1. Karin Technology was established more than 40 years ago and has been profitable every year since. What would you say is the formula for your success?
Established in 1977 and listed on the Singapore Exchange Mainboard in 2005, Karin Technology is a diversified electronic components, IC software and IT infrastructure solutions provider, with a significant market presence spanning over 40 years in Hong Kong and China. It has three core businesses — components distribution, IT infrastructure solutions and services and consumer electronics products.
For over 40 years, we have implemented strict financial controls, reporting and analysis that have enabled us to stay in the black even during the financial crisis of 1998 and 2008. We believe that our ability to identify future industry-shaping trends has enabled us to remain ahead of the curve. For example, we invested in cloud-related expertise and solutions as early as 2017, creating an early mover advantage.
We have a multi-pronged strategy to drive growth across our three business segments: Components distribution (securing distribution rights to leading solutions and products), IT infrastructure (ride on the digital transformation of businesses) and consumer electronic products (working with brands that have strong customer demand).
2. Karin Technology started as an electronic components distributor, then a provider of IT solutions and services, and has since expanded into retail. Can you explain the strategy behind each move?
We were founded in the 1970s in Hong Kong, the region’s manufacturing hub, and in the digital watch space, we provide crystals and components. In the mid-1980s and 1990s, we included components distribution and provided IT infrastructure during a period of rapid industrialisation and modernisation. We differentiated by providing value-added engineering services and consultancy to customers in Hong Kong, Macau and China.
In the early 2000s, we established a presence in Shanghai, Beijing, and Shenzhen. In 2011, riding on the trend of smart devices, we set up our retail arm and expanded into the distribution of prestigious consumer electronic brands such as Beats by Dr Dre, Jaybird, Polar and Jabra.
Our strength lies in our ability to recognise growth opportunities in the region through every technological transition, with new technologies bringing the group into new locations and markets.
3. For the past four decades, you have focused your business mainly in Hong Kong and China, and a small part in Singapore. Are there plans to expand to other markets?
Our products and solutions serve a wider ecosystem of global business partners and customers, even though our core markets remain in Hong Kong and China. We remain focused on our existing markets but we believe that digitally connected economies are crossing borders from software and applications to Internet of Things (IoT). We will continue to monitor this trend in the coming decade.
4. What are the group’s future growth drivers?
From smart healthcare, smart buildings to smart retail and smart transportation, we believe that IoT will transform everyday life including domestic appliances to healthcare devices, and even public facilities. To strengthen our capabilities in IoT, we have reinforced our current field application and service teams and set up a new IoT engineering team to supply business solutions to support our customers.
5. What can partners, customers and shareholders expect from the group going forward?
We will deploy our resources to support our business customers in the space of IoT technologies: Our electronics and components line will carry new product lines, particularly WiFi and Bluetooth low power technology that enables and supports smarter living and health-related application designs. Our IT professional service line will partner vendors supporting cloud, security, IoT, network and applications, as infrastructure and security transformation move towards faster and more agile platforms. Having identified smart solutions as one of the key technology trends in the coming decade, we will focus on recruiting new product lines and project management for smart healthcare, smart office and building, smart transportation and smart retail, strategically aligning towards a smart city development.
6. How has Covid-19 impacted your business and what is your strategy to ride out the crisis?
Consolidated revenue of the group decreased 7.7% y-o-y to HK$0.98 billion ($166.98 million) for the six months ended Dec 31, 2020 (HY2021), mainly from lower sales in components distribution and consumer electronics products at 13.4% and 44.7% respectively due to the pandemic. However, lower sales were partially offset by a 5.4% increase in revenue
from our IT Infrastructure business. Both components distribution and consumer electronics products segments were impacted by Covid-19, which affected the demand for electronic components and consumer electronic products.
Conversely, our IT Infrastructure segment had benefited from the enforced work-from-home requirements, which led to higher demand for home office tools for electronic communication and connection such as network security products, cloud solution services and data visualisation kits.
To increase our competitiveness, we improved our components segmentwith new modules that can be applied to smart devices as well as commercial and home appliances. To capitalise on the strong demand for network and communication tools, our IT Infrastructure segment expanded its product mix with new products. Although the group expects in-store sales from our consumer electronics products segment to remain weak, we intend to leverage the strong growth in online sales with enhanced product offerings.
7. The group had sold a property in Shanghai in 2020. Can you shed some light on this decision?
We have always believed in investing in real estate that supports our operations. This strategy not only allows us to save on rental costs but also gives us the flexibility to either lease out or monetise the properties at the appropriate time. The group currently owns properties in Hong Kong, Shenzhen, Shanghai, Beijing and Singapore.
8. What are some key ESG factors that are material to Karin Technology? How do you address these factors?
Anti-corruption, quality management and regulatory compliance are three issues most pertinent to the group. We have an employee handbook that stipulates our internal anti-bribery and anti-corruption guidelines. We also have a whistle-blowing policy for employees to report concerns such as ethical business, personal conduct, financial matters, integrity and professionalism. Quality management is essential to us and we have attained ISO 9001:2015 Quality Management Systems certification.
We have a Quality Assurance Manager who monitors the compliance of ISO requirements on a timely basis, provides training to employees and ensures quality services and support for our stakeholders. In addition, the group also adheres to the highest standards of corporate governance and has established clear policies and procedures and designated personnel to ensure compliance with all applicable laws and regulations
9. The group has been distributing dividends every year since its listing in 2005. What gives you the confidence to do so?
We firmly believe that we have a responsibility to shareholders and their expectations of returns on their investment. Therefore, we have set aside sufficient working capital reserves while investing in the various aspects of our business — including human resource, business network and technology. Our dividends are an indication of our confidence in the group’s future.
10. What is Karin Technology’s value proposition to its shareholders and potential investors?
We believe that we have a sound corporate strategy to drive business growth through product and service expansion. We will continue to develop new solutions, business and product lines along technology trends in smart projects (such as IoT, AI devices and smart facilities), electronic vehicles and power solutions, as well as expertise in cloud and cybersecurity.
Karin Technology has also been paying regular dividends since 2005 with accumulated dividend payouts exceeding our IPO proceeds. Over the last 40 years, the group has experienced many political and economic cycles and has remained profitable through these headwinds.
We attribute this to our prudent financial management, as well as our ability to be nimble and seek opportunities despite the challenging environment.
