Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
SUGA INT'L
HKEx Stock Code : 00912 
 
Corporate Profile
Principally engaged in the research and development, manufacturing and sale of electronic products, moulds and plastic products.

Business Review - For the year ended March 31, 2013

Electronic products

The electronic products segment generated sales of HK$1,075.4 million (FY2011/12: HK$1,193.3 million), accounting for 97.1% of the Group's total sales.

While the lackluster economic conditions did affect some of our clients, we were able to leverage our balanced product portfolio to sustain the growth of some of our major products, thus mitigating the impact of lower demand for other products. In respect of pet training devices, we saw satisfactory sales growth as the pet market in the U.S. gradually picked up. As for the professional audio equipment segment, it performed in a stable manner, providing a steady source of income to the Group. However, sales from general consumer electronic products tapered slightly, as a renowned Japanese client took a more conservative approach towards placing orders, a clear indication of the sluggish economic climate. The underperformance of the interactive educational products business was more prominent than expected in the second half year as our partner, which principally operates in Europe, continued to be impacted by the economic crisis and weak consumption sentiment.

SUGA was able to capture more opportunities with longstanding partners by enhancing its value-added services. Case in point, our pet training devices and interactive education products partners have sought for our greater involvement in product development, seeking to leverage the Group's R&D expertise and cost advantage.

Apart from protecting the wellbeing of our existing businesses, we have sought to enter new product segments. The PETNFANS pet tracking product is a clear example. Introduced at the Hong Kong Electronics Fair (Spring Edition) in April 2013, PETNFANS, which employs Bluetooth 4.0 low-energy technology, received a warm reception from the market.

Moulds and plastic products

Sales from the moulds and plastic segment recorded revenue of HK$32.1 million (FY11/12: HK$48.7 million), accounting for 2.9% of SUGA's total sales. With most of the products from this segment used to satisfy the Group's internal needs, such accessibility again highlights the importance of the business in playing a vertical integration role. Despite the ancillary position of this business, the management remains committed to ensuring that a reasonable margin level is sustained.

Business Outlook - For the year ended March 31, 2013

Despite economic conditions in Europe remaining shaky, there are signs of an economic recovery in the United States, which, as the world's largest economy, will help moderate volatility in the global economy. What is more, the generally positive sentiment from customers about the coming financial year offers optimism for the Group. As opportunities emerge in tandem with greater consumer confidence, SUGA will be prepared to grasp such opportunities.

For interactive educational products and pet training devices, new models will be launched in FY2013/14. We expect that sales from these new models together with recovering demand for existing models will help drive up revenue for the two product segments.

We are also proactively strengthening ties with customers by offering value-added services, with the ultimate goal of enhancing our profit margins. For the past several years, SUGA's R&D capability has been gaining recognition from its partners, resulting in a gradual rise in collaborative work. In view of our cost advantage and ability to deliver reliable technologies, we were selected to develop a new interactive educational product and pet training device. Aside from these products, we are working with a U.S. partner on a telecommunications device for the hearing impaired. The management is optimistic about the potential of this niche product as it will be particularly relevant to the elderly, and given that many parts of the world have aging populations. We will seek to secure still more R&D opportunities with existing and new customers going forward.

Yet another product in the works is PETNFANS, a pet tracking product that employs Bluetooth 4.0 technology and directed towards smart phone users. It will be introduced on the market in July 2013. We will be exploring even more applications for Bluetooth 4.0 as we seek to tap a larger variety of electronic devices.

Market research indicates that the online market for pet products in the PRC is immense. We are therefore exploring the possibility of cooperating with partners experienced in online retailing with the goal of introducing a dedicated platform for our pet products. This online store will create a direct link with physical stores to improve brand recognition and sales.

Complementing on product development efforts will be the consolidation of our production activities. The activities that have been conducted at our Buji and Xi Xiang factories will be brought to the Dongguan facility in 2014. This will lead to centralized production and allow us to capitalize on lower labor costs. Having commenced construction at the end of 2012, the Dongguan factory is expected to be completed in the first quarter of 2014.

Following the decision to shift production to Dongguan, the Group entered into a Sale and Purchase Agreement in December 2012 regarding the Buji Shenzhen property, which is where one of the factories is currently located. A cash consideration of RMB138,000,000 has been agreed upon with the purchaser, and the transaction will be completed in 2014.

Though the global economic recovery remains slow, we will leverage our solid foundation to explore new business opportunities, so as to deliver satisfactory returns to our shareholders.

Source: Suga Int'l Hold (00912) Annual Results Announcement
Chairman NG Chi Ho Issued Capital (shares) 272M
Par Value HKD 0.1 Market Capitalisation (HKD) 531M
 
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