[SALUTICA] One of 冷眼's biggest holding counter - Should you invest or the worst is yet to come? Here's my opinion.
Based in Ipoh, Salutica is known as a vertically integrated consumer
electronic manufacturer, primarily producing Bluetooth stereo headsets,
non-Bluetooth products such as light guides, smartwatches, camera
sub-parts, smart home controllers and in-house brand - FOBO including
tyre-pressure monitoring systems for light vehicles and multi-axle
vehicles as well as tracking devices.
Newest technology with Bluetooth 5 is set to be the next BIG thing in
the IoT space. With 2x the speed and 4x the range, the devices will
consume lesser battery power and hence power consumption will reduce.
Salutica's products have competitive advantages compared with the other
brands in terms of more advanced chipset, better noise cancellation and
high audio quality. Their recent launched of OEM headset product
(co-developed with European design partner) by their customer in August
2019 have received good reviews despite pricing above USD150 which is
said to be targeting the premium range segment of customers.
Here's are what I gathered:
1. Strong R&D Team
Salutica performance is backed-up by strong R&D team that is said to be the backbone of the company's business.
Salutica is not an ordinary contract manufacturer or EMS (Electronic
manufacturing services) player in the market. Their selling points lies
within the R&D team that is able to provide creative ideas and
manufacture innovative products which is align to their customer's
expectations.
They also have their machineries ready for production and assembly
without relying or outsourcing some of the processes to third party.
They have their own in-house capabilities such as product design,
product testing, product commissioning, manufacturing and assembly.
2. Hearable technology
Salutica is targeting hearble market. Hearable technology is referred
to as hybrid technology, which combines the advantage of wearable
technology with hearing devices. Hearable devices in different
industrial applications are now enabled with built-in voice-enabled
virtual assistant and wireless communication features.
Global hearable market is expected to reach $93.9 billion by 2026,
growing at a CAGR of 17.2%. WHO also estimates that the annual global
cost to society of untreated hearing loss is $750 billion. As shown by
statistics, the future is bright for Salutica, if partnering with
multiple global giants, given its relatively small player in the
electronic industry.
Recently, Salutica has shared its plan to co-develop hearables with a
Netherland's design partner. Barring any unforeseen circumstances, the
latest product development project will reach its mass production by 4Q
FY2020.
Besides, new businesses such as sleep science (sensors for mattresses),
smart homes (sensors for controllers and switches) and next generation
headsets will also be their next focus in addition to the TWS Bluetooth
earphone and headset which are still the Group's main revenue
contributer.
3. COVID-19 impact
During MCO period, Salutica's business is affected but the quantum is
not material enough to miss the expectation from its customers. Going
forward, Salutica has resumed its full production capacity from 29 April
2020 and is expected to launched a new version of cordless Bluetooth
headset this year.
4. Financials
Salutica is in a net cash position and has a healthy balance sheet.
However, Q4 for Salutica is normally the worst quarter in a year since
2017. Besides, MCO that has restricted Salutica to operate their factory
is expected to have severe impact to the financials results to be
released in August 2020.
However, the sales volume is expected to recover starting FY2021 with
higher volume of sales of mouse (due to lockdown) and hopefully higher
margin to be maintain from sales from new-generation wireless headsets
in America which gained from favourable forex as well.
Technical wise, it is above 50-days moving average and today's closings
is at Ichimoku cloud's baseline with increasing volume. With tomorrow
gap up will confirm the uptrend of Salutica.
5. Malaysia's savvy investor - Fong Siling
With the back-up of Malaysia's famous investor - Fong Siling at 2.69%
shareholdings in Salutica which makes him the second largest investor,
this company atleast will catch some attention from the value investors
circle.
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purposes only. It is solely reflecting author's personal views and the
author should not be held liable for any actions taken in reliance on
information contained herein.
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