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A sustainable business model, resilient semiconductor growth in Asia Pacific, good strategies, strong execution and an attractive dividend yield are good reasons to invest in Serial System stock, according to its CEO, Derek Goh. NextInsight file photo.

LEADING ASIA-PACIFIC electronics components distributor, Serial System, at a recent analyst briefing, provided insights into how its media / hospitality solutions segment would improve group gross margins by adding value to its core distribution business.

The company plans to penetrate the hospitality market through its Intelligent Digital Signage & Room Infotainment (IRIS) and I-connect solutions for digital signage and in-room services.

One IRIS project it has under its belt is at Khoo Teck Puat Hospital, Singapore’s newest public hospital and the first hospital to clinch the Gold Award in BCA Universal Design Awards.

The company is at the nascent stage of digital signage services but its track record of work for reputable clients like Khoo Teck Puat Hospital will help in future project tenders, said CEO Derek Goh.

It has successfully installed IRIS systems in about 20 VIP rooms in the hospital, providing patients with an iPad for interactive in-room services ranging from placing orders for food to controlling bedroom curtains.

Digital signage is a big market, according to Serial's management, as there is a growing trend of hospitals and hotels doing away with physical static media such as paper signage in favor of the greener option of digital signage.

Some other solutions for the hospitality market that Serial offers:

* High-speed Internet access. Serial provides hardware and the capital expenditure for hotels to install high-speed Internet access. The group then shares revenue that the hotels collect from guests for Internet access.

* Telephony solutions. It is currently reinstalling telephony solutions for 1,200 rooms in Swissotel Fairmont hotel in a project worth S$600,000. Hotels want to collate every single telephone access all over the hotel into a single point. It also has similar projects in China and Thailand, including 5-star hotels.

digital_signage
Digital signage


Below is a summary of questions raised by the analysts and the management’s replies.

Q: What are you doing for Khoo Teck Puat Hospital?

They want to go green and paperless. The nurse center uses iPad. The installation fee is less than S$300k, but we are expecting 3 to 5 years of recurring maintenance fees subsequent to the initial installation. Usually, the client upgrades the equipment and technology after 3 to 5 years.

Q: Are there any other players in this market?

There are a lot of players in the digital market, but there aren’t many with a solution like our proprietary solution for in-room infotainment (IRIS). Providing digital solutions for hotels require the Fidelio certification. Similarly, providing digital solutions for hotels require the HIS7 certification, which is a pre-qualification during the tender stage.

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Q: What do you think is the market potential in Singapore for IRIS and digital signage?

A lot of hotels and hospitals are looking for digital signage. They don’t want to keep changing paper signage. It’s a one-time upfront cost for ease and convenience.

Singapore is a small market, but I think the demand potential in Singapore for our IRIS and digital signage solutions next year can come up to $2-3 million. We are also focusing on regional markets such as Bangkok, Phuket and Taiwan.

Q: Who are your top three vendors for the core components business?

Texas Instruments is the largest, accounting for 50% of our product lines. Advago Technologies, ON-Semiconductor and TE Connectivity also account for a significant share.  We have over 50 vendors.

Q: Texas Instruments facilities were affected by the Japan earthquake in March. How is it you have come out relatively unscathed?

Texas Instruments has over 50 manufacturing facilities worldwide. Many of their made-in-Japan products are not carried by us. The latest news is they have resumed normal production. It was a storm in a teacup for us.

Q: Who are your major customers?

No single customer accounts for more than 5% of our revenues. We serve diverse sectors, ranging from automotive to consumer. A good proportion of our customers are from the industrial sector, which is stable and less competitive compared to the consumer sector.

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