Aztech Global (SGX:8AZ) listed on the SGX Mainboard today. The technology unit of Aztech Group (previously listed on SGX), provides one-stop design and manufacturing services. With core strengths in R&D, design, engineering and manufacturing, its key products include IoT Devices, Data-communication and LED lighting.
Aztech Global is also a key technology enabler for its customers which include multi-national blue chip corporations that are market leaders ranging from IoT/Smart Home devices and LED lighting markets, to security cameras and wearable sensors in North America, Europe and Asia (Taiwan, Japan, South Korea).
Aztech Global does not have a fixed dividend policy, however, its Directors intend to recommend dividends of at least 30% of its net profit after tax (excluding exceptional items) generated in FY21 and FY22.
Aztech Global was formed in 2009 as a holding company for Aztech Group’s electronics and LED manufacturing businesses and has listed on SGX today with a market value of over $1 billion, based on the opening price of S$1.37.
Aztech Global has 3 key product segments –
- Internet of Things (IoT) Devices and Data-communication products,
- LED lighting products, and
- Other electrical products.
It has over 290 customers worldwide and its products are sold in over 40 countries through multiple channels.
Based on its IPO Prospectus, Aztech Global believes that drivers for its business include:
Increasing demand for IoT Devices and Data-communication products – Global IoT industry consumer market is expected to grow at a CAGR of 23.4% to US$94.8 billion by 2023, while the non-consumer segment to grow at a CAGR of 20.2% to US$330.4 billion by 2023. Global data-communications and LED lighting are expected to grow to US$59.2 billion and US$80 billion by 2023 respectively
Positive outlook for the LED lighting industry – Global penetration rate of LED lighting estimated to reach 42.8% in 2023 from 25.3% in 2019.
Highlights of Aztech Global's IPO
Established track record and experienced management team in the electronics industry
- Led by experienced management team and helmed by founder and Executive Chairman and CEO, Mr. Michael Mun, who has over 30 years of experience in the electronics industry.
- Management team has in-depth product, industry and technical knowledge, coupled with strong management capabilities and business network, and instrumental in building the Group’s brand globally.
Strong core competencies of in-house R&D and production engineering capabilities
- According to Frost & Sullivan, the Group’s strong core capabilities in design and manufacturing to value-add production processes is what differentiates Aztech Global from other pure-play contract manufacturers.
- Dedicated research and development (R&D) team comprising 142 staff collectively equipped with expertise and experience in industrial design, mechanical engineering, electronics and electrical engineering and software and hardware design.
- Close engagement with customers in the early stages of product design and development and strong emphasis on the protection of customers’ intellectual property.
Strong manufacturing capabilities at diversified and highly integrated facilities in the PRC and Malaysia
- Aztech Global has operations in two countries – Malaysia and the PRC – to reduce logistics costs and ensure prompt flexible scheduling and just-in-time delivery.
- Production lines for LED lighting products, IoT products, data-communication products and other electronic products are housed in its manufacturing facility in Dongguan, Guangdong Province, the PRC in order to enjoy economies of scale as these products share similar manufacturing processes.
- The Group believes that its Dongguan facility, which is designed to be able to support both high-volume-low-mix and low-volume-high-mix production requirements, allows it to capture a wider customer base as compared to other manufacturers.
Key technology enabler to customers, including multi-national blue-chip corporations
- Key customers include multi-national blue chip corporations that are market leaders ranging from IoT/Smart Home devices and LED lighting markets, to security cameras and wearable sensors.
- The Group has three major customers with account for 5.0% or more of its revenue.
- Customer A (accounts for 49.0% of FY19 revenue) is a major US e-commerce retailer – supplies smart security cameras for them.
- Customer B (28.4% of FY19 revenue) is a Hong Kong subsidiary of a leading Europe-based multinational lighting group – supplies LED lighting products for them.
- Customer C (8.9% of FY19 revenue) is a German company specializing in smart home technology – supplies HomePlug for them.
Robust product portfolio catered to fast-growing industries and globally diversified sales channels
- As at 15 February 2021, the Group had an outstanding order book of ~S$307.9 million, comprising ~S$292.4 million for IoT Devices and Data-communication products segment and ~S$15.5 million for LED lighting products segment, all expected to be delivered or completed within FY2021.
Aztech Global's Business Strategies and Future Plans
- Expansion of manufacturing facilities such as sites outside of the PRC to double existing production capacity.
- Expansion of ODM/JDM business to capitalize on opportunities in the growing IoT market.
- Enhance of R&D capabilities through staff recruitment and strategic collaborations.
- Increase sales and marketing channels for overseas market expansion such as America, Europe, the PRC and Japan.
- Diversification of business through investments, M&As, joint ventures and/or strategic collaborations.
Aztech Global's Key Risks
- Subject to potential adverse consequences due to the Group’s lack of valid certificates, permits and other approvals in respect of the Dongguan Land and the buildings on it.
- Business operations may be materially and adversely affected if the Group fails to comply with laws, regulations and conditions stipulated in any licences, permits, registrations or approvals, and/or are unable to obtain, maintain and/or renew the required licences, permits, registrations and approvals.
- Exposed to concentration risk of reliance on its major customers, and may be adversely affected by any disruption or termination of its business relationships with its major customers or fluctuations in their demand for its products.
- Plan their production based on customers’ projections of the demand for their products which may not materialize into orders.
- (See Page 38 of the IPO prospectus for more risk factors)
Aztech Global's Financials & Valuation
- Based on its consolidated statements of comprehensive income, revenue for FY2019 was at S$428.8 million and audited revenue for 9M2020 was S$262.2 million. Profit after tax was S$47.2 million in FY2019 while 9M2020 (audited) was S$30.5 million.
- According to the IPO prospectus, Aztech Global’s earnings per share (EPS) is at 7.47 Singapore cents for FY2019 based on the audited consolidated statement of comprehensive income and the company’s share capital immediately before the issuance of New Cornerstone Shares, assuming the Service Agreements had been effect since 1 January 2019. Based on this and the Invitation Price of S$1.28, the price-to-earnings (P/E) ratio is 17.1x for FY2019.
- Aztech Global does not have a fixed dividend policy, however, its Directors intend to recommend dividends of at least 30% of its net profit after tax (excluding exceptional items) generated in FY2021 and FY2022.
Additional Information in Aztech Global's Prospectus.
Aztech Global - Company Background
Aztech Global was formed in 2009 as a holding company for Aztech Group’s electronics and LED manufacturing businesses. Aztech Group was founded in 1986 by Executive Chairman and CEO, Mr. Michael Mun, who co-founded the business to undertake the design, manufacture and distribution of personal computers. The Group’s product range has since expanded to include electronic products ranging from sound cards, and DECT phones to its current focus of IoT Devices, Data-communication products and LED lighting products. Aztech Group was listed on SESDAQ and subsequently delisted from the SGX in 2017.
The Group commenced a rebranding exercise in December 2019 which the “Aztech” brand is now used for the Group’s business-to-business markets providing OEM, ODM, JDM, and CMS services while the “Kyla” brand is used in the Group’s business-to-consumer markets selling products under its own name.
Aztech Global's IPO details
- Invitation price at S$1.28 per Offer Share.
- 68.12 million Offer Shares comprising:
- 64.62 million Placement Shares by way of Placement.
- 3.5 million Public Offer Shares.
- Estimated IPO market capitalisation at S$990.4 million.
- Use of gross proceeds from the issuance of the New Cornerstone Shares (S$198.4 million):
- S$50.0 million – Expansion and enhancement of manufacturing facilities.
- S$50.0 million – Expansion of business through investments, M&A, joint ventures and/or strategic collaboration.
- S$15.0 million – Enhancement of R&D capabilities.
- S$10.0 million – Increase sales and marketing channels for overseas markets expansion.
- S$5.0 million – Expansion of ODM/JDM business to capitalize on opportunities in the growing IoT market.
- S$58.6 million – Working capital.
- S$9.8 million – Listings expenses.
Aztech Global's Cornerstone Investors
At the same time as but separate from the Invitation, each of the Cornerstone Investors has entered into separate Cornerstone Agreements with Aztech Global and/or its Vendor to subscribe for and/or purchase an aggregate of 163,880,000 Cornerstone Shares (approx. 21.2% of the total number of issued shares) at the Invitation Price, conditional upon the, among others, the Management and Underwriting Agreement having been entered into and not having been terminated pursuant to its terms on or prior to the Listing Date.
Aztech Global's Cornerstone Investors are:
- Affin Hwang Asset Management Berhad
- AIA Investment Management Private Limited and AIA Bhd.
- DBS Bank Ltd.
- Eastspring Investments (Singapore) Limited
- Employees Provident Fund Board
- FIL Investment Management (Hong Kong) Limited
- Hong Leong Assurance Berhad
- HSBC Global Asset Management (Hong Kong) Ltd
- ICH Capital Pte Ltd
- JPMorgan Asset Management (Singapore) Limited
- Lion Global Investors Limited
- Fiera Capital (Magna New Frontiers Fund, OAKS Emerging and Frontier Opportunities Fund, and OAKS Smaller Emerging Market Opportunities Fund)
- Matthews International Capital Management, LLC
- New Silk Road Investment Pte. Ltd.
- Tokio Marine Life Insurance Singapore Ltd
- UOB Kay Hian Private Limited (on behalf of certain corporate clients)
- Value Partners Hong Kong Limited