Online Q&A with Investors
Dear SI Forumers and Investors,
Thank you for your interest in TT International and the questions posted over the past week.
I am Julia Tong, Executive Director of TT International Limited.
It is our pleasure to have this opportunity to interact with all Shareinvestor forumers and investors here and we hope this Q&A session will be able to provide you a better understanding of TT International, our businesses, our potential and future prospects.
I will repeat each question in blue followed by our replies in black.
Warm Regards,
Julia Tong
Executive Director
TT International Limited |
| Eng Chong Hock, you wrote:
In view of your outstanding results and strong cash balance, would the management set a strong dividend payment policy such as regular high dividend payout just like Singpost, SMRT, M1 etc as these companies tend to have better share price performance under volatile market. TT share price has been underperformed (below NTA).
If shareholders is guaranteed to received certain % of dividend yield per annum (let say 5%, your current normal dividend is only s$9 per annum) then this company should be able to attract long-term shareholders and even big funds.
Dear Chong Hock,
Thank you for your interest in TT International.
For FY 2004, we are proposing a first and final dividend of 6% per ordinary share, a 50%-increase over 4% declared in FY 2003. In addition, we are also proposing a special dividend of 9%. In total, the gross dividend per share for FY 2004 is 2.25 cents (1.8 cents net of tax) This represents a 5.8% net yield on the last done price of our shares on 26 May 2004, i.e. S$0.31 per share. This is the highest-ever dividend payout by TT international since we were listed in June 2000.
This year's dividend payout is special for two reasons. First, the exceptional gain from the $92 million sale our flagship building "TT International Tradepark", amounting to $10.3 million; second, in celebration of TT International’s 20th anniversary and to reward our shareholders for their continued strong support.
This first and final dividend of 6% per ordinary share represents a payout ratio of 19% for FY 2004 compared with 13.6% for FY 2003. It is always our intention to pay out a healthy dividend as a reward to our shareholders. However, it is also equally important to produce consistent growth and healthy performance in return for our loyal shareholders’ support. Having said that, it is really crucial for us to strike a fine balance between funding the growth of the company and paying out dividends.
As you may be aware, AKIRA is charting a high growth path, having grown 57% for FY 2004. The Group is confident that AKIRA sales will grow another 30% for FY 2005. This growth trajectory requires some funding from internal resources that is worthwhile as the rewards can be significant and consistent. In the growth path of a company, it is often necessary to plan ahead by making current sacrifices (if any, as it may be perceived) for future gain.
Also to reward shareholders, the company has proposed a bonus issue of one bonus share for every five existing ordinary shares held. This will raise the total number of shares in issue from 436.2 million currently to 523.5 million.
Thank you and warm regards,
Julia |
| Castwind, you wrote:
I have followed TTI results very closely in the recent months and I read in the 3rd quarter result that the operating profit for the 9 mths is 19.2 mil compared to the previous year of 17.8 mil and now from the final year result, the operating profit is 24.38 mil vs 24.88 mil of the previous year. It seems that TTI operating profit has actually gone down y-o-y if not for the sale of its flagship building. Is there any specific reasons why the operating profit has gone down significantly in the last quarter when the global conditions have actually became better?
Dear Castwind,
Thank you for your keen interest in TT International.
For FY 2004, the Group’s operating profit was $24.4 million compared with $24.9 million of FY 2003 on the back of total business turnover of S$ 701.7 million. Although the operating profit recorded a marginal drop, the gross profit for the Group before freight and handling charges has in fact increased by 1.6 percentage points for the current year compared to the previous year, that is especially commendable in a competitive industry like ours. Taking into consideration the significantly higher freight rates during FY2004, overall gross margin after freight and handling charges increased by only 0.7 percentage point, causing the marginal drop in the operating profit. Nonetheless, we believe that it is unlikely that we would witness the same quantum of significant increase in freight charges for FY 2005.
The increase in the staff costs also contributed to higher operating expenses. Staff costs were higher for FY 2004 as the Group has embarked on an extensive growth path for our in-house brand, AKIRA, which has paid off for FY 2004 as turnover from AKIRA grew 57%. The Group is confident that AKIRA sales will grow another 30% for FY 2005. TT International will remain prudent to ensure the growth in staff strength is consistent with our business growth.
Thank you and warm regards,
Julia |
| Patricia Monteiro, you wrote:
We are currently dealing with a company by the name of Akitech (Pty) Ltd in South Africa, would like to confirm that you have 51% shares in the mentioned company and please provide us with a company profile to confirm the commitment.
Thank you!
Dear Patricia
We do indeed hold 51% of the shares in the South African company Akitech Distributors (Pty) Ltd ("ADPL"), through Akira International Pte Ltd ("AIPL"), a wholly owned subsidiary of the Company. ADPL was incorporated recently with 800,000 ordinary shares of ZAR1.00 each. AIPL holds 408,000 ordinary shares. ADPL's principal activities include sourcing, trading and distribution of consumer electrical and electronics products in South Africa. We are firmly committed to our presence and growth in South Africa and appreciate your confidence in growing together with us.
Thank you and warm regards,
Julia |
| Casey, you wrote:
Can u explain what constitutes "the change in inventories" with an amount of $39.3mn in the latest FY03/04 P/L statement ? The amount is huge n accts for more than the profit increase over the previous yr.
Dear Casey,
Our inventories increased by S$39.3 million due to higher business turnover and localized assembly activities. We need to keep higher stock levels in several overseas subsidiaries to cater for significantly higher business volumes. The increased volume in localized assembly activities has also led to higher stocks levels in order to meet the assembly scheduling. Notwithstanding the increase in inventories, our inventory turnover days remained relatively unchanged at 51 days, as compared to the previous financial year.
Thank you and warm regards,
Julia |
Rick, you wrote:
Hi, I have some shares in TT International. The Brand Name AKIRA has been well so far. May i know how & where would TTI invest in other related companies for expansion? Also how will TTI market the product name in the future? Does the company plan to create another brand name for another product in future?
Dear Rick,
Thank you for investing in TT International and positive feedback for AKIRA.
As you are aware, TT International has two main businesses – distribution of branded goods and our in-house brand AKIRA, which has been experiencing a very rapid growth rate.
As a growing company, we are constantly on the lookout for opportunities to strengthen these two core businesses, especially for AKIRA. We are also on the lookout to grow our strengths in Original Design Manufacturing or "ODM". Basically, this will allow us to design products ourselves rather than totally rely on third parties. Next, with the ASEAN Free Trade Agreement or "AFTA", localized assembly activities within South East Asia will bring tariff savings in all ASEAN countries. For TT International to compete effectively and to move up the value chain, we have made some inroads into localized assembly activities. This in turn will allow us to enjoy tariff savings.
In the progress of better positioning for the AKIRA brand name in the future, we have been working very hard and have also increased our staff strength to achieve the following growth strategies for AKIRA:
- develop and to strengthen the AKIRA brand through widening product range;
- enhancing product quality and appeal;
- improving global after-sales services;
- strengthening quality assurance;
- strategic & effective marketing; and
- further expansion of market coverage.
We have set some medium term objectives for AKIRA:
- to emerge as one of the top 5 brands in some of our key markets over the next 3 years;
- to achieve $500 million annual sales in 3-5 years time (we have forecasted growth of about 30% for FY 2005); and
- to emerge as one of the top 10 brands globally over the next 3-5 years
and we will focus our efforts on these goals and position ourselves strategically to continue our growth path.
Thank you and warm regards,
Julia |
Shirley Ham, you wrote:
I would like to ask you why your share price didn't run despite the company's good performance. I notice that even during better stock market days some 2 or 3 mths ago, when other counters were trading at 12 to 15 times PER, TT Int'l instead was trading at 10 to 11 times and under heavy selling. Now after your latest full year result the PER has of course improved. Are you able to explain the lack lustre appetite for TT Intl?
Dear Shirley
Thank you for your interest in TT International.
Before I answer your question, I must first highlight that TT International has been working hard to enhance value for our shareholders.
The Company has strong fundamentals inclusive of an entrenched distribution network established in niche emerging markets, and excellent working relationship with principals of renowned international brands, and has being continuously adding value to our shareholders. Despite the regional economic doldrums, the Company has recorded steady growth for the past years, and rewarded shareholders with dividends. This year, we are proposing the highest-ever dividend payout, amounting to 19% of net profits, as our recognition to the strong support from our shareholders and in celebration of our 20th anniversary.
Our growth is underpinned by our strong business strategy and expansion of our two existing core activities. In addition, we are also committed to unlocking the value of AKIRA, which we believe has immense growth potential. We are now regularly covered by research analysts from several leading broking houses, in their recognition of our growth potential.
Whilst we note your observations, we would also like to emphasize that we will continue to focus on delivering sustainable results and thus bring healthy returns to our shareholders ultimately, which we believe we have done so. We will also put in our best efforts and resources to further explore any possible growth potential for future. Whether the share price performs or not, it shall not in any way impact the Company’s focus and directions for our future growth and enhancing shareholders’ value. We strongly believe that in no time, so long as we continue to deliver the sustainable results and returns, more and more investors will come to appreciate the true value of our company and will join us in sharing our excitement for future plans.
Thank you and warm regards,
Julia |
| Raymond Chua, you wrote:
You have done a pretty decent job in Akira. Hope you would be able to answer these questions.
i) Besides the Akira brand, the other core business of trading and warehousing has suffered. What are the plans and projection for this two businesses?
Dear Raymond
Despite the marginal drop of 4.8% (S$ 475 million in FY2004 compared to S$ 499 million in FY2003) in the trading and distribution of Branded consumer electronics, we are still able to increase our profit after tax but before exceptional item by 10.7%, from S$ 14.9 million in FY2003, to S$ 16.5 million in FY2004. The competitive business environment in warehousing, logistics and other business has reduced the turnover in this segment, although this segment only contributes less than 2% of our Group turnover.
We will continue to work closely with all our principals to further expand existing markets and to penetrate into new markets in growing our business of trading and distribution of Branded consumer electronics. The strategies will be complemented by our logistic capabilities, through the following:
- Extensive distribution network in niche markets
- Win-win relationship with suppliers & customers
- Seamless total supply chain management services and solutions provider
ii) I noted that the management has listed Merger & Acquisition to generate growth. Which part of the value chain does the managment have in mind? Would it be another distributor? Retailers? Another brands?
As can be seen in the value chain chart attached herewith, TT International can provide one-stop value chain to both our customers and suppliers by providing knowledge-based total supply management and logistics solutions which is vital in the success of operations in the emerging markets.
AKIRA’s position in the value chain has been mentioned in our reply to other questions posted. I would like to take this opportunity to share with you our views in the direction of the distribution of the branded segment. We feel strongly that the trend will move towards "Contract Distribution", a solution to outsourcing the sales and distribution of a brand to someone who specializes, or who has the ability, capacity and established distribution channels in the specific markets, that is similar to the "contract manufacturing", which had gradually shifted from running your own manufacturing plants to outsourcing of such manufacturing needs.
iii) Are there any plans to improve the web-site for myakira? The web-site looks much too shallow to project the image of a decent quality consumer product.
Many Thanks
Thank you for taking the time to explore www.myakira.com You may want to know that we offer many useful functions on our website including full range of product information, online warranty registration and a dealers support system, with latest introduction to our AKIRA Connections, an AKIRA points redemption system to be launched in June.
The overwhelming response from all our customers, potential investors and viewers might have slowed down the speed of accessing into our website.
I am also pleased to inform you that we are in the process of revamping our website www.myakira.com to project a better image of our AKIRA brand products. You can look forward to an improved interface and many exciting features on the new website in the months to come.
Your feedback will definitely help us to better improve our www.myakira.com website.
Thank you & warm regards,
Julia |
| David Lee, you wrote:
Dear Julia,
I'm holding about a million shares in the company since last Nov. I'm very disappointed with the share price because it free falls during bad market and hardly climbs back up even when the company annouce good results. What went wrong? Perhaps you should try to persuade influencial tycoons such as oei Hong Leong to buy a stake in the company to give it a magical touch....I also think that the profit margin achieved by the company was quite pathetic: 16.5m (less exceptional item) out of turnover of 700m+. What is the company's future plan to improve profit margin? Is there plan to expand into China in a big way? Like cooperation with companies like TCL and Haier? Nevertheless, I've confidence in the management that the company will continue to prosper and achieved greater heights in the near future.
Regards.
Dear David
Thank you for investing in TT International and your strong confidence in our company.
We would like to seek for your kind understanding that we are not in the position to comment on how our shares perform in the market nor let these movements impact our business directions and performance. We will continue to focus on our objectives of delivering sustainable results and healthy returns to our shareholders and enhancing shareholders’ value. We firmly believe that more and more investors will come to realize the value of our company.
In compliance with SGX regulations, we shall not comment or provide any predictions on stock price and business outlook.
However, to provide you a better feel on how the analysts view our company, we would like to share with you the three recent analyst reports from BNP Paribas, CLSA and GK Goh, which are attached herewith to give you a better feel of our fundamentals.
You may probably notice that our profit margins are gradually improving over the years, in spite of the significantly increased freight rates for FY2004 as referred to in our earlier reply to Castwind. We will continue to put in our efforts in improving our profit margin through the following: -
- Widening our product range so that we will have a wider basket of goods accommodating for a wider consumer base.
- Focusing on a product mix which will include higher margin products.
- The Global Trade Programme (GTP) from IE Singapore which will allow the Company to enjoy a concessionary tax rate of 10% on its qualifying income for a period of 5 years commencing from 1 October 2002.
- Localized assembly activities within South East Asia, which will allow us to enjoy tariff savings as highlighted previously
- Higher margin contribution by AKIRA’s performance – Currently, our AKIRA brand commands a higher net margin than that of trading and distribution of branded products. During the business expansion and growing stage, naturally, the operating expenses including A&P, after-sales support and staff costs will grow in line with our business growth and expansions. Such gradual acceleration will be able to managed within a cap, when economies of scale can be achieved; i.e., when we reach the level where we are able to grow the business turnover and yet able to manage these expenses within a certain level, the net margin will improve accordingly.
As for future expansion plans, the main growth drivers for the company for the near and medium terms will still be the emerging economies largely consisting of developing countries. However, we do recognize the importance and market size of China – a country no one can afford to ignore - and thus we do not rule out such possibility when the opportunity arises and we are ready to go in.
Once again, we would like to thank you for your support and appreciate your suggestions.
Thank you and warm regards,
Julia |
Dear BC
Thank you for your interest in our company. Please find my answers to your respective questions below.
Question : 1) When will the date for the dividend and bonus be confirm?
We expect to pay out the dividends (first & final and special) and issue the bonus shares by late July/early August 2004.
Question : 2) What is the estimated share price by end of the year?
Our sincere apologies as we are bound by the SGX, please note that as a public company, the management is not allowed to make market-sensitive comments such as earnings and turnover forecasts. However, you may want to have a look into the above 3 analyst reports to have a better feel of our fundamentals.
Question : 3) Can the company extend her growth and profit for the coming years?
As for Branded electronics, please refer to link.
As for AKIRA, please refer to link.
Question : 4) Will there be more home brands coming out?
At this current stage, we will focus on the launching of more new products in our product portfolio, and further improving the product quality and appeal. However, we do not rule out such possibilities in future.
Thank you and warm regards,
Julia |
Dear SI Forumers and Investors,
I believe this concludes our online Q&A.
I want to thank everyone for your interest in TT International and the questions posted, and Shareinvestor for providing this forum. I hope that I have addressed all the issues raised to your satisfaction.
Thank you once again. It has been a pleasure exchanging views and answering your questions.
Warm Regards,
Julia Tong
Executive Director
TT International Limited
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