MAJOR REGIONAL DISTRIBUTOR OF STEEL PRODUCTS TO INDUSTRIAL END-USERS CORPORATE PRESENTATION RHB INVESTMENT SEMINAR 11 OCTOBER 2016 Corporate Presentation 1
ESTABLISHED STEEL DISTRIBUTOR IN SINGAPORE AND THE REGION Corporate Presentation 2
CORPORATE OVERVIEW MAJOR REGIONAL STEEL DISTRIBUTOR • Over 40 YEARS of operating history • Focus on INDUSTRIAL END-USERS • Broad customer base from diverse industries across ASIA PACIFIC • Established reputation as a reliable distributor to the MARINE AND OFFSHORE SECTOR • One of Singapore’s LARGEST SUPPLIERS of steel products Corporate Presentation 3
CORPORATE OVERVIEW CORPORATE MILESTONES Mr Lee Choon Bok appointed as MD 10 th year of listing on the Ms Yvonne Lee SGX Mainboard Acquired third appointed as warehouse Acquired one of Group MD Incorporation Singapore’s of Asia Listed on SGX largest covered Enterprises Mainboard warehouses 1961 1973 1980 1985 2003 2005 2007 2010 2013 2015 1996 Established steel processing JV Recognised as Marked 40 th one of Forbes year in the Asia’s 200 “Best steel business Acquired second warehouse under A Billion” Corporate Presentation 4
CORPORATE OVERVIEW STEEL – A BASIC MATERIAL FOR MULTIPLE INDUSTRIAL USES Some common steel products and their applications : PRODUCT APPLICATION FLAT PRODUCTS Shipbuilding Plates Shipbuilding, ship repair & conversions High-tensile Plates High strength hull structures, offshore structures, steel towers & structures Hot-rolled Plates Buildings, bridges, steel towers, machining parts, containers Deck flooring in buildings, ships, towers Chequered Plates Electro-galvanised steel Precision metal stamping, automotive, electrical appliances and electronics coils/sheets LONG PRODUCTS Beams Support columns and beams for buildings, bridges, underground structures, structural fabrication for ships, machinery, railway coaches Structural reinforcement for steel towers, building Angles frames, bridges, ships Steel Pipes Line pipes for steam, water, oil and gas transmission, and also used in chemical processing Corporate Presentation 5
CORPORATE OVERVIEW STEEL DISTRIBUTORS PLAY A KEY INTERMEDIARY ROLE Industry Value Chain Supply Demand Industrial End-Users Industrial End- Steel Mills / Users Traders Value-add FACILITATE IMBALANCES BETWEEN DEMAND AND SUPPLY • Bridge time lag between production and usage • Readily available inventory for Just-In-Time delivery • Flexible order sizes • Steel processing facilities Corporate Presentation 6
CORPORATE OVERVIEW ONE-STOP SUPPLIER TO CUSTOMERS IN THE REGION Comprehensive Array of Products Stock more than 25 product categories - Over 1,200 items Corporate Presentation 7
CORPORATE OVERVIEW LARGE WAREHOUSING FACILITIES Combined land area of 45,934 sq m - ~80% of steel items stored in covered warehouses for protection 25 Pioneer Sector 2 3 Pioneer Acquired in 2003 Sector Walk Acquired in 1996 36 Penjuru Lane Acquired in 1980 Undergoing re- development for lease renewal. Completion expected in Oct 2017 Corporate Presentation 8
CORPORATE OVERVIEW DIVERSE BASE OF MORE THAN 700 ACTIVE CUSTOMERS E NGINEERING / Marine and Offshore F ABRICATION C ONSTRUCTION First & second-tier Mid-sized yards in the players region O IL AND G AS M ANUFACTURING P RECISION M ETAL S TAMPING Industrial end-users in Singapore, Indonesia, Malaysia and other countries in Asia Pacific Corporate Presentation 9
CORPORATE OVERVIEW HIGH BARRIERS TO ENTRY Capital Intensive Established Network Industry Expertise • Critical mass of customers • Substantial inventory with a • Over 40 years of experience diverse range of products • Wide network of established • Strong network of industry and reliable suppliers • Heavy investment in storage contacts and equipment facilities Corporate Presentation 10
STEEL INDUSTRY & BUSINESS REVIEW Corporate Presentation 11
STEEL INDUSTRY MEPS Global Composite Carbon Steel Price* (US$/tonne) 1200 • MEPS Global Steel Price rose for six straight months since the start of 2016 1100 Global prices declined 1000 from 2H2011 • China steel mills restarted idle capacity 900 800 Post global • China accounts for half the world’s steel financial Supply 700 output. Its steel production increased for crisis Steel prices softened during 2014. outstripped six straight months from March to August 600 Sluggish demand especially in demand 2016 second half when oil prices fell 500 400 • Average prices in 1H16 were still below Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 the levels in 1H15 1800 World crude steel 1600 production (million tonnes) -0.9% 1400 Crude steel production year-on- continued to expand year 1200 1000 800 2008 2009 2010 2011 2012 2013 2014 2015 Jan-Aug SOURCE : MEPS, WORLD STEEL ASSOCIATION 16 *Prices illustrate the general steel price trend and are Corporate Presentation not representative of the Group’s buying/selling prices 12
BUSINESS & FINANCIAL REVIEW GROUP REVENUE (S$ M) GROSS PROFIT MARGIN 27.3% Reflection of weaker industry conditions 170.2 13.2% 11.4% 12.3% 10.8% 7.8% Steel demand affected by slump in 133.7 oil prices and 115.1 softness in coal FY11 FY12 FY13 FY14 FY15 1H16 commodity markets NET PROFIT (S$ M) Higher tonnage 65.1 sales offset impact Profit Turnaround of lower ASP 8.9 32.3 3.7 1.5 1.7 2.0 17.8 18.2 FY11 FY12 FY13 FY14 FY15 1H15 1H16 -12.1 One-time inventory write-down of S$9.8M FY11 FY12 FY13 FY14 FY15 1H16 Corporate Presentation 13
BUSINESS & FINANCIAL REVIEW FY2015 FY2014 Engineering & By Customer Segment Engineering & Fabrication, 28% Fabrication, 22% Marine and Construction, Marine and Offshore, 50% Offshore, 31% 16% Construction, 9% Stockists/ Stockists/ Others, Traders, Others, Traders, 12% 7% 14% 11% By Geographical Market* Singapore, Singapore, 72% 48% Indonesia, 39% Indonesia, 10% Malaysia, Malaysia, 8% 6% Others, 12% Others, 5% *Based on shipment destination Corporate Presentation 14
POSITIONED TO RIDE THE STEEL INDUSTRY CYCLES Corporate Presentation 15
MARKET OUTLOOK INDUSTRY VIEWS GROUP OUTLOOK Benefited from recovery in steel prices and end- BMI Research 1 : users’ restocking activities • Expects lower steel prices in coming quarters Sustained profitability during 1H2016 • Weak demand in China will lead to oversupplied market However, cautious view of the operating • Predicts steel prices to edge higher from 2017 environment Supply-side concerns | End-user demand remains MEPS 2 : modest | Steel price volatility • Expects steel prices in China to come under Despite prevailing headwinds, Asia Enterprises pressure in the second half of 2016 due to ramp-up in output by Chinese mills has a sturdy foundation to endure slower business periods 1 BMI Steel Report, BMI Research 2 MEPS, “MEPS Global Steel Price Rises Again in June” published 30 June 2016) Corporate Presentation 16
WITHSTANDING INDUSTRY SLOWDOWN (S$ million) Well-positioned to withstand As at 30 June 2016 challenges Cash 68.1 Strong balance sheet – high cash Debt (including trust receipts) 0.0 balance and no debt, strong asset position and minimal liabilities Total assets 102.8 Total liabilities 4.6 Experienced management team – navigated the Group through several Net asset value 92.5* economic and business cycles Financial Ratios Focused on sustainability – Gearing Zero borrowings Financial discipline and lean Current ratio 22.6 times operating structure *Attributable to equity holders of the Company Corporate Presentation 17
CAPITALISING ON THE DOWN CYCLE Positioned to capitalise on market recovery opportunities Taking advantage of slower market conditions to redevelop a warehouse and upgrade equipment • Expected completion by end-2016 • On completion, it will be one of the largest multi-storey covered warehouses for steel products in Singapore • 30% expansion in gross floor area; doubles storage capacity 36 Penjuru Lane • Additional loading bays and new cranes with higher Artists’ Impression lifting capacities • Improved design and layout Construction-in-progress • Increases operational efficiency, productivity and improves utilisation of manpower resources • Raises market competitiveness and enhances customer service standards Corporate Presentation 18
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