected to be online
by 2017. According to current plans, Production capacity in Poland will grow from
current 9.5mn suspension component units to over 10mn units by 2016, China
capacity from 1.2mn units to 2mn in near term. The UK and US facilities will
continue to produce 2mn sets suspension and 8mn suspension component units
respectively.
Exhibit 4: Revenue breakdown by segment
Source: Company data, OP Research
968 998 1,217
472 603
1,038 1,099
1,168
551 559
119 88
92
32 40
0
500
1,000
1,500
2,000
2,500
3,000
2011 2012 2013 5M13 5M14
(RMB mn)
Controlled suspension Passive suspension Technical services income
Wed, 26 Nov 2014
BWI (2339 HK)
Page 11 of 19
Exhibit 5: Forecast order growth
Source: Company data, OP Research
Cost savings from increased China production
BWI China has a current annual capacity of 1.2mn units, whilst the group’s
production plants in Poland and UK each have a current production capacity of
9.5mn units and 2mn sets respectively. The Group plans to further ramp up
capacity in China to meet the demands of their key customers all of which are
growing their presence on the Mainland, and over time will make China a key
manufacturing centre, which management expects will reduce production costs
and enhance overall profitability.
Strong order backlog from blue chip customers
Automobile controlled and passive suspension products are tailored according to
the specifications provided by automobile OEMs which mean that suspension
suppliers and vehicle ODMs work very closely from a very early stage in the
suspension design stage. Typically, OEMs invite several suspension system
providers to propose their respective solutions, the best or most appropriate of
which will be chosen to be the preferred vendor. BWI has worked closely with all
the leading luxury automobile brands, including Jaguar/Land-Rover, BMW/MINI,
Volvo, Mercedes-Benz, Audi, Porsche, Ferrari and Lamborghini since the Delphi
era.
According to management, OEMs usually sign a 3-year contract term with
suspension suppliers which may be for the life of a particular model which is why
BWI Group enjoys clear order backlog visibility. In addition, given that the
suspension system is a critical automobile component, especially for luxury
brands, OEMs infrequently switch between suppliers. BWI Group’s longstanding,
well-established relationships with the major luxury auto OEMs and the high
technological and safety requirements set by these marques represent high
barriers to entry.
10,500 10,900 11,000 11,000 11,000
250 1,050
2,600
0
4,000
8,000
12,000
16,000
2015 2016 2017 2018 2018
(units '000)
Poland Czech
Wed, 26 Nov 2014
BWI (2339 HK)
Page 12 of 19
Exhibit 6: Client Mix
Source: Company data, OP Research
Strong Aftermarket Potential
BWI Europe also sells its products to aftermarket under the brand “de Carbon” via
distributors throughout Europe. Aftermarket sales generated RMB64mn of
revenue in FY13, or ~2.6% of total sales. According to Ipsos Report, in 2012, the
size of the global suspension aftermarket was around US$12bn, with the EU the
largest market, accounting for 29% of total. Western Europe UK, Germany,
France, Italy and Spain) represented 57% of EU. BWI Group aims to further
penetrate the suspension system aftermarket segment which will be another
meaningful profit driver given that the aftermarket segment gross margin is 50%
compared with 23% - 25% in the primary market. BWI Group estimates
aftermarket sales to expand from HK$80mn in 2014 to HK$170mn by 2017.
Exhibit 7: Aftermarket sa les forecast
Source: Company data, OP Research
Jaguar/Land Rover49%
BMW/MINI11%
GM5%
Citroen/Peugeot4%
Volvo3%
Others28%
40 40 40 40
4570
95
130
0
40
80
120
160
200
2014 2015 2016 2017
(HK$ mn)
UK Poland
Wed, 26 Nov 2014
BWI (2339 HK)
Page 13 of 19
Valuation
The target company reported a net profit of RMB114mn in FY13, and a net profit
of RMB75mn in 5M14, up 25% yoy compared with 5M13. Management believes
BWI Europe to deliver net profit growth of 20% in 2014, and a sustainable
10%-15% profit growth beyond 2015.
Based on our preliminary estimates which assume the listco has no major
liabilities or continued losses from the legacy, BWI Intl’s is likely to achieve
RMB137mn/RMB150mn net profits or HK$0.034/HK$0.037 fully diluted EPS in
FY14/15E based on 5.129bn outstanding shares.
The fair value of HK$0.56 per share at 15x FY15E PE or 25% premium to peers
average 12x FY15E PE, in our view, is justified by (1) potential further asset
injections from parent group, the North American in 2016 and China business in
2017, which with similar sales scale (USD150mn sales for North American
business and USD240mn sales for China business as compared to ~USD380mn
sales for European business in FY14E), (2) a leading market position in global
brake and suspension system market, and (3) strong shareholder backgrounds.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 14 of 19
Investment risks
Client concentration
In 2013, Jaguar/Land Rover was BWI Europe’s single largest customer
accounting for 49% of BWI Europe’s revenue followed by BMW 11%, GM 5%,
Peugeot/Citroen 4% Volvo 3% respectively.
Cost pressure from OEM
According to management, OEMs typically ask for discounts on auto parts which
BWI Europe will need to mitigate by streamlining costs.
Slower than expected luxury vehicle sales
Given BWI Europe’s exposure to the luxury passenger vehicle market, slower
than expected sales will hurt the company’s revenue and profitability.
Currency risk
BWI Europe’s reporting currency is in RMB, whilst sales and expenses are
denominated in a mixture of foreign currencies including USD, Pound Sterling,
Polish Zloty and Euro. For example, in the first five months of this year, BWI
Europe recorded an exchange loss of RMB10.3mn mainly on RMB appreciation.
M&A execution risk
BWI’s solid earnings growth in future and stock re-rate catalysts are highly related
to the successfully of injection and further M&A events. BWI needs to overcome
the obstacle of culture, politics and managements of different regions. Any
shortfall may cause failure, and that will adversely hurt investment sentiment, as
well as earnings forecasts and valuations.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 15 of 19
Management profile
Mr. Jiang Yunan (蔣運安), Executive Director and Managing Director, aged 53,
responsible for the overall business development and day-to-day management of
the group. Prior joined BWI, he served in various positions in the groups of
Shougang Corporation. Since June 2014, Mr. Jiang started serving as the deputy
part secretary, a director and the president of BWI, where is responsible for the
implementation of strategy, business development and day-to-day management
of BWI Group.
Mr. Li Shaofeng (李少峰 ), Executive Director, aged 47, responsible for
overseeing the operations of the group. Mr. Li also holds various positions in
other listed companies, such as Shougang Concord Int’l Enterprises Company
Ltd; Shougang Fushan Resourses Group Ltd; and Global digital Creations
Holding Ltd.
Mr. Xu Ning (徐凝), Non-executive Director and the Chairman, aged 60,
responsible for providing leadership of the Board and ensuring the Board’s
working efficiently and performing its responsibilities. Mr. Xu is the member of the
standing committee of the communist party since 1996. He also has been the
director and deputy chairman of Beijing Shougang Company Ltd.
Mr. Zhang Yaochun (張耀春), Non-executive Director, aged 56, responsible for
scrutinizing the performance of the group. He was the chairman and GM of
Beijing City Fangshan District General Company in 2002. He has been the
chairman of the labour union of BWI in 2012.
Mr. Craig Allen Diem, Non-executive Director, aged 53, responsible for
scrutinizing the performance of the group. Mr. Diem is currently the director of
programme management and strategic development of BWI. He had served in
different positions in GM since 1983 with the last position as the country manager
of Korea. He was also transferred to Delphi Automotive Systems Limited. In 2001,
Mr. Diem became the product team leader of the brake corner team in Delphi
Automotive Systems.
Wed, 26 Nov 2014
BWI (2339 HK)
Page 16 of 19
Exhibit 8: Financial summary of BWI Europe
Year to Mar (RMB mn) FY11 FY12 FY13 5M13 5M14
Income Statement
Turnover 2,125 2,185 2,477 1,055 1,202
COGS (1,602) (1,673) (1,916) (816) (926)
Gross profit 523 513 561 239 276
Other revenue 15 11 21 3 15
Selling costs (36) (14) (14) (6) (13)
Administrative costs (425) (350) (411) (155) (170)
Other expenses (32) (11) (5) 0 (10)
Operating profit 46 149 151 80 97
Finance income (7) (6) (6) (2) (2)
Profit before tax 39 143 146 78 96
Taxation (10) (29) (32) (18) (20)
Net income 29 115 114 60 75
Balance Sheet (RMB mn)
Non-current assets 165 219 256 261
Current assets 668 781 831 991
Current liabilities 495 496 520 578
Non-current liabilities 116 171 161 163
Source: Company data, OP Research
Exhibit 9: Key financial ratios of BWI Europe
FY11 FY12 FY13 5M14
Inventory turnover days 25 29 29 25
A/C receivable turnover days 49 52 51 51
A/C payable turnover days 54 61 61 59
Current ratio 134.9% 157.6% 159.8% 166.2%
Quick ratio 111.9% 126.9% 130.8% 138.7%
Gearing ratio 62.4% 36.5% 25.4% 20.5%
Net debt / equity 4.5% Net cash Net cash Net Cash
Interest coverage (X) 6.2 24.9 26.8 49.7
ROE 12.9% 41.2% 30.8% N/A
ROA 3.5% 12.5% 10.9% N/A
Operating cash flow 69,360 136,708 169,490 42,659
Source: Company data, OP Research
Exhibit 10: Key financial summary of listco
(RMB mn) Year ended 31 March 2013 Six months end 30 June 2014
Revenue 133 39
Growth (%) -34%
Net profit 3 218
Growth (%) -52%
Diluted EPS (RMB) 0.003 0.102
Consensus EPS (RMB)
EPS growth (%) -53%
ROE (%) 1.7% 136.6%
P/E (x) 121.6 3.0
P/B (x) N/A 21.2
Yield (%) 0 0
DPS (HK$) 0 0
Source: Company data, OP Research
Wed, 26 Nov 2014
BWI (2339 HK)
Page 17 of 19
Exhibit 11: Peer Group Comparison
Company Ticker Price
Mkt cap
(US$m)
3-mth
avg t/o
(US$m)
PER
Hist (x)
PER
FY1 (x)
PER
FY2 (x)
EPS
FY1
YoY%
EPS FY2
YoY%
3-Yr EPS
Cagr (%) PEG (x)
Div yld
Hist (%)
Div yld
FY1 (%)
P/B Hist
(x)
P/B FY1
(x)
EV/
Ebitda
Hist
EV/
Ebitda
Cur Yr
Net
gearing
Hist (%)
Gross
margin
Hist (%)
Net
margin
Hist (%)
ROE
Hist
(%)
ROE
FY1
(%)
Sh px
1-mth %
Sh px
3-mth %
Beijingwest Indu 2339 HK 0.35 114 0.6 10.5 N/A N/A N/A N/A N/A N/A N/A N/A 19.35 N/A 73.3 N/A N/A 10.5 3.3 N/A N/A (7.9) (11.4)
HSI 23,843.91 10.3 11.1 10.3 (6.9) 7.4 3.2 3.48 3.8 3.6 1.34 1.32 13.0 11.9 2.3 (5.3)
HSCEI 10,782.91 7.5 7.3 6.8 1.6 7.5 6.3 1.16 4.1 4.4 1.13 1.09 15.2 14.9 3.8 (3.0)
CSI300 2,685.56 11.6 10.9 9.5 6.8 15.2 12.1 0.90 2.2 2.7 1.67 1.57 14.4 14.4 12.3 14.6
Adjusted sector avg* 16.0 13.3 10.6 35.4 18.4 25.2 0.54 1.8 1.7 3.34 3.63 10.4 8.6 21.6 16.9 5.6 16.1 21.5 5.7 1.4
Nexteer Automoti 1316 HK 6.40 2,061 2.1 13.8 13.5 10.7 1.7 26.2 17.8 0.76 1.1 1.5 3.63 2.72 9.9 7.3 46.4 14.2 4.6 29.6 22.6 (6.2) 9.8
Minth Group Ltd 425 HK 15.62 2,209 1.4 13.8 11.7 10.1 17.7 16.1 16.3 0.72 2.9 3.1 1.76 1.61 10.4 8.2 0.0 33.0 17.6 14.2 14.5 1.3 (3.5)
Xinchen China Po 1148 HK 3.71 616 1.1 13.2 12.9 10.0 2.3 29.1 40.8 0.32 N/A N/A 1.73 1.51 10.5 9.1 0.0 19.7 10.5 15.5 12.0 (8.4) (15.1)
Amer Axle & Mfg AXL US 20.94 1,586 22.7 17.0 9.4 8.3 82.0 12.7 27.5 0.34 N/A 0.0 9.37 7.65 7.0 5.7 4,181.8 14.9 2.9 N/A 131.7 18.2 16.3
Autoliv Inc ALV US 99.55 9,012 66.4 19.6 17.3 15.0 13.3 15.0 14.8 1.17 2.1 2.1 2.46 2.44 8.5 8.2 0.0 19.4 5.5 10.9 13.1 10.2 (3.7)
Delphi Automotiv DLPH US 72.81 21,558 146.2 18.7 14.4 12.8 30.1 12.4 19.3 0.74 1.4 1.4 7.46 6.88 10.6 9.0 29.8 17.6 7.4 46.3 48.1 9.0 2.9
Johnson Controls JCI US 50.52 33,656 162.9 28.1 14.0 12.0 100.8 16.9 39.8 0.35 1.7 1.9 2.97 2.61 12.3 9.7 53.3 15.5 2.8 10.3 18.8 16.0 3.3
* Outliners and "N/A" entries are in red and excl. from the calculation of averages
Source: Bloomberg, OP Research
Wed, 26 Nov 2014
BWI (2339 HK)
Page 18 of 19
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