exceed company limited · 2011-01-14 · actual results may vary ... this information is qualified...
TRANSCRIPT
喜得龙 Official Partner of Fitness for All
Exceed Company Limited Nasdaq
(Global Select Market): EDS
Investor Presentation
January, 2011
Safe Harbor Statement
This presentation contains forward‐looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 regarding future events
and future performance of Exceed Company Ltd (“Exceed”). These statements
are based on management’s current expectations or beliefs. Actual results may
vary materially from those expressed or implied by the statements herein. This
information is qualified in its entirety by cautionary statements and risk factor
disclosure contained in certain of Exceed's
Securities and Exchange
Commission filings. For a description of certain factors that could cause actual
results to vary from current expectations and forward‐looking statements
contained in this presentation, please refer to documents that Exceed files
from time to time with the Securities and Exchange Commission. Exceed is
under no obligation to, and expressly disclaims any obligation to, update or
alter its forward looking statements, whether as a result of new
information,
future events, changes in assumptions or otherwise.
1
Agenda
Introduction to Exceed
Investment Highlights
Company Strategy and Outlook
Appendix
2
3© 2010 Exceed Company Limited
Introduction to Exceed
Exceed Company Profile
4
Exceed owns and develops “XIDELONG”
brand sportswear, a leading local
brand in the mass sportswear market in China with, strength in 2nd and 3rd
tier cities
There are three major product categories: shoes, apparel and accessories.
Each has a comprehensive product portfolio
Solid revenue growth and expanding margins: CAGR revenue growth 26.6% 2007‐2009Q3 2010 revenue grew 25.8% y‐o‐yGross margin expanded by 0.6 pt y‐o‐y to 30.4% in Q3 2010
Company facts and stock information: Founded in 2001, voted “most popular sportswear brand in China” by sohu.com in 2005Ranked among China’s Top‐10 Sports Footwear Enterprises in 2010Listing: Nasdaq, Oct 2009 Ticker symbol: EDS (Global Select Market)Shares outstanding: Approximately 25.3 million, as of Dec 30, 2010Public float: 50%Fiscal year end: Dec 31Investor Information: http://www.ir.xdlong.cn
Rapid Development
in 10 Years
Company was established in Fujian, China
R&D center established
“XIDELONG”brand shoes launched in market
“XIDELONG”brand apparel and accessories launched in market
Began exclusive partnership with the China Institute of Sport Science
ISO9001 quality control certification granted for shoes
Nasdaq listing
2009 Revenue: RMB 2,078 million
2009 Net Income: RMB 248 million
Manufacturing plant in Jinjiang, Fujian, commenced operations with annual capacity of 6.4mn pairs of shoes
5
Transferred to Nasdaq Global MarketNationwide sales network: 4,194 stores by Sep 30, 2010Started “Happy Lifestyle” promotional campaign
20102010
20062006
20082008
20012001
20092009
2002200220032003
20072007
Awarded “National Inspection‐Exempted Product”and “Chinese Famous Brand”
Transferred to Nasdaq Global Select MarketAwarded one of China’s Top‐10 Sports Footwear Enterprises for year 2010
20112011
Brand Positioning
6© 2010 Exceed Company Limited
361361°°
Li Li NingNing
AntaAntaNikeNike
AdidasAdidas
Exceed Exceed XDLXDL
PumaPuma
Comprehensive Product Lines
7
Over 700
Items Across the Entire Product Range
R&D Innovations Drive Product Development
8
22 distributors22 distributors(1)(1)
EndEnd‐‐consumersconsumers
(1) As of(1) As of
SeptemberSeptember
3300, 20, 201010
Asset‐Light Business Model
–
Sales Channel
Extensive sales network with deep penetration
3 sales fairs held each year to showcase new products and take orders
22 distributors operate 4,194 retail shops(1) directly or indirectlyRetail shops include stand‐alone shops and department store concessions
Asset‐Light Business Model
‐
Production
Self‐produced Outsourced
Footwear 44.2% 55.8%
Apparel 0.0% 100.0%
Accessories 0.0% 100.0%
Note: all numbers are YTD first 9 months of 2010Note: all numbers are YTD first 9 months of 2010
9
10
Investment Highlights
Overview
11
(1) Huge and Fast‐growing Addressable Market
Huge and fast growing sportswear market in
ChinaMarket is valued at USD11.4 billion in 2009, with expected CAGR of 17.6% to reach USD18.9 billion in 2012 and further increase to USD22.3 billion in 2013Fast growth outpacing GDP and retail sales
Driving economic forces Continued robust GDP growthPer capita expenditure on sportswear is among the lowest*, with ample room to grow
Social and culture driving forcesChanging lifestyle favors sportswear market development Rapid urbanization 2010 Asia Games impact
12
Sportswear
Market Surpassing Retail Growth
2008‐2013
CAGR = 17
.6%
Domestic Consumer Retail Sales
CAGR =
14%
*Source : Frost & Sullivan, CIMB/CIMB‐GK Research Source: ZOU
Marketing
(1) Huge and Fast‐growing Addressable Market (Cont’d)
3rd Tier City Characteristics Drive Fast Growth
Vast and rapidly growing market in 3rd tier cities
About 2,800 3rd tier cities in China
Fast nationwide urbanization especially in 3rd tier cities
Government support for development of small and medium cities/towns
Faster growth in purchasing power
Higher growth in spending power measured by GDP per capita compared with 1st and 2nd tier cities
Minimum wages increases allowing rising purchasing power which favors consumer goods
Customers tend to be value‐sensitive
Favor domestic brands with lower price‐points
Prefer products with good value for money
13
13.6%
22.3%23.5%
37.6%
0%
8%
16%
24%
32%
40%
Baotou Dongying Linyi Nanchang
2001
‐200
8 GDP pe
r capita CAGR
Average
24.2%
Note: CAGR of Baotou and Linyi
is from 2001‐2007
18.4%20.7%
18.9%21.3%
0%
5%
10%
15%
20%
25%
Chongqing Hangzhou Nanjing Tianjing
2001
‐200
8 GDP pe
r capita CAGR
Average
19.8%
Note: CAGR of Nanjing is from 2001‐2007
17.1%14.6%
18.9%
15.2%
0%
5%
10%
15%
20%
25%
Beijing Guangzhou Shanghai Shenzhen
2001
‐200
8 GDP pe
r capita CAGR
Average
16.5%
First‐tier cities’
GDP per capita CAGR, 2001–2008
Selected second‐tier cities’
GDP per capita
CAGR, 2001–2008
Selected third‐tier cities’
GDP per
capita CAGR, 2001–2008
Source : CEIC
(2) Leading Local Brand in 3rd Tier Cities
Mid‐range price points and good value for cost products fit consumption pattern in 3rd tier cities
Firmly establishing leading position through strong distribution network in 2nd and 3rd tier cities
Established a top brand position in 6 years – products launched in 2002, became one of the leading domestic sportswear brands in China.
14
Fast Growth
in Net Revenue
Fuelled by Expansion
in Third‐Tier Cities
2007‐09
CAGR =
26.6%
+ 25.8%
(USD124.4 )
1,483
2,519
3,277
3,694
~4,300
~5,000
0
1,000
2,000
3,000
4,000
5,000
6,000
2006 2007 2008 2009 2010E 2011E
(No. of stores)
Source: The Company
Store Growth to
around
5,000
(3) Nationwide Distribution Network; Focused Expansion Plan
Two‐pronged expansion strategy –
Deepen penetration in 3rd tier cities as primary focus;
selective expansion in 2nd tier cities with strengthening brand profile
15
Nationwide distribution network with 4,194 stores; strong foothold in 3rd tier city segment
With over 200 retail storesWith 100-200 retail storesWith 50-100 retail storesWith less than 50 retail stores
As of September 30, 2010Total = 4,194
Jiangsu 105
Xinjiang 85
Tibet 3
Qinghai 8
Sichuan 214
Yunnan 375
Guizhou66
Guangxi 193
Guangdong 248
Fujian 116
Shanghai
Zhejiang 388
Anhui 277
Shandong 128
Hebei 56
Beijing 27Tianjin
Liaoning 110
Jilin 45
Heilongjiang 202
Inner Mongolia 62
Gansu 62 Shaanxi
318
Chongqing 196
Hunan 136
Jiangxi 143
Hubei 290
Henan 170
Shanxi 130
Ningxia 41
(4) Effective Marketing Efforts to Raise Brand Equity
16
First official partner of “Fitness for
All”
nationwide
campaign
and
events
organized
by
PRC
governmental Sports Council.
Sponsorship of “Inter‐City”
–
popular CCTV
entertainment show – since early 2010
Official Sponsorship
(4) Effective Marketing Efforts to Raise Brand Equity (Cont’d)
One of the Hottest
Regional Entertainment
Channels
One oOne of the f the HottestHottest
Regional Regional Entertainment Entertainment
ChannelsChannels
National Sports Channel
National National Sports Sports ChannelChannel
TV Commercial
Spokesperson
New Marketing Campaign Geared
Toward Focused Target MarketSigned By2 duo as product spokespersons to broaden reach to youth population
New product launches in lifestyle apparel segment benefits from prominent store displays
HUNAN TV
17
(5) Strong R&D and Product Development Capabilities
Partnership with major national research centers
Exclusive strategic partner of the China Institute of Sport Science
Hefei Institute of Intelligent Machines
Research‐backed customized products for Chinese
market
Proprietary database ensures product features customized for consumers in China
Footwear products customized for Chinese foot characteristics
Continued investment in R&D to enhance product
development capabilities
About 1.5‐2% of revenue invested in R&D to enhance new product development capabilities
Sustained efforts to explore the next generation of “intelligent” fabrics and sensor technology for new items
18
R&D gives XIDELONG products their distinctive competitive advantages
(6) Seasoned Management Team
19
Proven track record in the sportswear industryIn‐depth knowledge and extensive experience in the industryDedication towards delivery results and return Stable management team
Proven track record in the sportswear industryIn‐depth knowledge and extensive experience in the industryDedication towards delivery results and return Stable management team
Shuipan
LIN
Chairman,
Chief Executive Officer and
Founder, joined in 2001
Terence WONG
Chief Financial Officer,
joined in 2010
VP –
Finance and Company
Secretary, joined in 2008VP –
Design/R&D, joined
in 2001
Vivien TAI Dongdong
DING
(7) Strong Revenue Growth
Strong revenue growth supported by rising volume and ASP
CAGR revenue growth 2007‐2009: 26.6%
10.3
13.4
16.0
5.4
5.2
13.2
16.817.7
5.2
6.7
0
4
8
12
16
20
FY 07 FY 08 FY 09 3Q09 3Q10
Footwear Apparel
Pairs/Pieces
in m
illions
Sales Volume: Footwear & Apparel
RMBDollars
Wholesale Average Selling Price (ASP): Footwear & Apparel
Net Revenue
20
53.6
65.3 68.8 68.8 64.972.8
45.551.0
58.3
66.3
0
10
20
30
40
50
60
70
80
90
FY 07 FY 08 FY 09 3Q09 3Q10
Footwear Apparel
2007‐09
CAGR =
26.6%
+ 25.8%
Y-o-Y growth: 3Q YTD
Footwear: -3.9% 17.8%
Apparel: 29.0% 37.2%
Y-o-Y growth: 3Q YTD
Footwear: 12.1% 5.8%
Apparel: 13.7% 12.6%
(USD124.4)
YTD (first 9 months)
2009: RMB1,478.5mYTD (first 9 months) 2010: RMB2,042.9mY-o-Y Growth: 38.2%
Gross Profit/Gross Margin
Operating Profit/Operating Margin Net Income/Net Margin
(7) Sustainable Profitability RM
B in m
illions
336.9497.0
613.1
197.1 252.8
26.0%
27.3% 29.5%
29.8%
30.4%
0
100
200
300
400
500
600
700
FY07 FY08 FY09 3Q09 3Q10
0%
10%
20%
30%
40%07‐0
9 CAGR
39.6%
157.9 194.2281.4
67.0128.1
13.5%12.2%10.7%
10.1%
15.4%
050100150200250300350
FY07 FY08 FY09 3Q09 3Q10
0%
4%
8%
12%
16%
20%
OP OM
07‐09 CA
GR 38.1%
RMB in m
illions
135.6171.7
250.4
55.9111.0
12.1%10.5% 9.4%
8.4%
13.3%
0
50
100
150
200
250
300
FY07 FY08 FY09 3Q09 3Q10
0%
4%
8%
12%
16%
20%
NI NM
07‐09 CAG
R 40.8%
RMB in m
illions
21
Gross margin expansion
Enhanced brand recognition drove up ASP
Improvement in cost control and efficiency
Stable operating margin while investing for growth
Invest in A&P and R&D to enhance brand equity and product development capabilities for long‐term growth
YTD (first 9months)OPM: 15.8%Y‐o‐Y growth: 2.5pts
YTD (first 9 months)GPM: 31.5%Y‐o‐Y growth: 2.1pts
YTD (first 9 months)NPM: 13.6%Y‐o‐Y Growth: 2.3pts
SG&A Advertising/Promotion Expenses
Administrative Expense R&D Expenses
(7) Improve
Cost Structure and Invest for Growth
RMB in m
illions
127.7 107.9 97.1209.0 247.9
11.7%16.3%
11.9%9.9% 11.5%
0
50100
150
200250
300
FY07 FY08 FY09 3Q09 3Q10
0%
5%
10%
15%
20%
25%
A&P % of sa les
RMBin m
illions
RMBin m
illions
30.0 29.2
10.2 11.7
44.5 1.4%1.5%2.1%
2.3%1.6%
0
10
20
30
40
50
FY07 FY08 FY09 3Q09 3Q10
0%
1%
2%
3%
4%
Admin % of sales
RMBin m
illions
12.87.0 8.117.6 25.0
1.0% 1.0%1.2%
1.1% 1.0%
0
5
1015
20
25
30
FY07 FY08 FY09 3Q09 3Q10
0%
1%
2%
3%
R&D % of sa les
22
YTD (first 9 months):2009: 11.7% 2010: 11.7%
YTD (first 9 months):2009: 2.1% 2010: 1.7%
YTD (first 9 months):2009: 1.4% 2010: 1.5%h
YTD (first 9 months):2009: 16.1% 2010: 15.9%
(7) Healthy Balance Sheet
(RMB in Millions)Dec. 31
2008
Dec.31
2009
Sep. 30
2010
Sep. 30
2010 (USD
in Millions)
Cash and Cash
Equivalents 120.1 262.2 655.7 98.0
Receivables 284.8 812.7 585.9 87.6
Inventories 86.1 56.0 85.6 12.8
Trade and Bills Payable 127.6 195.5 122.9 18.4
3Q10 3Q09
Inventory Turnover Days 13 15
Trade Receivables Turnover Days 64 74
Trade Payables Turnover Days 19 47
Balance Sheet Highlights Cash Flow Summary
(RMB in Millions) FY08 FY09 3Q10 9M10
9M10
(USD in
Millions)
Cash Flow from
Operating Activities
44.0 ‐155.7 129.2 421.7 63.0
Capital
Expenditures
17.3 2.3 0.8 5.1 0.8
Cash Flow from
Financing Activities
24.5 299.9 ‐1.0 ‐11.1 ‐1.7
Working Capital Management
23
24© 2010 Exceed Company Limited
Company Strategy and Outlook
Growth Strategy
Focused three‐pronged strategy to drive organic and acquisitive growth and to
improve profitability
25
Capitalize on high growth potential of 2nd
and 3rd
tier
cities, deepen penetration to drive acquisitive growth
Elevate “XIDELONG”
brand equity to achieve
higher ASP and margin expansion
Deepen Market
Penetration
Focused marketing efforts to strengthen brand
profile and improve store growthStrengthen Market
Position
Enhance Brand Equity
Operational Initiatives
Expand distribution network to meet fast‐growing demand
Addition of 700 stores on average in 2010 and 2011, to reach approximately 5,000 stores by the end of 2011, representing a 35.4% increase from 2009Total of 500 stores added in the first nine months of 2010
Penetrate new cities, with the focus in 3rd tier cities in Guangdong, Jiangsu and Zhejiang provinces
Select expansion in 2nd tier cities
Increase sales efficiency
Raise brand profile through strategic advertising campaign
New marketing campaign and spokespersons to align brand image and product, enhance brand equity
Drive ongoing margin expansion
Expand margin through higher ASP
Improve production efficiency
26
4Q 2010 Guidance
Exceed expects to generate net revenues in the range of RMB2,639.0 million (USD394.4 million) to RMB2,680.6 million (USD400.7 million) in the fiscal year 2010, an increase of 27% to 29% compared with RMB2,078.0 million (USD310.6 million) in 2009.
This represents the Company’s preliminary estimates, and is subject to change.
27
Q & A
28
Appendix
Q3 2010 Financial Highlights
Q3 2010 Selected Balance Sheet Items
Revenue Breakdown
R&D Capabilities
29
Q3 2010 Financial Highlights
30
(In millions, except EPS data)Q3
2010US$ 4
Q3
2010RMB
Q3
2009RMB
Y‐o‐Y%
Total Net Revenue 124.4 832.4 661.7 25.8%
Gross Profit 37.8 252.8 197.1 28.3%
Operating Profit 19.1 128.1 67.0 91.1%
Profit for The Period Attributable to
Equity Holders of The Company
16.6 111.0 55.9 98.6%
Basic EPS 1 0.66 4.39 9.73 ‐54.9%
Diluted EPS 2 0.59 3.98 8.86 ‐55.1%
Q3 2010 Q3 2009 Y‐o‐Y
Gross Margin 30.4% 29.8% 0.6pts
Operating Margin
3 15.4% 10.1% 5.3pts
Profit Margin Attributable to Equity Holders of the
Company 3
13.3% 8.4% 4.9pts
Notes:
1.
The weighted average basic shares outstanding for the three months ended September 30, 2010 was 25,303,727; the weighted average
basic shares outstanding for
the three months ended September 30, 2009 was 5,741,466. The increase is mainly due to new shares issued during new listing in Oct 2009.
2.
The weighted average diluted shares outstanding for the three months ended September 30, 2010 was 27,909,665 the weighted average diluted shares outstanding
for the three months ended September 30, 2009 was 7,220,478.
3.
The operating margin for the 9 months ended September 30, 2010 and 2009 are 15.8 % and 13.3% , respectively. The net profit margin for the 9 months ended
September 30, 2010 and 2009 are 13.6% and 11.3%, respectively. Both margins improved for the 9 months period.
4.
RMB to $US conversions were made using the exchange rate of US$1.00=RMB6.6905.
Q3 2010 Summary Balance Sheet
31
(in millions)Sep
30, 2010
US$
Sep
30, 2010
RMB
Dec
31, 2009
RMB
Change
%
Cash and bank balances and pledged
time deposits
98.0 655.7 277.2 136.5%
Inventory 12.8 85.6 56.0 52.9%
Trade Receivables 87.6 585.9 812.7 ‐27.9%
Total Current Assets 203.4 1,360.7 1,165.9 16.7%
Trade and Bills Payables 18.4 122.9 195.5 ‐37.1%
Total Current Liabilities 31.1 208.3 319.4 ‐34.8%
Total Equity 218.0 1,458.3 1,148.4 27.0%
(in millions)3Q10
US$
3Q10
RMB
3Q09
RMB
9 Months 2010
RMB
Net Cash flow 19.0 127.3 ‐17.5 393.5
3Q10 3Q09 Y‐o‐Y Change
Inventory Turnover Days 13 15 ‐2
Trade Receivables Turnover Days 64 74 ‐10
Trade Payables Turnover Days 19 47 ‐28
Revenue Breakdown by Product
For the year ended Dec. 31
FY07
%
FY08
%
FY09
%
Footwear 52.0 50.7 53.0
Apparel 46.1 47.1 45.7
Accessories 1.9 2.2 1.3
Total 100.0 100.0 100.0
53.1%45.5%
53.4%45.8%
1.1%1.1%
0%
10%
20%
30%
40%
50%
60%
3Q09 3Q10
Footwear Apparel Accessories
(In millions)
Q3 2010
RMB
Q3
2009RMB
Y‐o‐Y
%
Footwear 378.4 351.1 7.8%
Apparel 444.3 303.0 46.6%
Accessories 9.7 7.6 27.7%
32
Revenue breakdown by products
Strong R&D Capabilities
Better underside support and shock absorption
Better color‐fading resistance and higher durability
Better deodorizing and anti‐bacteria effects
Develop foot
measure machine
Collect data to
establish
Chinese foot
shape database
Pressure
distribution test
Design/develop
sole and last
Analyze foot
shape data
Footwear products customized for unique Chinese foot characteristics based on proprietary database
33
Nano‐silver photocatalystSilicone rubber materialsArch support pad