Company profile:
Home Control, headquartered in Singapore, is the world's leading provider of home control solutions, with operations all over the world, including North America, Europe, Asia and Latin America. According to Frost & Sullivan, the company was the second largest provider of home control solutions in the world in 2018, accounting for 9.6% of the market share. The company has established global partnerships with internationally renowned MSO (system operators), television and OTT (Internet transmission) equipment brands for remote control design and development. Customers include Airtel in India, SkyUK in the UK, AT&T and Frontier in the US, Xiaomi (1810 HK) and Hisense (921 HK) in China.
The views of China and Thailand:
The home control solutions market will be driven by increased demand for OTT services: according to Frost & Sullivan, the total revenue of the home control solutions market increased from US$930 million in 2013 to US$1.82 billion in 2018, with a compound annual growth rate of 14.4%, mainly due to improvements in network infrastructure and the popularity of internet-enabled devices. As end users move from MSO to OTT, television remains the main channel for content consumption, and subscription services continue to grow, which is beneficial to home control solution providers. North America is the main segment of the home control solutions market, accounting for 48.9% of the market in terms of revenue in 2018. The home control solutions market is expected to be supported by increasing demand for OTT services and will reach US$3.73 billion by 2023, with a compound annual growth rate of 15.1% from 2019 to 2023.
In terms of operating performance: In the 2016-2018 fiscal year and ending April 30, 2019, the company achieved operating income of 140 million US dollars, 150 million US dollars, 170 million US dollars and 60 million US dollars respectively. Among them, revenue from MSO gradually declined from 96.2% to 69.3%, and revenue from OTT increased from 3.8% to 30.7%. In addition, about half of the revenue came from North America; gross margin was 22.5%, 22.6%, 19.6% and 17.8% respectively. Excessive growth in sales costs led to an overall decline in the company's product gross margin, 19 The year-on-year decline in the first four months of the year was due to the end of the product usage cycle of two high gross margin customers, and the 18-year gross margin fell due to the increase in sales made by a Chinese customer with a low gross margin, which enabled the company to expand its market share in China and further establish business relationships with that customer. In terms of net interest rates, the net interest rate after adjustment was 3.4%, 3.7%, 3.2% and 1.7%, respectively. The year-on-year decline in the first four months of 19 was due to the sale of more gross profit margins to customers; in terms of net interest, it was 4.2%, 3.5%, 2.1% and -0.8% respectively. The net interest rate after adjustment was 3.4%, 3.7%, 3.2% and 1.7% respectively. As a result of declining products, future performance will also be suppressed by loss of goodwill.
In terms of valuation: Based on the calculation of 500 million shares after the global public sale, the company's market value was HK$51-745 million, which is lower than that of its Hong Kong stock peers. The price-earnings ratio of the company in 2018 was about 17.8-26.0 times, which is higher than the industry average; in 2018, the net price-earnings ratio was about 12.42-25.50 times, which is higher than the industry average. In terms of profitability, ROE and ROA in 2018 were 29.6% and 7.74% respectively, which is higher than the industry average. Based on the company's industry status and performance, we gave it 49 points, and the rating was “no subscription”.
Risk warning: (1) Market competition risk (2) sharp rise in component prices or loss of major suppliers (3) Risk of a global trade war
