SINGAPORE (Aug 19): Amid the US-China trade tensions and a resultant down cycle in the electronics industry, Singapore Exchange Mainboard-listed Excelpoint Technology remains positive about opportunities that will bear fruit.
“We are closely monitoring market developments and remain confident that with our value-added technical capabilities and strong business presence in Asia-Pacific, we can capture [emerging] opportunities,” says CEO Albert Phuay in an interview with The Edge Singapore.
Founded in 1987, the Singapore-headquartered company is a regional business-to-business provider of electronic components, engineering design services and supply chain management services to original equipment manufacturers (OEMs), original design manufacturers (ODMs) and electronics manufacturing services (EMS) providers. This is done through the making of the devices and provision of cloud and application solutions.
Excelpoint’s value proposition as a systems integrator sees its components being used across the mobile and computing, industrial and instrumentation, and consumer segments. Examples include in smartphone devices, medical and healthcare equipment, utility meters, industrial power supply, and audio and home entertainment appliances. It is also positioning itself as a key player in the Internet of Things (IoT) growth story with its range of products in optical networking, and navigation and control across the lighting, communications and automotive industries.
From its home base in Singapore, Excelpoint has built up a presence in more than 40 cities in 10 countries, including Malaysia, Thailand, Vietnam, India, Indonesia, the Philippines, China, Australia and the US. The company had its IPO in 2004, selling shares at 26 cents each and raising $3.82 million. The proceeds were used to expand its geographical footprint and product -offerings.
Year to date, Excelpoint’s shares have dropped some 14% to close at 50 cents on Aug 15. At this level, its shares are trading at a historical price-to-earnings ratio of 7.55 times, valuing the company at $59 million.
For its most recent quarter ended June 30, Excelpoint saw a hefty 92.5% y-o-y drop in its net profit to US$200,000 ($280,000), from US$2.2 million in the previous year. According to Phuay, a one-off impairment loss of US$1.4 million from a trade debtor caused the significant drag in profits. Revenue in the same period was down 36.2% y-o-y to US$231.1 million, from US$362.2 million in 2Q2018, on the back of lower sales from its Singapore and Hong Kong business units.
The company also saw a decrease in key expense components such as sales and distribution (down 15.7% y-o-y to US$8.8 million) and administrative expenses (down 25.5% y-o-y to US$3.9 million), owing to lower staff costs and net foreign exchanges during the quarter.
Overall, Excelpoint recorded earnings of US$1.2 million for 1H2019, which is 68.1% less than the US$3.7 million recorded in 1H2018. Revenue for the period was US$470.9 million, down 25.8% y-o-y from 1H2018’s US$635 million. To Phuay, the company’s results are “not too bad”, given the downturn and compared with how other companies in the industry are faring. For now, the company’s board is not giving out an interim dividend.
Bets on IoT
While the downturn and slowdown prove challenging, Phuay, a businessman with decades of experience, remains focused on “doing the business well and improving the products and R&D capabilities”. He says: “No matter how good or bad times are, if your products can add value, that is the most important thing.”
Phuay places great emphasis on the human resource aspect of the company. He is proud that in Excelpoint’s history, despite going through various business cycles, it has never retrenched staff.
With the help of his employees, Phuay makes it a point to always be forward looking. To this end, the company is investing in new technologies through its four R&D centres in Singapore, China and Vietnam. These centres have labs that cost about US$1 million each and that work on the testing and development of new technologies, their applications and how they can go to market.
There are two new growth areas of particular interest: IoT and far-field voice recognition technology. Under IoT, Excelpoint is conducting research into smart buildings, smart agriculture and smart infrastructure to ensure a more sustainable and efficient future. The global IoT market is expected to hit US$111.3 billion by 2026, from US$190 billion in 2018, with smart devices spearheading the growth, according to a report by global market research and consulting company Fortune Business Insights. However, the report goes on to show that most of these developments are coming from the US and Canada. Through its research, Excelpoint wants to make its own mark in this field in Asia-Pacific, where its key markets are.
Excelpoint’s far-field voice recognition technology, on the other hand, will be useful in the development of voice-enabled devices that respond to commands made from a distance. The company has set up a far-field audio tuning lab — the first in Singapore. According to research company MarketsandMarkets, the far-field voice recognition market is set to jump to US$3.5 billion by 2024 from a market value of US$969 million in 2018, thanks to heightened demand for smart speakers, TVs and other such gadgets. The Americas, particularly the US, is expected to be the largest market for such devices, but Excelpoint sees opportunities in the Asian market, where demand for such devices has yet to peak.
New blood and fresh ideas
Phuay was the one who started the company and built it up over the years, but he now has help from his daughter, Li Ying, who is Excelpoint’s deputy director for corporate development. She has wasted no time in introducing fresh ideas to the business.
Li Ying joined her father five years ago after stints in finance at a bank and in marketing at a start-up. She says her involvement in the company was unplanned; rather, it was a “seamless and natural move” that came about when she was looking to do something different. Phuay quips that his leadership of the business was also unplanned. “I believe such things must happen naturally; if it is forced, then [the employees’] productivity may be affected,” he says.
However, he stresses the need for businesses to include and groom second-generation leaders — be they family members or other millennials. Since Li Ying joined the company, Excelpoint has moved on to another stage — it now also acts as “a big brother” to early- and mid-stage start-ups focused on IoT, hardware and electronics in Singapore and Asia. This is done through PlanetSpark, its entrepreneurial and research arm set up in 2018 and helmed by Li Ying. Investing in such start-ups and smaller companies is part of Excelpoint’s broader strategy to grow in the long run via strategic alliances.
PlanetSpark got off the ground with an initial commitment of $5 million from Excelpoint. Its first investment was in Singapore-based chip design firm CLOP Technologies (CLOPTech), a spin-off company from the Agency for Science, Technology and Research (A*STAR), for $300,000. CLOPTech’s focus on wireless solutions and smart connectivity is in line with Excelpoint’s emphasis on IOT and was what caught its eye.
Both Phuays say the gap in the IoT ecosystem is something they hope to fill through PlanetSpark. And in line with that, they made their second investment of US$2 million in home-grown Meridian Innovation for the development of thermal imaging sensor solutions. So far, the company has funded two Singapore-based start-ups and has collaborations with more than six companies. Its investments in the companies so far range from US$100,000 to US$2 million, depending on the extent and type of aid given.
“Investing in start-ups has always been [our desire], as many of them have very good R&D that can be commercialised,” says Phuay. He believes the start-ups can leverage Excelpoint’s regional footprint, market size and capabilities to expand and gain traction. Li Ying adds that this has also saved costs for the company’s mentees, as they can gain access to new technologies and go to market faster.
While many think that working with family members is difficult, father and daughter complement each other well: Phuay concentrates on the technical aspects, while Li Ying focuses on building Excelpoint’s brand. Just as bets on new technologies need time to gestate, a company’s future hinges on grooming the next generation of leaders. “Whatever we are enjoying today is the result of investments made 10, 20 years ago,” Phuay says.
