JT 8.2016This article by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange) was published in SGX's kopi-C: the Company brew series on 29 March 2018. The article is republished with permission.

AlbertPhuayAlbert Phuay is the CEO of Excelpoint Technology, a B2B distributor of components and services for OEM, ODM, and EMS providers in the Asia Pacific region. (Photo: Company)

The founder and Chief Executive Officer of SGX-listed Excelpoint Technology Ltd began his career in the tech sector, with roles ranging from quality assurance to manufacturing.

"Coming from a technical background, electronics was familiar territory for me, and I also had many peers who joined this industry," Phuay recalled.

The opportunity to set up Excelpoint came in 1987 - as a bolt from the blue - when one of the electronics suppliers he was working with offered him a contract to distribute its components.

Phuay lacked capital to set up the business, but a close friend, who believed in his enterprising spirit, stepped in with a US$25,000 loan.

That marked a key turning point in his life, and resulted in the birth of Excelpoint.

LQM C5B5A8 An entrepreneur's path in the electronics sector is never an easy one.

But the many ups and downs along the way are not as important as building a solid foundation and establishing the right values from day one.


- Albert Phuay

CEO
Excelpoint Technology

"An entrepreneur's path in the electronics sector is never an easy one," Phuay said with a wry grin.

"But the many ups and downs along the way are not as important as building a solid foundation and establishing the right values from Day One.

"The most critical lessons are staying positive and upholding the principles of integrity."

From a one-man operation in the 1980s, Excelpoint today has a presence in more than 10 countries across the Asia Pacific region, and a total of over 700 employees.

Listed on SGX Mainboard since January 2004, Excelpoint is a business-to-business platform that provides quality components, engineering design and supply chain management services to original equipment manufacturers (OEMs), original design manufacturers (ODMs) and electronics manufacturing services (EMS) providers in Asia Pacific.

It was ranked among the Top 25 Global Electronics Distributors in 2017 by EBN, a premier online community for global supply chain professionals.

The Group's key suppliers include Analog Devices, Qualcomm, Samsung Electronics and Qorvos.

Excelpoint has a current market capitalisation of about S$83 million. In the 2018 year-to-date, its shares have generated a price gain of 12.9%, outperforming the benchmark Straits Times Index's (STI) 1.1% rise and the broader FTSE ST All-Share Index's 0.5% increase.


Cutting-Edge

On the financial front, the Group has increased revenues by a compounded annual growth rate (CAGR) of 18% between 2015 and 2017, with sales surpassing the US$1 billion mark for the first time last year. Net profits have increased by a CAGR of 36% over the same period.

For the financial year ended 31 December 2017, Excelpoint achieved record revenue of US$1.1 billion, up 16% year-on-year, while net profit gained 14.8% to US$8.1 million.

"Compared to 30 years ago, our business today is very different, and the ways in which we service our customers have also evolved significantly," noted Phuay, who clinched the Entrepreneur of the Year Award in the Electrical and Electronics Industry category at the 2017 Asia Pacific Entrepreneurship Awards.

"In the past, it was all about brands and consumer demand. Now, the focus is not just on branded white goods, but also the latest cutting-edge technologies and infrastructure development."

 

LQM C5B5A8In the past, it was all about brands and consumer demand. Now, the focus is not just on branded white goods, but also the latest cutting-edge technologies and infrastructure development.

- Albert Phuay
CEO
Excelpoint Technology

Right from the start, Phuay was quick to set up research and development (R&D) centres to boost service offerings for clients.

"Initially, we employed field application engineers to solve problems onsite on behalf of suppliers. But we soon realised the FAEs were not enough - we needed to get closer to the market and focus on developing new technologies."

The Group set up its first R&D centre in 1994, and has added another in China since then, with each centre helmed by a team of professional engineers. About a quarter of Excelpoint's workforce - one of the highest percentages in the industry segment - comprises trained engineers.

"Focusing on R&D was the most strategic decision that we made, which helped secure Excelpoint's future," Phuay said.

"The rewards have been huge - though not necessarily in profit terms - as our efforts signalled to suppliers and customers that we were totally committed to the industry, and to meeting their needs."

Three decades ago, Phuay was optimistic about the outlook for the electronics distribution business, despite a myriad of challenges that included the need for superior product innovation and strong interpersonal skills to keep abreast of the competition.

"Today, I remain equally, if not more, confident of our prospects. Everyone thinks this is a sunset industry, but they could not be more wrong. Growth over the next decade will be very steady," he noted.

"This business will still exist in the next 20 years, because there are gaps between customers and suppliers that need to be filled by distributors, especially for emerging markets such as China, India and Southeast Asia, in areas like time-to-market, because products get outdated very quickly in this industry," he added.

Time-to-market refers to the length of time it takes to design and manufacture a product before it is available for sale to the consumer.

 

star bullet white Future-Proof

Key growth drivers for the distribution industry include China's "One Belt, One Road" (OBOR) initiative, which is expected to boost regional infrastructure demand, as well as the rise of the digital economy, including the Internet of Things (IoT).

Global spending on IoT - which refers to the interconnectedness of computing devices embedded in everyday objects or smart devices - is forecast to reach US$772.5 billion in 2018, up 14.6% from 2017, according to forecasts by IT consultancy International Data Corporation (IDC).

IDC expects worldwide IoT spending to sustain a compounded annual growth rate of 14.4% between 2017 and 2021, surpassing the US$1 trillion mark in 2020 and reaching $1.1 trillion in 2021.

"OBOR and the resulting infrastructure demand will need a lot of support in terms of electronics, while IoT should see a take-off in volume terms over the next three years, especially in the areas of artificial intelligence and electric cars," Phuay said.

Stock price  69.5c
52-week Range 58c to 71c
Market Cap S$82.4m
Price/Book 0.835 x
Price Earnings 7.6 x
Dividend Yield 4.32%
Source: SGX StockFacts

"Right now, IoT is only a fraction of the ecosystem that it can, and will, become."

China's "Made in China 2025" initiative, targeted at upgrading its domestic manufacturing chain, will also throw up new opportunities in the industrial and instrumentation space, a key segment for Excelpoint.

Currently, North Asia is the largest revenue contributor, accounting for nearly 55% of the Group's aggregated revenue in FY2017.

These drivers are expected to help Excelpoint double its annual revenues to US$2 billion within the next five years, Phuay added.

Inorganic growth opportunities - in the form of mergers and acquisitions as well as partnerships - will also play a critical role.

"For a company of our size, we need partnerships and M&As to enhance our technological know-how and broaden our revenue streams," he said, adding that the Group is focusing on electronics-related segments, such as plastics, rubber and precision engineering.

 

Unflagging Ambition

Two years ago, Phuay put in place a succession plan - not just for the next, but also subsequent generations - to ensure the company stays on a growth trajectory.

He is unwavering in his goal to develop Excelpoint into an Asian nexus between customers and suppliers, offering the best-in-class design services and integrated R&D solutions.

 

LQM C5B5A8As long as you are flexible enough to adapt to industry changes and can stay at the forefront of the technology curve, your distribution business will never die.

- Albert Phuay
CEO
Excelpoint Technology

"Our management team is always improving and evolving to ensure we are ready to take on the next milestone of growth - to expand our current revenue of US$1 billion to US$2 billion," he said.

He aims to build a 百年老店 (bai nian lao dian) - a business with a 100-year legacy - for both staff and shareholders. "We've just crossed the 30-year mark, we have another 70 to go," he said with a laugh.

"As long as you are flexible enough to adapt to industry changes and can stay at the forefront of the technology curve, your distribution business will never die."

So far on this front, Phuay has few concerns. "I'm very proud of our management team - about 70% to 80% of our senior management staff have been with Excelpoint for more than 15 years, and are industry leaders in their own right."

As a result, he sleeps like a baby every night. Phuay attributes his cheerful spirit and good health to a stubbornly positive attitude.

"It's all about your mindset - I make it a point to be happy and energetic every day," the father of two daughters and a son, aged 20 to 29, said with a laugh.

The Chinese proverb 人生不如意的事, 十之八九 - the observation that in life, eight or nine out of 10 things will usually not go your way - is a constant reminder of the need to choose positivity.

"Some things will always go wrong, but if you focus on the 80% to 90% of these occurrences, you will never be happy. All that negativity will just create more trouble and chaos in your life," he said.

"On the other hand, a positive attitude will go a long way towards resolving problems."


Financial results

Year ended 31 Dec
(US$'000)
2017 2016 2015 2014
Revenue 1,146,394 988,240 828,283 728,968
Gross Profit 60,907 55,112 47,742 44,275
Profit attributable to equity holders 8,098 7,053 4,355 7,083



Quarter ended 31 Dec (US$'000) 4QFY2017 4QFY2016
yoy chg
Revenue 297,524 250,220 18.9%
Gross Profit 17,077 14,751 15.8%
Profit attributable to shareholders 2,813 2,554 10.1%

Source: company data

 


Outlook & Risks
  • The outlook for the electronics and semiconductor industry continues to be positive in 2018. Increasingly, technology applications require more electronic components than before, and this is one of its key growth drivers. The recent Consumer Electronics Show held in Las Vegas in January 2018 showcased new developments that will fuel additional demand for technology solutions and applications, especially in wireless connectivity and sensors, which are vital segments to the entire Internet of Things (IoT) infrastructure. The Group believes these developments will support its business growth for FY2018.
  • The Group will continue to strengthen its value-added services to enhance its position in the market as a B-to-B platform. While it works on capturing new business opportunities both organically and inorganically, the Group remains focused on driving operational efficiencies and sustainable growth for the year ahead.


Excelpoint Technology Ltd

Excelpoint is a leading regional B-to-B business platform providing quality electronics components, engineering design services and supply chain management to original equipment manufacturers (OEMs), original design manufacturers (ODMs) and electronics manufacturing services (EMS) providers in the Asia Pacific region.

It ranks among the Top 25 Global Franchised Distributors List from EBN in 2017. Excelpoint works closely with its principals to create innovative solutions to complement its customers' products and solutions. Aimed at improving its customers' operational efficiency and cost-competitiveness, the Group has set up research and development (R&D) centres in both Singapore and China that are helmed by professional engineers. Established in 1987 and headquartered in Singapore, Excelpoint's business presence spans more than 40 cities across Asia Pacific, with a workforce of over 700 people from different nationalities and cultural backgrounds.

 

For the company's financial results for the year ended 31 December 2017, click here.

The company website is: www.excelpoint.com.

The ccompany's Stock Facts page is here.

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