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Public company info - Time Interconnect Technology Limited , 01729.HK
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Time Interconnect Technology Limited, 01729.HK - Company Profile
Chairman Lo Chung Wai Paul
Share Issued (share) 1,840,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Telecomm. & Networking Equipment
Corporate Profile Business Summary: The Group is principally engaged in the manufacturing and sales of cable assembly products. Performance for the year: The Group’s revenue for FY2020 increased by HK$124.4 million to HK$1,438.8 million from $1,314.4 million in the previous financial year, which represented an increase 9.5% as compared to last financial year. Total profit for the year of the Company for FY2020 was HK$128.1 million, an increase of HK$5.2 million or 4.2% as compared to the last financial year. Basic earnings per share for FY2020 were HK7.0 cents as compared to the basic earnings per share of HK6.7 cents in the previous financial year. Business Review： The Sino-U.S. trade war has caused the overall slowdown of global economic market. The trade and tariff disputes between the United States and China caused further impact on the telecommunication and industrial equipment sector. Since the Department of Commerce of the United States had added the Group’s largest customer (“Customer A”) in telecommunication sector to the entity list under Export Administration Regulations, companies from the United States will not be permitted to sell goods or services to this customer without the relevant license or authorisation. Meanwhile, the Sino-U.S. trade war also lead to depreciation of Renminbi. During the FY2020, the average foreign currency exchange rate from converting Renminbi into Hong Kong dollars was 4.1% lower than the previous financial year. The Renminbi revenue converted into Hong Kong dollars decreased by HK$29.6 million, representing 2.1% of the Group’s revenue. Telecommunication, medical equipment and industrial equipment sectors were also affected by this impact and revenue was reduced. On the other hand, due to the outbreak of Novel Coronavirus (COVID-19), the Group’s production capacity has dropped temporarily as the PRC government announced the temporary lockdown in various provinces since January 2020 to avoid the spreading of the pandemic. Following the end of the extended Chinese New Year holiday on 10 February 2020, the Group’s production facilities begun resuming in phases. The Group experienced a slower-than-usual return to normal conditions, as many workers around the country have delayed returning to work resulting in a loss of 60% of production capacities of February 2020. The Group’s production facilities have resumed full operations since mid-March 2020. Fortunately, the demand from customers remained relatively stable and there was no significant decrease or cancellation of sales orders from customers. The Group has proactively liaised with customers to adjust the delivery schedule in order to minimise the impact, and the delayed delivery schedule for those sales orders resumed normal in April 2020. Despite all these challenges and difficulties, the Group recorded encouraging results for the year ended 31 March 2020. The Group’s revenue for FY2020 was HK$1,438.8 million, an increase of HK$124.4 million or 9.5% as compared to the previous financial year. Operating profit increased by HK$32.4 million or 22.0%, and operating profit margin improved 1.3% to 12.5% in FY2020. The increase of revenue and profit were mainly attributable to having resolved the additional tariff issues. The shipments of the data centre sector were back to the normal level as prior to the Sino-U.S. trade war since May 2019, and the previous backlog orders have also been shipped out progressively during the year. The Group also achieved favourable results benefiting from the new production factory acquired in 2019 in order to prepare for business expansion and production lines extension. The Group has kept expanding its customer base to capture the rising business opportunities from the telecommunication equipment, data centre and medical equipment industries. In FY2020, the Group achieved recognition on its business operations, and received two Certificates of Merit presented by the 2019 Hong Kong Awards for Industries (HKAI), in the categories of “Smart Productivity” and “Upgrading and Transformation”, in recognition of the Group’s outstanding performance and achievements in enhancing its competitiveness in various aspects. Prospects: Looking ahead, the cable assembly industry is expected to sustain growth in the coming years. To meet with the market demand, the Group is striving to enhance its production capacity by acquiring a parcel of industrial land with two industrial buildings for the production, with 34 production lines were installed. The management remains confident that the Group’s enlarged production capacity and well-established business fundamentals would enable it to capture the market opportunities upon the arrival of the next-generation 5G network. With the rapid development of the 5G cellular network technology in China and the announced 5G network deployment by various mobile operators in the second half of 2019, the Company noted that there will be gradual and large scale replacement of 5G devices and equipment in the coming years, which is expected to drive the demand of cable assembly products. China has continuously made great efforts to accelerate the research and development of 5G technology. China Mobile also announced its Phase II wireless equipment centralised procurement results in March 2020, in which Huawei won the highest percentage as 57.25%. It is expected the sales order from Customer A will be increased and benefit to the telecommunication sector. In addition, with the signing of the first phase of the trade deal between China and the U.S. in January 2020, China granted tariff exemptions on various types of U.S. goods to support purchases. The easing of the trade war atmosphere will also benefit to the recovery of the global economic market. For the data centre sector, the Group has moved its supply source away from China in April 2019 for certain major components of products to be shipped to the United States for avoiding additional tariffs. Meanwhile, the Group also procured the “Country of Origin and Marking Ruling” from the U.S. Customs and Border Protection for the fibre cable assembly products in February 2019. Accordingly, the fibre cable assembly products will not be subjected to any additional tariffs when importing into the United States anymore even though the major components are purchased from China. The shipments of the data centre sector were back to the normal level prior to the Sino-U.S. trade war since May 2019, and the previous backlog orders have also been shipped out progressively during the year. The revenue of data centre sector for FY2020 has substantially increased by 51% to a record high level. As the development of 5G will boost the application of big data, IoT, internet gaming and video streaming through cloud platform, the Company remains positive and optimistic on the continuous growth of the business of data centre sector. As for the medical equipment sector, despite the decrease in the first half of FY2020 due to a major customer consuming the inventory backlog, sales orders have resumed normal in the second half of FY2020. The Group noticed that the outbreak of COVID-19 spurred medical cable orders to rise, and the number of new orders received in March 2020 have trebled as a result. In addition, as the epidemic broke out across the world, the Company expects the demand for medical cables will continue to last for a while and it will continue to bring positive impact to the Group’s medical cables orders in the coming few months. Moving ahead, the Company believes that this sector will maintain its dynamic pace of growth, considering the arising demand from the medical equipment market. To catch up with the trend, the Company will continue to enhance its medical equipment customers base, as well as to strengthen its R&D capabilities. For the industrial equipment sector, the escalation of the trade tensions between the United States and China has brought more uncertainties to the global economy and the business of industry equipment sector becomes difficult to predict. In FY2020, the Group has strove to grasp different business opportunities in order to minimise the risks and uncertainties involved in the unstable economies. After many efforts, the Group received HK$7 million trial orders from a new prestigious customer Sany in March 2020, which has become one of its major revenue contributors in this sector. Additionally, Huawei’s intelligent automotive solution BU was officially established in May 2019 and this will be a part of Information and Communication Technology (ICT) business sectors of Huawei. The Group is honoured to become one of the four first tier suppliers of Huawei in this sector. Moving ahead, the Group is expected that the demand of sales order in this sector will increase gradually for the coming year. The acquisition of Linkz Cables Limited and its subsidiaries (collectively the “Target Group”), a long-established cable manufacturer with its manufacturing facilities located in the PRC, is expected to be completed by the end of June 2020. The Target Group has over 26 years of business operation and currently owns three sizable industrial complexes situated in Shanghai and Kunshan City, Jiangsu Province. It is certified as the first market shareholder of PRC networking cable market by the China Electronic Components Association. It focuses on the manufacturing of different networking cables with copper as the transmission media and has an annual production capacity of approximately 4 million kft of networking cables. The Target Group has technical know-how in the next-generation networking cables, such as Cat 8 cables, PoE, hybrid cables and compatibility with the HDBaseT standard. The networking cable products of the Target Group are marketed and sold to large enterprises including multinational corporations and which are usually the end users, such as international networking infrastructure companies, which mainly incorporate the Target Group’s products in their networking solutions services. The Target Group sells a small proportion of its products as a majority of the networking cables on the OEM basis. The Target Group has distinct customer base as compared with the Group and its major customers are reputable multinational corporations that have presence in the PRC. After the successful acquisition, the Group’s revenue base will be significantly enlarged and its risk of customer concentration will be mitigated by merging with the diverse customer base of the Target Group. Moreover, the Company believes that the acquisition can better position the Group and the Target Group to capture the evolving opportunities brought by the rapid development of 5G technology, and strategically improves the Group’s defence position amid the global economic uncertainties. Moving ahead, the Group will continue to stay alert to the changes in economic environment and take prompt and decisive actions to maintain the Group’s competitiveness and sustainability. Meanwhile, the Group will keep enhancing its business operations, so that it is fully capable to capitalise on an eventual market turnaround.

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