A short article with not too much detail.
The two good things:
1. IOT segment has grown tremendously at 30% CAGR over the last 3 years making up over 80% of revenue to date.
2. Plenty of cornerstone investors including JPM Asset management.
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The not-so good things:
1. Track record of management is disappointing - Company previously was listed at $1.00 and delisted at S$0.42.
2. Company interests in business outside electronics is odd - purchasing of Kay Lee Roast Meat by the parent group seemed like a strange detour from electronics focus.
3. A deep dive into the company found the following:
- LED segment is falling significantly over the years making up about 15% of revenue now
- Annualized revenue for FY20 likely fell y-o-y meaning that while some parts of the company flourished in 2020, some didn't, that is not good for a manufacturing company (supposedly less impacted by COVID-19 demand fall)
- No moats. The top 4 favourite moats of mine are Proprietary Tech, Network Effects, Brand and Economies of Scale - yet I don’t see that they have any of that. I would think at best they have some EoS.
- High concentration risk, top customer makes up nearly 60% of sales (most of its growth is from the one customer) while the top 3 make up about 82%. A further dive into the top customer make it seem that it is probably Amazon's blink whom they manufacture security cameras for. There is always a possibility of losing this contract in the future damaging the company significantly.
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Summary: I normally don’t take the opposite side of cornerstone investors. But the business, management, lack of moats and high concentration risk makes me think the business at S$990m is not worth the money. As such, I would advice friends to avoid this.
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