A STRATEGIC move that Anwell Technologies (market cap: S$166 million) completed in Nov ’07 has begun to pay off.
Anwell acquired three businesses that churn out DVDR and CDR discs in Hong Kong and China. They contributed positively to Anwell’s bottomline for FY ’07.
The contribution would have been bigger if not for 30% of the capacity being non-operating as production lines based in Hong Kong were relocated to a plant in China.
The transfer will be completed by the end of this month.
With the acquisition, Anwell became the only manufacturer in the world which produces equipment for manufacturing optical discs as well as manufactures the discs themselves (about 60 million discs a month).
Anwell also has the distinction of being the No.2 disc equipment manufacturer in the world after Singulus of Germany.
Of the HK$583 million of equipment sold, about 20% were for making pre-recorded discs – that is, discs with content such as movies and software on them, as opposed to blank discs.
Anwell's performance was affected by a one-off payment for terminating an agreement relating to convertible notes that it issued in mid-07.
All told, Anwell returned to the black with HK$3.6 million in net profit after suffering a HK$57.1 million loss in 2006.
Potential ahead
The exciting part of Anwell’s story this year lies in the strong cashflow that is expected from the first full-year contribution of its disc manufacturing business, said Ken Wu, executive director, at a briefing for analysts and fund managers on Monday (Mar 3).
“Our disc manufacturing business will contribute to the Group's topline and the stable cashflow can be very powerful,” said Ken.
As for equipment for making recordable discs, Anwell will concentrate on making it for its own use as well as continue to expand in markets such as South America and China.
As for equipment for pre-recorded discs, a segment which Anwell entered in 2005, the company sees more market share that it can grab, said Ken.
Asked about the order book, Ken said for disc equipment (both pre-recorded and recorded types), Anwell now has about HK$100 million of orders in hand. The order visibility In this business is restricted to a few months as clients typically place orders shortly before they expect delivery.
Asked about equipment for making Blu-Ray discs, Ken said Anwell shipped its first line to a customer in California in January this year. This year and next year, it is targeting customers in North America and Europe, but doesn’t expect surging sales.
“We will increase our share of the pre-recorded segment through sales of Blu-Ray equipment. As for recordable Blu-Ray discs, the market is not there yet – maybe in two years’ time,” said Ken.
Blu-Ray sales
Asked how many Blu-Ray machines Anwell might sell this year, he said he expects more orders based on his staff's marketing efforts and customer feedback.
Each machine would sell for about US$1 million.
He added: “For Blu-Ray to replace DVD, that will not take place overnight as a lot of people are happy with the quality of DVD. In addition, for Blu-Ray, consumers need to invest in a new player and a new TV screen.”
In the meantime, the market for DVD discs is massive and growing, and Anwell expects to grab more market share.
Its operating costs in China are lower than competitors such as the Taiwanese. On top of that, Anwell makes its own machines, so for the same amount of investment dollars, Anwell can have greater production capacity.
On another front, Anwell has been developing the technology to make OLED panels, which is quite similar to the technology for making optical disc equipment. It is anticipating government subsidy of more than HK$100 million over the next two years to build a prototype and finetune its design.
To watch the TV programme on Anwell which was produced by Public Insight, click here.
Recent story:
ANWELL: Strong cashflow from newly-acquired disc manufacturers
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