Investor Presentation December 2018
Agenda 01 Introduction 02 Target Niche Markets to Fuel Sales Growth The Global Tek Alliance 03 Execution 04 Automotive Safety Systems 05 Robust Financial Performance (Airbag Inflators) 2
Global Tek - A Niche Machining Expert ⚫ Founded in 2000 & Listed on TWSE on Feb. 5th, 2018 (Ticker: 4566 TT) ⚫ Employees: 900+ ⚫ Founders + management team shareholdings are more than 50% ⚫ Revenue: NT$3.3bn in 2017 with +23% 2013-17 sales CAGR ⚫ Products: Precision metal machining for airbag inflator, powertrain system components, industrial applications and aviation products Source: TEJ and Global Tek 3
Target Niche Markets to Fuel Sales Growth Powertrain System Components 4
Auto Industry Trends Favor Powertrain Sales Growth Our powertrain products enhance fuel efficiency and are used in enhanced ICE and electrified drivetrains automobiles: ⚫ Dual Clutch Transmissions (DCT) improve fuel economy by 5~15% ⚫ Overrunning Alternator Decoupling (OAD) Systems improve fuel economy by 5% ⚫ Crankshaft vibration dampers are used in three-cylinder engines and hybrid cars Government Mandated Fuel Consumption Targets for Passenger Cars EU US China Liters per 100km 2015 5.6 7.4 6.9 Avg. 5% reduction per year 2025 3-3.4 4.7 4 Source: Global 5 Tek
Our Product Portfolio Powertrain System Industrial Aviation Airbag Inflator components Applications Products (24% 3Q18 sales) (40% 3Q18 sales) (25% 3Q18 sales) (11% 3Q18 sales) • Oil refinery industrial • Landing gear Key components, Hybrid and Three- including igniter, diffuser Cylinder Engine instruments • Engine accessories and sealing & inflator Compatible: • Semiconductor wafer • Flight control subassembly • OAD and basfilter fab instruments actuator • High-end bicycle • Crankshaft damper/pulley components suspension and • Vacuum pump component • Proximity sensor transmission systems • DCT: Dual-Clutch components Transmission components • Modular camshaft head and tailstock 6
Continuous Growth on End Demand Powertrain System Industrial Airbag Inflator Aviation Products Components Applications • Emission reduction • Rising capex at IC • New aircraft • Average # of airbags per • Engine downsizing Fabs & Oil Refineries demand • Increasing clean energy • High end and electric • LEAP engine rising car to increase to 5.2 by 2020 from 3.5 in 2014. vehicles bicycles penetration • Global Airbag market to • Out of 2023’s 110mn global • Global Semi capex for • Global aircraft ≤10 nm to grow at a grow at 4% pa, reaching vehicles, 30% are expected to volume to grow at a US$5bn by 2021 be Advanced ICEs (down- 21% CAGR from 4% CAGR between sized w/turbo) 2020-25 2016 and 2036 • Includes knee, side, • 7% are expected to be clean • WW bicycle mkt to frontal, external and curtain airbags energy vehicles vs. 5% in grow at a 4% CAGR 2018 from 2018-26 Source: GIA, IHS, SEMI, Persistence Market Research, Airbus and Boeing 7
Tier 1 Customer Portfolio Powertrain System Airbag Inflator Industrial Applications Aviation Products Components In-plant integration In-house capacity In-house capacity In-plant integration Our customers have a 65%+ share of the global airbag market Note: Key Safety Systems (KSS) acquired the global assets of Japan- based Takata Corporation in April 2018, with financial backing from KSS parent Joyson Electronics (based in Ningbo, China), PAG, an Asia based private equity firm and the Future Industry Investment Fund ("SDIC"). 8
Superior Track Record of Client Satisfaction Group Annual Annual Outstanding Supplier Award Best Supplier Best Supplier Supplier Award Performance for 10 straight Award Award 2009 Supplier Award years 2009-2010 2001-2008 2011 2002-2012 Annual Merit Approved as a Outstanding Best Supplier, Best Supplier, Supplier Award Supplier of Quality Award Drive Drive 2012 Control 2012 Line Systems Line Systems Systems 2013 2013 2012 Annual Outstanding Outstanding International Outstanding Outstanding Cooperation Quality Excellent Supplier Award Progress Award Award Service Award 2013 Award 2016 2015 2013 2015 9
“All for one, one for all” - Alexandre Dumas, The Three Musketeers The Global Tek Alliance 10
Balanced Deployment of Manufacturing Resources In-plant integration In-house capacity China – Wuxi Factory China – Xi’an Factory Taiwan – Xinwu Factory 52% total sales (2017) 8% total sales (2017) 40% total sales (2017) 444 employees 130 employees 340 employees Quality system: Quality system: Quality system: Specialization: Specialization: Specialization: Automotive Automotive Industrial Industrial Aviation Aviation Core processes: Core processes: Forging / Bar stock Core processes: Dewaxing casting CNC machining CNC machining CNC machining 11
In-House + In-Plant = Alliance Growth Engine #1 : In-House Capability ◆ Targeting complex and critical components ◆ Powertrain and aviation product manufacturing Improving Gross Margin Increasing Cash Flow Growth Engine #2 : In-Plant Integration ◆ Targeting less complex components ◆ Industrial and airbag-related products ◆ Supply chain resource management 12
Execution Industrial Instrumentation 13
Synergies of the Alliance In-house capacity Acquiring more Tier 1 orders ⚫ Key machining ⚫ Further penetration processes of existing clients ✓ Accelerate sales ⚫ New product R&D ⚫ New niche markets growth ⚫ New applications ⚫ Yield learning curve ✓ Improvement in asset Reinvestment in turnover and CCC In-plant core capabilities integration ⚫ Fine tuning process ✓ Increase ROE ⚫ Mfg. systems capabilities alignment ⚫ Enhance efficiency ⚫ Resource integration ⚫ Talent and facilities ⚫ Economies of scale ⚫ RD & QA 14
Global Tek Execution Plan Learning and growth Financial Goals • Sales Growth: maximize revenue • Dedicated, centralized R&D and from existing clients & explore niche Quality Assurance markets • Utilize Cross Functional Team • Profitability Improvement : reduce structure to create a learning OPEX rate to below 15% by 2023 organization • Target Higher ROE : increase asset • Maintain 3% R&D intensity turnover and financial leverage Capacity Expansion Customer Acquisition • Client Focus : large volume with • In-House : 15%+ gross margin and medium i) Expand core machining capacity volume with 30%+ gross margin ii) Industry 4.0 + Automation • New Niche Markets : mid-size • In-Plant Integration : clients requiring complex machining processes, such as i) Strengthen supply chain high-end durable goods & medical partnerships devices ii) Seek M&A targets in forging, • Provide Extra Services : from stamping, surface & heat machining & stamping to treatment subassembly *Cross Functional Team integrates sales, engineering, manufacturing, quality and logistics 15
Winning Formula Investment in Superior Human Resources 41% of employees are college graduates, R&D staff are 5% of total work force and 11% of R&D staff have a Master’s degree or above Supply Chain Collaboration Share resources with supply chain partners; pre-emptively invest in in-house capacity and in-plant integration Efficient Working Capital Management Lower AR days, longer AP days and an 82% asset turnover ratio result in a shorter cash conversion cycle than our peers Build a Defendable Niche in Our Focus Markets Form strategic partnerships with top-five clients in each niche market and support them with the cross function team structure and agility 16
Experienced Management Team Years in Name and Position Function Education/Experience Industry Pursue lean spirit and learning ￭ National Taiwan University EMBA Donald Huang organization culture, embed 32 ◼ Co-Founders & Associate General Manager Chairman and CEO company’s vision and strategy of Primax (4915 TT) ◼ Taiwan Feng Chia University, Jonathan Lo Xinwu Factory General 16 MS in Mechanical Engineering Executive VP Manager ◼ VP of Snap-On, Zhejiang (SNA US) Ken Liu ￭ Taiwan Chung Yuan Christian University, Wuxi Factory General Manager 15 Auto Group GM MS in Biomedical Engineering Yong Yang ￭ China Xi'an Jiaotong University, Xi’an Factory plant Head 29 Director BS in Mechanical Engineering Mike Chang ￭ Taiwan Chang Gung University, MBA Automotive Division Head 30 ￭ Manager, Global PMX (4551 TT) Director ￭ Lawrence Technological University, USA Ari Chang Aviation Division Head 21 MS in Automotive engineering Director ￭ Manager of FOX factory, Tung Pei Industrial ￭ Imperial College of Medicine, UK David Chan Industrial Division Head 23 MS in Mechanical Engineering Director ￭ VP of Lorom Industrial Lewis Yeh ￭ National Taiwan University EMBA Financial Division Head 30 ￭ CFO of Cyber Power Systems (3617 TT) CFO 17
Robust Financial Performance Aviation Products 18
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