solomon systech (international) limited 20-21 october … oct 2005 sing ndr.pdf · worldwide large...
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7 September 2005Hong Kong
Solomon Systech (International) Limited
20-21 October 2005Singapore
www.solomon-systech.com
P. 2Nomura Singapore NDR 20-21 Oct
Table of contents Table of contents
• Our mission • Interim results• Q3 performance • Business outlook • Investment summary
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P. 3Nomura Singapore NDR 20-21 Oct
Our Mission Our Mission Our Mission Our Mission
www.solomon-systech.com
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Mission statements Mission statements
• Be a dominant display IC supplier • Be a respectable enterprise with high standard of
business integrity
Newdisplay
Largedisplay
Mobiledisplay
Display panel
Display system
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Market potential Market potential –– mobile display mobile display
Worldwide mobile phone shipments (m)
500
600
700
800
900
1,000
2004 2005 2006 2007 2008
2G & 2.5G 3G
Worldwide MP3 player shipments (m)
0
20
40
60
80
100
120
140
2004 2005 2006 2007 2008
1.8+ inch HD 1 inch HD Flash
Source: IDC, April 2005 Source: CIBC World Markets, April 2005
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Market potential Market potential –– large display large display
Worldwide large display shipments (m)
0
50
100
150
200
250
2004 2005 2006 2007 2008
Notebook LCD monitor
Source: CIBC World Markets, April 2005; HSBC, March 2005
Worldwide large display shipments (m)
0
10
20
30
40
50
60
2004 2005 2006 2007 2008
LCD TV Plasma
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Market potential Market potential –– new display new display
E-Paper
LED
Micro Display
BacklightSamsung’s 46” LED
powered LCD TV
Outdoor TV Automotive Indoor lighting
Digital Camera Viewfinder
Eyewear for Video & 3D Games
Electronic Signboard
Timepiece Credit Card with Flexible Display
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Interim Results Interim Results Interim Results Interim Results
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• Turnover up 69%, year-on-year • Net profit growth of 62% • EPS reaching 11.7 HK cents for the 6-month period • Dividend per share of 4.0 HK cents • Global market share in mobile display ICs
approaching 20%
Summary Summary –– Continuing to deliver Continuing to deliver
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Profit and loss Profit and loss
54%2.64.0 Dividends per share
39%8.411.7Earnings per share*
(HK cents)
62%22.536.3Profit attributable to shareholders
46%39.757.9Gross profit
69%110.1185.7Turnover
Change20042005(US$ million)
YoYSix months ended 30 June
* EPS calculation is based on the weighted average number of shares for the period
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Balance sheet Balance sheet
(HK cents)
19%148.7176.3Shareholders’ funds
20%124.4149.9 Net cash
21% 3947Net cash per share
20% 4655Shareholders’ funds per share
N/ANilNilTotal borrowings
25%190.9238.2Total assets
ChangeAs at 30
June 2004As at 30
June 2005(US$ million)
Note: 2004 balance sheet items extracted from interim report without restatement All per share figures are based on the outstanding shares of the Company at the period-end
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Adopting of new accounting standards Adopting of new accounting standards
• Effective date January 1, 2005
• Impact immaterial• One standard
worth mentioning
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HKFRS 2 HKFRS 2 –– Share based paymentsShare based payments
• Its impact on SSIL can be summarized below:
~1.0%~0.2%~0.2%Dilution (increase in no. of shares)
~2.0%b~1.5%b<1.0%aExpense* (as % of revenue)
2007P2006P2005EImpact on
* The dollar value impact on expense is reflected as a percentage of 2005E revenue Note (a): Estimated impact on expenseNote (b): Projected impact on expense assuming the equity compensation, revenue and profit are the same in 2005
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Units shipment by product line Units shipment by product line
0
20
40
60
80
100
120
1H 2002 1H 2003 1H 2004 1H 2005
Un
its
(mill
ion
) LARGE PANEL OTHERSOLEDm-TFTCSTNMONO
Source: Solomon Systech
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Gross margin and market shareGross margin and market share
0%
10%
20%
30%
40%
50%
2002 2003 2004 1H 20050%
5%
10%
15%
20%
25%Gross margin SSIL market share (RHS)
Assumptions:(1) Mobile handsets with dual display as a percentage of overall mobile handsets shipped in the previous years are 15% (2001), 20% (2002), 23% (2003), 27% (2004) and 29% (1H 2005) respectively (2) 90% of the Group’s display ICs are used for the mobile handsets(3) A total of 383 million units of mobile handsets shipped in 1H 2005 Note: 1H 2005 gross margin number is unaudited
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What we delivered in the first half? What we delivered in the first half?
Mobile display
New display
Large display
• m-TFT display ICs for 3G phone
• OLED display ICs for MP3 player
• Controller ICs for micro-display applications
• TFT driver ICs for LCD TV, LCD monitor and notebook
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New awards in the first half New awards in the first half
2005 International ARC AwardsGrand Winner – Best of Hong Kong
2004 Employer of the Year Award- Manufacturing
2005 International ARC AwardsOverall Annual Report Gold Award
- Technology Consulting
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Q3 Performance Q3 Performance Q3 Performance Q3 Performance
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Wafers started Wafers started
0
20,000
40,000
60,000
80,000
100,000
120,000
Q1 Q2 Q3
6"8"
Source: Solomon Systech
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Units shipment and bookUnits shipment and book--toto--bill ratiobill ratio
0.5
1.0
1.5
2.0
2.5
Q12002
Q3 Q12003
Q3 Q12004
Q3 Q12005
Q30
10
20
30
40
50
60
70
80
Units shipment (million) Book to bill ratio (LHS)
Source: Solomon Systech
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Change in blended ASPChange in blended ASP
Note: Quarterly change in ASP for the corresponding period Source: Solomon Systech
-40%
-20%
0%
20%
40%
Q12002
Q3 Q12003
Q3 Q12004
Q3 Q12005
Q3
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Design wins Design wins
0
10
20
30
40
50
Q12002
Q3 Q12003
Q3 Q12004
Q3 Q12005
Q3
Source: Solomon Systech
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Business OutlookBusiness OutlookBusiness OutlookBusiness Outlook
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General views on the second half General views on the second half
• Demand for mobile handsets and MP3 players
• New products and customers
• Stability of wafers supply
• Cost of sales
• Pricing pressure
• Competition
Most favorable Most unfavorable
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P. 25Nomura Singapore NDR 20-21 Oct
Expected units growth of 2H versus 1H Expected units growth of 2H versus 1H
Note: Others include large display driver ICs and new display products
0 - 50% 50 - 100% >100%
MONO
CSTN
M-TFT
OLED
OTHERS
Growth
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Investment Summary Investment Summary Investment Summary Investment Summary
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High growth High growth
Earnings Per Share
11.7
0
4
8
12
16
1H 2003 1H 2004 1H 2005
HK cents
CAGR 80%
Turnover
185.7
0
50
100
150
200
1H 2003 1H 2004 1H 2005
US$m
CAGR 100%
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High dividend payout High dividend payout
79%79%79%79%47.047.047.047.059.259.259.259.2Total 2004 Total 2004 Total 2004 Total 2004
US$ millionUS$ millionUS$ millionUS$ million
107%38.736.32H
Year 2005
36%12.936.31H
36%8.322.91H
Year 2004 Payout ratioPayout ratioPayout ratioPayout ratioDividendDividendDividendDividendNet profitNet profitNet profitNet profit
Source: Solomon Systech interim and annual reports
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High ROE High ROE
0
40
80
120
160
200
2002 2003 2004 1H 2005
US
$m
0%
10%
20%
30%
40%
50%
Net profit Shareholders' funds Return on equity (RHS)
Note: ROE is calculated by net profit divided by shareholders’ funds. For 1H 2005 ROE figure, net profit is multiplied by a factor of 2, then divided by the shareholders’ fund as of 30 June 2005.
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P. 30Nomura Singapore NDR 20-21 Oct
What do you look for?What do you look for?
• High growth• High dividend• High ROE• Leading market position• Strong balance sheet• Cash generative business• Share based payment
The answer is Solomon Systech
~80% EPS growth
~20% global market share
~80% dividend payout ratio
>40% return on equity
~US$150m net cash
Fabless model with min capex
Transparent and fair treatment
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P. 31Nomura Singapore NDR 20-21 Oct
Thank YouThank YouThank YouThank YouSolomon Systech (International) LimitedSolomon Systech (International) LimitedStock code: 2878 HKStock code: 2878 HK
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About Solomon SystechAbout Solomon SystechAbout Solomon SystechAbout Solomon Systech
www.solomon-systech.com
www.solomon-systech.com
P. 33Nomura Singapore NDR 20-21 Oct
Who are we? Who are we?
• Founded in 1999, a spun off unit of Motorola• Listed on the Main Board of the Stock Exchange
of Hong Kong (stock code: 2878) in April 2004• Included in the MSCI Hong Kong in May 2005,
with current market capitalization of roughly US$900 million
• A leading global flat panel display IC company, providing one-stop solutions for global customers
• The largest fabless IC company in Hong Kong and China in terms of revenue
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P. 34Nomura Singapore NDR 20-21 Oct
Business model Business model
Customers
Sales & Marketing
Design & Development
Outsource Manufacturing
Mask Making
Wafer Manufacturing
Packaging and Testing
Quality Control
Co-development Own brand display ICs
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Chain of customers Chain of customers
Display IC makers
More than 70 module makers
Global brand names
OEM ODM Own factory
Note: Customers related to mobile handsets business
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P. 36Nomura Singapore NDR 20-21 Oct
New customers added New customers added
Business with Solomon Systech
0
5
10
15
20
2004 2005E
No.
of c
usto
mer
s
>US$ 10m >US$ 5m
Source: Solomon Systech
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Existing productsExisting products
Monochrome STN
Color STN
OLED
m-TFT Motorola Motorola Motorola
Putian TCL UTStarcom
Nokia Sony Ericsson LG
Motorola Samsung Philips
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Existing products (continued) Existing products (continued)
E-paper(Flexible watch)
Graphics controller (Coffee machine & printer)
OLED products (MP3 player)
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0
500
1,000
1,500
2,000
2,500
3,000
3,500Q
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US$
mRankings Rankings –– global top 25 global top 25 fablessfabless companies companies
Note: Rankings based on 2004 FY revenue Source: FSA (April 2005) and ITRI / IEK (May 2005) No. 24
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Rankings Rankings –– total driver market shares total driver market shares
1.5Renesas152.2Leadis142.2Philips 133.4Magnachip123.8Sanyo114.3Matsushita 104.4Himax94.5Solomon Systech 84.5Toshiba75.2Oki / TI 66.2Novatek56.4Sharp46.7Seiko Epson 39.7NEC2
20.6Samsung Electronics1Market share (%) Company Position
Note: Rankings based on 2004 FY performanceSource: iSuppli Display Electronics (March 2005)
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Shareholding structure Shareholding structure
JP Morgan 5.1%CBA
8.0%
GIC5.1%
CIDC Funds4.4%
Public 64.3%
Corporate Investor
3.6%
Board of Directors
9.5%
Source: Hong Kong Stock Exchange and Solomon Systech, as at October 17, 2005