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2014 Investor Presentation
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Safe Harbor StatementSafe Harbor Statement
This presentation contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," “will,” "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the effectiveness of the Company’s multiple-brand, multiple channel strategy and the transitioning of its product development and sales focus to a “light-asset” model. Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or factors not all of which are known to the Company, which may include, without limitation, requirements or changes adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally; our success in promoting our brand of LCD and LED products in China and elsewhere; our ability to have effective internal control over financial reporting; our success in designing and distributing products under brands licensed from others; management of sales trends and client mix; possibility of securing loans and other financing without fixed assets as collateral; changes in government policy in China; the fluctuations and competition in sales and sale prices of LCD and LED products in China; China’s overall economic conditions and local market economic conditions; our ability to expand through strategic acquisitions and establishment of new locations; compliance with government regulations; legislation or regulatory environments; geopolitical events, and other events and/or risks outlined in SGOCO's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F and other filings. All information provided in this presentation is as of the date of the issuance, and SGOCO does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
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AgendaAgenda
Company Overview Competitive Advantages Industrial Overview & Emerging Growth Opportunities Evolving Business Model & Growth Strategies Financial Snapshots Management Team Appendix
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Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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Sgoco At a GlanceSgoco At a Glance
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As of October 31, 2013
Stock Ticker: SGOC
Stock Price: $3.40
Market cap: $58.5 M
Share outstanding: 17.2M
A Company in Transformation ….A Company in Transformation ….
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Capturing enormous opportunities from China’s urbanization
• Wide range from Smart displays and PCs, ASPs to LCD/LED monitors and TVs
• Develop and distribute products co-branded with top-tier brands • Own in-house product development capabilities
• A multi-brand strategy supported by wide distribution network • Target at China’s fast-growing 3rd and 4th tier cities
• Business model transformation in November, 2011• Sold manufacturing facilities and shifted focus to branding and distribution
• Listed in NASDAQ with an offering of 1.3M ordinary shares at $5.00 per share.
• Founded in China as a leading display products supplier and a OEM partner of choice.2005
2010
2011
2012
Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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An Integrated “Channel” Solution ModelAn Integrated “Channel” Solution Model
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ConsumersTRADITIONALLCD/ Monitor
RetailerDistributionOEM• Co-brand product
design• Procurement
Consumers
BRAND SOLUTION or
RetailerDistribution
DISPLAY SOLUTION
OEM
• Product design• Co-brand partnership• Procurement• R&D
• Find target corporate customers
Consumers
Corporate customers
RetailerDistributionOEM• Product design• Procurement• R&D
or
OEM
• Design solution based services and products• Co-brand partnership• Procurement
• Find target industry verticals
Industry Verticals
A Multiple Brand Strategy A Multiple Brand Strategy
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The company's flagship brand
China's leading TV brand
A leading brand in Tier 3 and Tier 4 markets
A leading brand in Tier 3 and Tier 4 markets
China's leading PC brand
Anhui
Zhejiang
GuangdongGuangxi
Hunan
HubeiSichuan
Henan
Shandong
Shaanxi
Heilongjiang
Inner - Mongolia
Jiangsu
Hebei
Fujian | Product center
Chongqing
Liaoning
Jiangxi
Beijing | Headquarter
Shenzhen | Sales office
An Extensive Channel Network in Tier 3 & 4 MarketsAn Extensive Channel Network in Tier 3 & 4 Markets
Self-managed province-level distributors covering 19 provinces in China
TRADITIONAL BUSINESS:LCD/LED Monitors, LCD/LED TVs
LED/LCD TVLED Monitor Touch-screen Monitor
LCD Monitor 3D TV
A Market Driven Product & Solution OfferingsA Market Driven Product & Solution Offerings
ADDITIONAL GROWTH BUSINESS:Smart Display Products
Tablet PC Part-in-ones (PIO)All-in-ones (AIO)
CCTV MonitorAdvertising LCD Touch ScreenE-board
FUTURE GROWTH FOCUS:Application: Specific products and services
target at industry verticals
A Distinctive SGOCO CompetenciesA Distinctive SGOCO Competencies
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Low AP risk : Direct control and billing to few distributors
First-hand market information : Localized sales and CRM teams in key sales points
Low AP risk : Direct control and billing to few distributors
First-hand market information : Localized sales and CRM teams in key sales points
Top tier licensing brands focus Continue to expand distribution networks High growth industries focus Continue to expand product and solution offerings
Top tier licensing brands focus Continue to expand distribution networks High growth industries focus Continue to expand product and solution offerings
Strong presence in rural display market Product development team owns market-know-how Cross-connected sales and product development team
sharing market knowledge
Strong presence in rural display market Product development team owns market-know-how Cross-connected sales and product development team
sharing market knowledge
Successful early development in high margin products Big opportunities ahead in commercial International expansion through distribution Optimize Cross-channel synergies
Successful early development in high margin products Big opportunities ahead in commercial International expansion through distribution Optimize Cross-channel synergies
Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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Expanding Addressable Display Market in China – Industry VerticalsExpanding Addressable Display Market in China – Industry Verticals
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Fast-growing demand for domestic travel.
Intensive infrastructure investments in China, encouraged domestic travel and the growth of budget hotels.
By the end of 2013, 37% of classrooms in China will have an interactive display. Source: Futuresource.
• Travel & Leisure• Transportation & Infrastructure • Education
RMB
Source: China National Tourism Administration
Domestic Tourism Expenditure per Capita Growth in China
National Enrolment Breakdown 2012Approx. 509.6 million students
Source: Ministry of Education of China
Emergence of Solutions Driven Demand from Retail and CommercialEmergence of Solutions Driven Demand from Retail and Commercial
Interactive panel displays are gaining popularity:
For 1H 2013, sales of interactive whiteboards & interactive flat panel displays in the education and corporate sectors up 20% Source: Futuresource
China retained its position as the largest world country market, with 40% of the global market and 77% of the Asia region's sales.
• Household ASP• Commercial ASP• Younger generation’s need on sophisticated electronic devices
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Source: KDB Daewoo Securities Research
Touchscreen Penetration in Desktop PCs
The “Screenager” Era: Touch panels are in increasingly widespread use in a variety of applications, including
mobile phones, tablets, notebook PCs, and in-car technology... (Nomura)
Exponential Growth in Lower Tier CitiesExponential Growth in Lower Tier Cities
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In China:
PC shipment to have double-digit growth until 2016. Lower tier cities are growth drivers. (1)
Disposable income per capita of urban households up 9.6% to nearly RMB 25K. (2)
Urbanization rate at 42.2% in 2012 (3). 390 million people will move to urban areas by 2030.
Internet population to reach ≈ 800 mil by 2015. Mobile internet users up 18.1% yoy to 420 mil in 2012. (4)
210 mil fixed-line broadband subscribers by 2013, 270 mil by 2015 end, 400 mil by 2020 end
(1) IDC, June 2012(2) National Bureau of Statistics of China(3) Chinese Academy of Social Sciences, CASS
• TV• PC• Mobile/ Handheld
4. Chinese Ministry of Industry and Information Technology, MIIT5. China’s Sate Council – 2013-2020 Broadband Development Plans
Disposable Income of Urban Households 2008 ~ 2012 (2)
By end of 2013
By end of 2015
By end of 2020
Urban areas 55% 65%
Rural areas 20% 30%
Overall 40% 50% 70%
25% 32.5% 85%
China Target Broadband Internet-access Penetration Rates
Network type
Fixed-line networks
3G and LTE
Source: China State Council, compiled by Digitimes, August 2013
Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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Transformative Business Model Moves Up the Value StackTransformative Business Model Moves Up the Value Stack
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Channel Play = Combining products and display solution
V A L U
E C H
A I N
P R
O D
U C
T S
Multi-brands:- Sgoco- TCL- Founder- Povizon- No. 10
Channels SGOCO Brand
Channels
e-commerce
Sector Driven : Education
Market Driven : Media Display
Display Solution
Others ….
Transformation in 4-Pronged Strategies Transformation in 4-Pronged Strategies
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Leverage on strong distribution network to sign up top tier brands
Increase overall brand awareness for SGOCO and clients to capture additional market share
Leverage on strong distribution network to sign up top tier brands
Increase overall brand awareness for SGOCO and clients to capture additional market share
Continue to expand in the traditional distribution network
Look into emerging channels such as e-commerce to capture the shift of consumer behaviors in the market
Continue to expand in the traditional distribution network
Look into emerging channels such as e-commerce to capture the shift of consumer behaviors in the market
Identified high growth industries, such as budget hotel chains - provide them with tailored display products for their boutique size
Identified high growth industries, such as budget hotel chains - provide them with tailored display products for their boutique size
Self-develop and partner with brand clients to develop niche products
o All-in-one PCso Parts-in-one PCs
Self-develop and partner with brand clients to develop niche products
o All-in-one PCso Parts-in-one PCs
Product Driven Short-Term Growth Catalysts Product Driven Short-Term Growth Catalysts
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All-in-One / Part-in-One PCs
Features: Touch-screen, Built-in to a flat screen monitor, Multi-functional, Slim design. PIO also provides flexibility for users to configure and build their own PC system
Target markets: Retail and Commercial use e.g. Budget hotels
Features: Touch-screen, Built-in to a flat screen monitor, Multi-functional, Slim design. PIO also provides flexibility for users to configure and build their own PC system
Target markets: Retail and Commercial use e.g. Budget hotels
Design and Price is King!
Worldwide All-in-one Desktop PC Forecast
CAGR: 13%
DisplaySearch
Solution & Channel Driven Mid to Long-Term Growth Catalysts Solution & Channel Driven Mid to Long-Term Growth Catalysts
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Target markets: High growth industries in China
Education Infrastructure Travel and Leisure
Target markets: High growth industries in China
Education Infrastructure Travel and Leisure
Flexibility and Diversification is King!
Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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US$ Millions
Revenue Growth Traction ReturnedRevenue Growth Traction Returned
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3Q 2012:•SGOCO was experiencing the transition to a “light-asset” business model. Therefore, the revenues were negatively impacted.
Total Revenue
Profitability FocusedProfitability Focused
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Income from Operations & Operating Margin
US$ Millions US$ Millions
Stabilized Cash Position to Fuel GrowthStabilized Cash Position to Fuel Growth
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Working Capital & Current Ratio
US$ Millions
US$ Millions
Cash and Cash Equivalents
US$ Millions
Inventories
Shareholders’ Return FocusedShareholders’ Return Focused
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Return on Invested Capital Return on Equity
Per QuarterPer Quarter
Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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A Dynamic Management TeamA Dynamic Management Team
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Chief Financial Officer •CPA in Hong Kong and Australia•Started with Deloitte in Hong Kong and Beijing from 1997, Mr. Lau has over 17 years of experience in the accounting profession•Previous worked in various public companies in the US and England as Director of Finance and CFO for nine years•Bachelor degree in commerce from Monash University, Australia
Mr. Johnson Lau
Mr. David Xu
Chief Executive Officer•Appointed as SGOCO’s CEO in January 2014•Served as SGOCO’s COO from July 2013 to January 2014•Served as SGOCO’s CFO from May 2011 to July 2013•Nearly 20 years of finance and accounting experience in both Asia and North America•Previous employers include General Electric and Yum! Brands•MBA from the University of Illinois at Chicago, and a BA in English and American Literature from Beijing Normal University
Mr. Tin Man Or
Chairman of the Board•Appointed as SGOCO’s Chairman of the Board in January 2014 •Previously served as a director of the Board from 2010 to 2013•35+ years of experience in the investment and marketing of the display and trading industries throughout Greater China. •Owns Sun Zone Investments Limited, which is the major shareholder of SGOCO Group. •Served as General Manager of Honesty Group from 2005 to 2011, before SGOCO's sale of Honesty Group and transformation into a light-asset business model
Company OverviewCompetitive AdvantagesIndustrial Overview & Growth OpportunitiesEvolving Business Model & Growth StrategiesFinancial SnapshotsManagement TeamAppendix
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$ in thousands except shares and per share data
Three Months EndedSeptember 30, 2013
Nine Months EndedSeptember 30, 2013
2013 2012 2013 2012
Revenues 42,969 26,047 156,754 103,272
Cost of Goods Sold 39,501 25,105 144,341 95,692
Gross Profit 3,468 942 12,413 7,580
Selling expenses 259 212 815 460
General and administrative expenses 765 1,482 2,435 4,166
Total operating expenses 1,024 1,694 3,250 4,626
Income (Loss) from Operations 2,444 (752) 9,163 2,954
Income before Provision for Income Taxes 2,667 (759) 9,210 2,946
Provision for Income Taxes 513 331 1,942 1,887
Net income (loss) 2,154 (1,090) 7,268 1,059
Comprehensive Income 2,180 (1,093) 7,400 974
Earnings (Loss) per Share – basic & diluted 0.12 (0.06) 0.42 0.06
Weighted Average Number of Common Shares – basic & diluted
17,254,860 17,059,860 17,172,720 17,059,860
P&L – Selected ItemsP&L – Selected Items
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$ in thousands except shares and per share data
As ofSeptember 30, 2013
As ofDecember 31, 2012
Cash 13,681 11,548
Accounts receivable 54,393 59,355
Inventories 25,709 5,725
Advances to suppliers 20,502 28,511
Total Current Assets 120,204 105,386
Total Assets 120,445 105,647
Short-term loan 11,451 6,230
Accounts payable 8,342 12,038
Customer deposits 6,098 1,155
Taxes payable 7,915 7,147
Total Current Liabilities 34,477 27,314
Total Liabilities 34,505 27,332
Retained earnings 60,312 53,044
Total Shareholders’ Equity 85,940 78,315
Total Liabilities and Shareholders’ Equity 120,445 105,647
Balance Sheet – Selected ItemsBalance Sheet – Selected Items
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$ in thousands of U.S. dollars Nine Months EndedSeptember 30, 2013
Nine Months EndedSeptember 30, 2012
Net cash provided by (used in) operating activities
(2,921) (12,138)
Net cash (used in) provided by investing activities
(29) 18,629
Net cash provided by (used in) financing activities
5,012 (254)
Increase in cash 2,133 6,213
CASH, beginning of period 11,548 535
CASH, end of period 13,681 6,748
Cash Flow Statements – Selected ItemsCash Flow Statements – Selected Items
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Investor Relations ContactInvestor Relations Contact
Serena WuSGOCO Group, Ltd.Direct Line: +86-10-8587-0173Email: ir@sgoco.com
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