Regal Partners Holdings Limited · HKEX:1575
Regal Partners — Morris Holdings — IPO Roadshow (December 2016)
40 slides from Regal Partners's IPO roadshow presentation, December 2016
Slide 1: Corporate Presentation
(eal oe Corporate Presentation
Slide 2: Disclaimer
Disclaimer This document has been prepared by the Company for a limited number of recipients and for information purposes only. Please do not forward this document to any third party. This document does not constitute or form part of, and should not be construed as, an offer to sell or issue or the
Slide 3: Agenda
Agenda Offering Summary P.3 Presentation Team P.4 Company Overview P.5 Industry Overview P.11 Investment Highlights P.14 Financial Highlights P.22 Business Strategies & Use of Proceeds P.28 2
Slide 4: Offering Summary
Offering Summary Issuer Morris Holdings Limited (慕容控股有限公司) Offering size: 250,000,000 Shares (subject to the Over-allotment Option) Placing: 225,000,000 Shares (90%) (subject to adjustment and the Over- Offering Structure allotment Option) Public Offer: 25,000,000 Shares (10%) (subject to ad
Slide 5: Presentation Team
Presentation Team Mr. ZOU Gebing (鄒格兵) Chairman, CEO and Executive Director Mr. CHEN Guohua Mr. XU Jing (陳國華) (徐景) Executive Vice President Head of Capital Market and Executive Director 4
Slide 6: Company Overview
Company Overview ra Leal
Slide 7: Company Overview
Company Overview Recognized Market Leader in the PRC-based Sofa Export Industry Integrated Business Model ▪ The second largest PRC upholstered sofa manufacturer in ▪ Strategic focus on OBM segment (64.9% of 2015 revenue) terms of export value to the U.S. in 2015 while also offering OEM & ODM service
Slide 8: Corporate Milestones
Corporate Milestones Expected to be We launched “Morris listed on the Main Zou” brand for sofa and Board of the SEHK wood based furniture products sold We extended our in the PRC business from OEM to We established our first ODM direct sale store in We commenced Haining City 2017 showcase
Slide 9: Shareholding Structure
Shareholding Structure Post-IPO (Pre-Greenshoe): (Note) Mr. Zou Ms. Wu 85% 15% Morris Capital Limited Public (BVI) Shareholders 75% 25% Morris Holdings Limited (Cayman Islands) 100% Morris International Group Limited (BVI) 100% 100% 100% 100% Masia Investments Limited Mstar International Group Limit
Slide 10: Integrated Business Model
Integrated Business Model Customer provides design, Counter samples made OEM specifications and samples and provided to customer for approval Design and Customer’s Prototypes made Customer development approval of ODM for customer’s with customer’s design and places Production selection order general
Slide 11: High Quality Products with Innovative Designs and Smart Home Features
High Quality Products with Innovative Designs and Smart Home Features ▪ Stationery & Motion Sofas: Manufactured in a wide spectrum of sizes, designs, colours, patterns and upholstered in various materials such as leather, PU leather or fabric Smart Home Features ▪ Sofa Covers: Manufactured on OEM ba
Slide 12: Industry Overview
Industry Overview ra Leal
Slide 13: Growth of Future Upholstered Sofa Market in the U.S.
Growth of Future Upholstered Sofa Market in the U.S. Retail Sales Value of Upholstered Sofa in the U.S., 2011-2020 The U.S. is the PRC’s largest export market US$ (billions) for upholstered sofa products: 18.3 19.3 20 17.5 16.7 14.2 14.7 15.3 16.0 ▪ From 2011 to 2015, upholstered sofa 15 13.3 13.6 e
Slide 14: Growing Demand for Upholstered Sofa Products in the PRC
Growing Demand for Upholstered Sofa Products in the PRC Manufacturer’s Sales Value of Upholstered Sofa in China, 2011-2020 Healthy Growth in Domestic Sales of Upholstered Furniture Industry: RMB (billions) 193.8 200 175.6 185.4 ▪ Continued progress in urbanization 164.9 150.7 156.6 140.4 146.9 150 1
Slide 15: Investment Highlights
Investment Highlights re lal
Slide 16: Investment highlights
Investment highlights 1 Market Leadership in the PRC-based Sofa Export Industry 2 Continuous Improvement in Profitability 3 Integrated Business Model with Self-owned Brands 4 Innovative Design and Strong R&D Team 5 Economies of Scale and Effective Cost Management 6 Visionary Management Team 15
Slide 17: Market Leadership in the PRC-based Sofa Export Industry
1 Market Leadership in the PRC-based Sofa Export Industry Top 10 upholstered sofa manufacturers in terms of export value to the U.S., 2015 Market Share In terms of export value to the U.S. in 2015, the Company is the 12% second largest PRC upholstered sofa manufacturers with a market 9.8% 10% share
Slide 18: Continuous Improvement in Profitability
2 Continuous Improvement in Profitability Revenue Breakdown by Product Adjusted Net Profit and Adjusted Net Profit Margin* RMB (millions) RMB (millions) Profit Margin (%) 1,000 47.7 60 20% 33.3 31.4 800 226.5 379.3 15% 253.0 4.2 40 600 18.5 9.4% 104.8 10% 172.2 400 5.7% 5.7% 666.7 20 557.0 540.3 3.4
Slide 19: Integrated Business Model with Self-owned Brands
3 Integrated Business Model with Self-owned Brands Design: - In-house staff with extensive experience - U.S. designer and consulting firm R&D: - Self R&D centre in Haining City - 40+ in-house R&D personnel with extensive experience Manufacturing: - Efficient integrated model with focus on OBM busine
Slide 20: Innovative Design and Strong R&D Team
4 Innovative Design and Strong R&D Team Haining Research and Development Centre: ▪ Accredited as a Zhejiang Enterprise Technical Centre by the Zhejiang Province Economic and Trade Commission in 2003 ▪ 40+ staff members with extensive experience in the sofa production industry ▪ Senior members with 1
Slide 21: Economies of Scale and Effective Cost Management
5 Economies of Scale and Effective Cost Management Economies of Scale Lead to Lower Cost of Sales Cost of Sales and Admin Expenses thus Higher Margin RMB (millions) As % of Revenue 800 85% 80.0% 79.1% 600 76.3% 75.3% 80% 71.1% 400 75% 200 70% 787.5 652.1 706.6 425.6 413.6 0 65% 2013 2014 2015 8M2015
Slide 22: Visionary Management Team
6 Visionary Management Team Mr. Zeng Jin Mr. Zou Gebing Mr. Chen Guohua Senior Vice President, Executive Director and Executive Vice President Head of Production and and Executive Director Quality Management Chairman, CEO and Executive Director ▪ Over 15 years of industry and ▪ Extensive experience
Slide 23: Financial Highlights
Financial Highlights rl lal
Slide 24: Growing Revenue and Profitability
Growing Revenue and Profitability Revenue Breakdown by Product Adjusted EBITDA1 & EBITDA Margin2 RMB (millions) RMB (millions) Margin (%) 1,200 140 20% 47.7 120 16.1% 33.3 14.1% 900 31.4 14.0% 15% 100 379.3 226.5 9.9% 9.9% 253.0 4.2 80 600 18.5 10% 104.8 60 172.2 300 666.7 40 5% 557.0 540.3 472.5 37
Slide 25: Effective Cost Control Helps Improve Profitability
Effective Cost Control Helps Improve Profitability Cost of Sales Adjusted EBIT1 & EBIT Margin2 RMB (millions) As % of Revenue RMB (millions) Margin (%) 800 85% 140 20% 80.0% 79.1% 120 15.7% 600 80% 13.5% 13.1% 15% 76.3% 100 75.3% 80 400 75% 8.0% 8.0% 10% 71.1% 60 200 70% 40 5% 20 787.5 652.1 706.6 4
Slide 26: Strategic Focus on OBM Business and Improving Profit Margin
Strategic Focus on OBM Business and Improving Profit Margin Revenue Breakdown Gross Profit Breakdown RMB (millions) RMB (millions) 1000 240 200 800 160 600 67.3 491.5 120 23.2 118.5 76.7 400 113.2 483.1 600.9 27.2 80 20.5 69.8 88.6 319.6 358.3 110.0 99.1 18.9 200 73.2 25.1 118.5 40 379.3 253.0 226.5
Slide 27: Healthy Financial Condition & Return on Capital
Healthy Financial Condition & Return on Capital Current Ratio1 Interest Coverage Ratio2 120% 7 6.6 100% 6 108.6% 111.4% 5 80% 102.7% 4 60% 3 2.3 2.3 40% 2 20% 1 0% 0 2013 2014 2015 2013 2014 2015 Return on Equity3 Return on Assets4 120% 110.7% 10% 8.9% 100% 8% 80% 6% 60% 4% 40% 11.9% 1.7% 20% 2% 8.0
Slide 28: Efficient Working Capital Management
Efficient Working Capital Management Average Inventory Turnover Days1 Average Trade Receivables Turnover Days2 200 100 80 150 60 100 40 89.9 83.5 132.9 145.9 67.1 66.9 50 118.6 89.2 20 0 0 2013 2014 2015 8M2016 2013 2014 2015 8M2016 Average Trade Payables Turnover Days3 Cash Conversion Cycle4 200 10
Slide 29: Business Strategies and Use of Proceeds
Business Strategies and Use of Proceeds
Slide 30: Further Expand Sales and Marketing Network
Further Expand Sales and Marketing Network Europe ▪ The Company plans to Canada further expand sales and U.K. marketing network by U.S.A. Korea extending reach in the China Haining City, overseas furniture markets Zhejiang Province as well as expanding and Singapore strengthening sales Production Ca
Slide 31: Continue to Enhance Brand Recognition in the Furniture Market
Continue to Enhance Brand Recognition in the Furniture Market Marketing and Promotions Selective Pursuance of Strategic Alliances and Acquisitions ▪ Combination of marketing endeavours including advertising ▪ Selectively pursue strategic alliances and through: acquisitions of furniture brands with r
Slide 32: Continue to Enhance Brand Recognition in the Furniture Market (cont'd)
Continue to Enhance Brand Recognition in the Furniture Market (cont’d) High Point Market Showroom ▪ We have participated in the “High Point Market” exhibition in High Point, North Carolina, U.S. twice a year since 2010 by way of housing a showroom to promote and market our “Morris Holdings Limited”
Slide 33: Expand Manufacturing Capacities in Cambodia to Meet Market Demand
Expand Manufacturing Capacities in Cambodia to Meet Market Demand Cambodia has huge supplies of working age population in the coming years Minimum Wage for A 19-year-old or Europe Apprentice by Country (Year 2016) US$ per month Canada 2,000 1,500 U.K. 1,000 Korea 267 157 140 U.S.A. 0 China The U.S.
Slide 34: Use of Proceeds
Use of Proceeds Further expansion of our sales and marketing 31.3% network in both overseas market and the PRC Repayment of part of our outstanding bank 26.4% borrowings Enhancement of our brand recognition 26.0% in the furniture market General working capital and 9.8% other general corporate purpos
Slide 35: Q&A
Q&A ra Leal
Slide 36: Appendix
Appendix ra Leal
Slide 37: Efficient Production Process with Whole-process Quality Monitoring
Efficient Production Process with Whole-process Quality Monitoring Centralized purchasing of raw materials Disapproved materials Incoming inspection Approved Wooden frame processing Leather cover processing materials Foam processing Fabric cover processing Cutting Cutting Cutting Cutting Carpentry a
Slide 38: Extracts of Statement of Profit & Loss Figures
Extracts of Statement of Profit & Loss Figures For the year ended For the eight months ended 31 December 31 August 2015 2013 2014 2015 2016 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Revenue 984,026 824,675 926,471 564,958 581,566 Gross Profit 196,576 172,624 219,914 139,314 167,933 Gross P
Slide 39: Extracts of Balance Sheet Figures
Extracts of Balance Sheet Figures For the year ended For the eight months 31 December ended 31 August 2013 2014 2015 2016 RMB’000 RMB’000 RMB’000 RMB’000 Non-current Assets 132,490 142,570 51,554 52,518 Current Assets 1,891,375 1,586,052 885,805 935,366 Cash and Cash Equivalents 31,297 10,640 33,131
Slide 40: Extracts of Cash Flows Figures
Extracts of Cash Flows Figures For the year ended For the eight months ended 31 December 31 August 2015 2013 2014 2015 2016 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (unaudited) Net Cash Flows from/(used 57,442 34,204 110,636 38,518 92,524 in) Operating Activities Net Cash Flows from/(used (56,904) 18