BUSINESS AT Willas-Array Electronics has been brisk largely thanks to the Chinese government’s stimulus programme.
“Right now, in our warehouse, very often we wait for the goods to come in and then there’s no time for them to go into inventory. Immediately we pack and ship them to customers,” said Mr Andy Hung, an executive director and the chief financial officer of the company.
“The customers patiently wait because if they go elsewhere, they won’t get the components anyway.”
He was answering a question on inventory turnover ratio of around 50+ after a presentation to investors at CIMB-GK Investment Centre yesterday.
While the business outlook remains positive, Mr Hung cautioned that operating costs have risen. Travel has become more expensive, as airline raise ticket prices, for example.
Listed on the Singapore Exchange, the company is one of the largest Hong Kong-based distributors of electronics components.
About 57% of its revenue in the financial year ended Mar 2010 came from China while another 37% came from Hong Kong.
Willas-Array last week reported a net profit of HK$70.5 million for that financial year, reversing a loss of HK$19.7 million in the previous year. Revenue rose 25% to HK$2.9 billion.
It has proposed a first and final dividend of 1.8 cents a share, translating into a yield of 10%.
Here are some highlights of the Q&A session:
Q: The euro has dropped. Do you source a lot from Europe?
Mr Hung: Not much. We source from ST Microelectronics, which is French-Italian, for example, and they have a big factory here in Singapore. We source from the Japanese and the Americans. Not too much from Europe – which is unfortunate given the drop in euro.
Q: Can you maintain your earnings per share this year?
Mr Hung: We will try. With what’s happening in China, Europe and the US, no one can really tell what will happen next.
Q: Your business is very competitive and the margin is very low. How do you differentiate yourself from competitors?
Mr Hung: It’s the product types that we have – the common ones and the unique ones. It’s also the service we provide and our location in HK – we can service our customers quickly.
Q: In the face of rising oil and raw material prices, can you pass on the costs?
Mr Hung: Some but not all. It depends on the customers and the products.
About 10 years ago, we could enjoy 13-14% gross margin. This is history because of transparency in the industry. Everybody knows what you are doing, how much you are charging.
Q: The inventory this year (2010) is higher than last year. What is the reason?
Mr Hung: During the bad economic period, we reduced inventory. Later, the turnover ratio stayed low because of a shortage of components.
The suppliers didn’t have enough for us to sell. If we didn’t have the shortage, our year’s sale would have been higher than the HK$2.9 billion we achieved.
The suppliers cut production last year because they didn’t expect an increase in sales in Europe and America. And they weren’t willing to add capacity for two reasons – prices have been suppressed for a long time and they saw it as a chance to raise prices. Second, they didn’t know for sure if the demand would pick up.
Read about a peer that is also riding the wave of the Chinese stimulus programme:
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WILLAS-ARRAY: Rides electronics boom, reports record HK$71 m profit
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Andy Hung, ED and CFO, Willas-Array Electronics. Photo by Sim Kih
With a stock price of 17.5 cents, Willas-Array now has a market cap of S$54 million, double what it was in Nov last year.
Raymond Leung, financial controller, Willas-Array. Photo by Sim Kih
