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Public company info - SMIT Holdings Limited , 02239.HK

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SMIT Holdings Limited, 02239.HK - Company Profile
Chairman Huang Xueliang
Share Issued (share) 319,000,000
Par Currency U.S. Dollar
Par Value 2.0E-5
Industry Telecomm. & Networking Equipment
Corporate Profile Business Summary: The Group principally engage in the following activities: development and sales of conditional access modules (“CAM”) and mobile point-of-sales (“mPOS”) devices that enable secure distribution and delivery of digital content to television and secure mobile payment transactions, respectively; development and sales of rapid verification system and software; and research and development of electronic design automation (“EDA”) products. Performance for the year: The Group recorded revenue of US$38.1 million in 2019 as compared to that of US$41.3 million in 2018, representing a year-on-year decrease of 7.8%. Profit for the year increase by 836.7% to US$12.3 million. Basic earnings per share for the year were US3.3 cents (2018: US0.4 cent). Business Review The Group is a leading security devices provider globally for pay-TV broadcasting access. It designs, develops and markets security devices primarily for the pay TV industry worldwide through sales of conditional access modules, or CAMs, products which provide end users with access to pay-TV content. The Group is also a supplier of mobile point-of-sales or mPOS systems, and develops and markets mPOS devices for the mobile payment industry in China. S2C Tech Inc. (“s2C”), a subsidiary of the Group prior to its deemed disposal of S2C business in the end of the year, is a leading hardware-based rapid verification system and software provider globally. Rapid verification systems and software products of S2C can quickly build complex system models for the development and testing of software before product establishment, which will enable customers reduce the design cycle of system-on-chip (“soC”). In addition, the Group obtained requisite approval for the implementation of the national science and technology project of “Development and Application of Full Process Electronic Design Automation (“eDA”) System for Chip Design” in 2018 and duly launched the research and development of EDA system, which is currently in the research and development phase. CAM For the year ended 31 December 2019, the Group recorded revenue of approximately US$24.6 million from CAM, around 6.5% more than last year, which accounted for around 64.5% of the Group’s total revenue. The European market (excluding Russia) remained the largest market for the Group’s CAM sales, and made up around 59.7% of total CAM sales, which was approximately 0.4% less than the previous year. The share of revenue from Russia accounted about 17.2% of CAM, which increased by around 34.5% year on year. Other emerging markets accounted for approximately 16.7% of The group’s total CAM sales, and recorded a year-on-year increase of around 2.6%. The Mainland China market contributed approximately 6.4% of The group’s total CAM sales, representing an increase of around 30.1% year-on-year. Approaching the end of analog switch-off (ASO) by most of the market operators in Europe, market demand stabilized. Sales increase in the Russian region has benefited from a significant increase in the number of satellite users. The acceptance of CI CAM in emerging markets has been affected by the base number of TV-adaptive models, which has limited market capacity. But the increase in customer demand in the African markets has brought some growth in the overall sales in emerging markets. In the domestic market, under the impact of IPTV and limited investment by operators in the project of USB CAM, despite lower-than-expected sales, thanks to the increased investment in broadcast control platforms by operators, the overall domestic revenue increased with the increased demand for engineering cards in the second half of 2019. Last year, the Group completed the deployment of CI + 1.4 products in Europe firstly and also displayed the latest CI + 2.0 and HbbTV products with major industry partners during the IBC exhibition in September. The CAM and TV products that comply with the new specifications will bring more secure, beautiful and convenient products to the paid TV broadcast industry, helping operators promote more services to users on CI + products. In addition, during the year, the integration of smart-card-less conditional access technology with various conditional access companies was completed and the customized CI + 1.3 functional products was launched to a number of operators. The Group continues to invest in USB CAM products, completing product integration with a number of domestic TV manufacturers and operators. mPOS In view of the oversupply in the mobile payment terminal market and the fact that China has continued to tighten its financial policies, the funds of payment business channels has become increasingly tight, which resulted in increased operation risks of the payment terminal business during the year. For the year ended 31 December 2019, sales revenue from mPOS decreased by approximately 56.4% year-on-year to approximately US$3.4 million, accounting for around 9.0% of the Group’s total revenue. Rapid verification system and software – S2C S2C, a subsidiary of the Group prior to its deemed disposal in the end of the year, further optimized product performance and services in 2019, and also enhanced its production capacity significantly. For the year ended 31 December 2019, S2C contributed revenue of approximately US$10.1 million, accounting for approximately 26.5% of the Group’s total revenue. Apart from the full year impact of the operating results of S2C in 2019, S2C experienced an organic growth in revenue mainly driven by its complete range of products, which can meet the needs of various customers. After the existing mature products have undergone early market cultivation, the number of additional orders from customers has grown rapidly, especially in the Japanese and American markets. The new products launched in 2019 are highly modular and integrated, which received wide market recognition after launch, with orders growing rapidly. On the customer side, S2C had cooperated with a number of well-known IC design companies, and its renewal needs have been further released, which has contributed to the growth of S2C’s revenue. EDA system After receiving approval for the implementation of the national science and technology project of “Development and Application of Full Process Electronic Design Automation System for Chip Design” in 2018, the Group leveraged on its strong financial advantages and strong government support to actively mobilize local government, enterprise resources and universities to carry out in-depth cooperation in 2019. By continuously improving fundamental research and development facilities, increasing talent pool with adequate training, and formalizing the standard management of special research and development projects, it guaranteed the orderly progress of various technological developments and promoted the initial formation of the EDA industry layout plan. In March 2019, the Group and Xidian University (“Xidian”) jointly established the EDA Research Institute. Through a number of major strategic cooperation with Xidian and further relying on the strengths and resources of all parties, the Group advanced technological research and development, cultivation of high-end talent and industry development. In July 2019, the Group signed a strategic cooperation agreement with Shanghai Lingang Group (上海臨港集團), the only large scale state-owned enterprise under the Shanghai State-owned Assets Supervision and Administration Commission engaged in investment, development and operation of industrial parks and supporting services related to the parks. The Group and Shanghai Lingang Group will focus on in-depth cooperation around the semiconductor industry. For the year ended 31 December 2019, the research and development expenses of the Group’s EDA system were about US$3.7 million, accounting for approximately 9.6% of total revenue. In the future, the Group will continue to increase its R&D investment in EDA systems, fully promoting the formation of new revenue growth points. Prospects: Since last year, the global integrated circuit industry has entered a period of evolution and transformation, and the industrial structure of China’s integrated circuits has continued to be optimized. Under the new environment, the development of the integrated circuit industry faces not only huge challenges but also rare opportunities. In line with the rapidly growing needs of the national semiconductor design industry, the Group’s business now covers the design and application of pay TV broadcast security products and the research and development and application of integrated circuit electronic design automation (“EDA”) systems. In respect of CAM business, the Group will introduce a new CAM chip platform, which will increase the competitiveness of its products in terms of performance, security and cost. Products will also continue to be invested in the development and market launch of new industry standard products, including HbbTV, CI + 2.0 and domestic USB products. In respect of the market, the Group will increase the marketing of USB products, including CI + 2.0 in Europe, the customized products of the domestic and emerging market operators, meanwhile, actively explore the market opportunities of USB CAM combined with OTT terminal equipment in China. The current spreading of COVID-19 pandemic has certain impact on the Group’s CAM business: 1) the production capacity of memory components and passive components has been affected, which may possibly lead to an increase in the purchase prices of such components and The group’s product costs to a certain degree, as well a prolonged stocking (inventory) turnover period; 2) in order to curb the spreading of the pandemic in many European countries, their focus is shifting to the provision of medical care and the production of medical products, resulting in a slowdown in the provision of home entertainment programs; and 3) the extension of the exhibition will also make it impossible to visit customers and carry out the onsite product tests during the pandemic period, thus affecting the promotion of new products. In response to this, the Group will put efforts to take the following countermeasures: 1) make pre-procurements for the potential orders based on the quantities of expected orders from customers so as to reduce potential procurement risk; 2) proactively communicate with customers to ensure that the quantities of pre-procurements can meet the demand of new orders from customers, and that the shipments can be made for those orders already placed by its customers as soon as possible; and 3) take the sample-sending approach and create a complete development environment in Shenzhen to step up the research and development of products, so as to ensure the rapid rollout of market promotion upon disappearance of the pandemic. In respect of mPOS business, the previous business has been suspended in response to fierce market competition and the change in industry models. However, The group will continuously explore new models and seize opportunities to regain The group’s growth in the Fintech business. In respect of rapid verification system and software business, in view of the fact that S2C Shanghai is no longer the Company’s subsidiary, the business will develop independently in the future. The new round of capital injection provided S2C Shanghai with sufficient working capital to finance its existing and future research and development projects and other necessary capital expenditures. In addition, the introduction of Shanghai investors increased the possibility of S2C Shanghai’s application for support from Shanghai local government, which has currently introduced several favourable policies for the business activities of S2C Shanghai. As the largest shareholder of S2C Shanghai, the Group will fully support S2C Shanghai to make the rapid verification system and software business bigger and stronger. In respect of the EDA system business, the Group will continue to increase investment in research and development, continue to expand EDA system business, actively develop more EDA technologies with independent intellectual property rights, and achieve new revenue growth point through commercial operations. In addition, the Group will comply with the policy requirements of the country to vigorously promote the development of integrated circuits, and for the shortcomings in the domestic integrated circuit industry, the Group will actively seek cooperation with or investment in outstanding companies which have certain technical advantages in the software or hardware, chip design, R&D and industrialization within the industry and along industry chain and which can generate synergies with the Group’s businesses, to complement and expand the Group’s existing technologies with the aim of laying a more solid foundation for the Group’s efforts to develop its EDA system business. In the future, the Group will make full use of its advantageous position in the industrial chain, comprehensively integrate major resources, adhere to the strategy of independent research and development, combination of industry, academy and research, investment and mergers and acquisitions, comprehensively deploy EDA field. The Group will adhere to integrated circuit design as the core focus, and security and applications products as the pillar, on the basis of ensuring the steady development of traditional businesses, it will continue to explore new revenue growth points, and explore opportunities in the chip design industry in multiple dimensions to achieve diversified development. While enhancing the overall strength of the Group, it will create greater value for shareholders.

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