Thai Rating and Information Services Co., Ltd. (TRIS) announced Thursday 19 April 2001 that it has assigned a "BBB" rating to Cal-Comp Electronics (Thailand) PLC's (CCET) Bt4,000 million senior debentures. The rating reflects the company's product diversification, good quality control management and the growth prospects for the original equipment manufacturing industry. However, these strengths are offset by the highly competitive nature and limited profitability of the industry as well as CCET's significant customer concentration.
TRIS reported that as an original equipment manufacturing (OEM) company, CCET basically assembles electronic products that are mainly designed and distributed by the products' brand owners (technology companies). CCET has worked to develop flexible assembly lines to cope with market circumstances and customer demands. Two-thirds of its product lines are at the medium level of technology, and the remaining are low-end products. The contribution to revenues from office equipment fell from about 59% of total sales in 1997 to 14% in 2000; whereas the contribution made by telecommunication equipment rose from 8% to 28%, and the contribution from computer equipment rose from 15% to 55% during the same period.
To enhance its competitiveness, CCET emphasizes product quality control, competitive pricing, on-time product delivery and flexible assembly lines, TRIS said. The company strives to maintain good relationships with its raw material suppliers to keep production costs low and to help manage its procurement schedule to achieve on-time product delivery to clients.
Competitive pressure in the electronics market has forced technology companies to concentrate on their core competitive strengths, such as product design innovation and brand building. Because OEMs can offer mass production and product quality, the OEM industry has grown at a compound annual growth rate of more than 20% since 1998, according to Technology Forecasters, Inc., and this growth rate will be sustained until 2004. Competition among OEMs in the electronics industry is extremely intense with technology companies carefully selecting OEMs by considering price, experience, product quality and reliability to deliver products on schedule. The competitive environment also requires that OEMs maintain close relationships with raw material suppliers to ensure good purchasing conditions.
Since variable costs account for more than 90% of sales revenues, CCET expects to maintain profit margins at around 5%-6%, which is in the same range as other players. Although management plans to diversify its client portfolio, its current narrow client base exposes it to significant concentration risk, TRIS said. In 2000, sales to CCET's top five customers accounted for more than 78% of total sales.
The company has average financial liquidity and capital structure evidenced by funds from operation-to-total debt at about 44.3% and total debt-to-capitalization at about 48.7% in 2000. However, profitability is low, and the company recorded operating margins before depreciation and amortization at around 6.1% in 2000. CCET plans to issue three-year debentures worth not more than Bt4,000 million in the first half of 2001 to repay short-term loans.
Cal-Comp Electronics (Thailand) PLC (CCET) Issue Rating CCET#1: Bt4,000 million senior debentures due 2004 BBB
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TRIS reported that as an original equipment manufacturing (OEM) company, CCET basically assembles electronic products that are mainly designed and distributed by the products' brand owners (technology companies). CCET has worked to develop flexible assembly lines to cope with market circumstances and customer demands. Two-thirds of its product lines are at the medium level of technology, and the remaining are low-end products. The contribution to revenues from office equipment fell from about 59% of total sales in 1997 to 14% in 2000; whereas the contribution made by telecommunication equipment rose from 8% to 28%, and the contribution from computer equipment rose from 15% to 55% during the same period.
To enhance its competitiveness, CCET emphasizes product quality control, competitive pricing, on-time product delivery and flexible assembly lines, TRIS said. The company strives to maintain good relationships with its raw material suppliers to keep production costs low and to help manage its procurement schedule to achieve on-time product delivery to clients.
Competitive pressure in the electronics market has forced technology companies to concentrate on their core competitive strengths, such as product design innovation and brand building. Because OEMs can offer mass production and product quality, the OEM industry has grown at a compound annual growth rate of more than 20% since 1998, according to Technology Forecasters, Inc., and this growth rate will be sustained until 2004. Competition among OEMs in the electronics industry is extremely intense with technology companies carefully selecting OEMs by considering price, experience, product quality and reliability to deliver products on schedule. The competitive environment also requires that OEMs maintain close relationships with raw material suppliers to ensure good purchasing conditions.
Since variable costs account for more than 90% of sales revenues, CCET expects to maintain profit margins at around 5%-6%, which is in the same range as other players. Although management plans to diversify its client portfolio, its current narrow client base exposes it to significant concentration risk, TRIS said. In 2000, sales to CCET's top five customers accounted for more than 78% of total sales.
The company has average financial liquidity and capital structure evidenced by funds from operation-to-total debt at about 44.3% and total debt-to-capitalization at about 48.7% in 2000. However, profitability is low, and the company recorded operating margins before depreciation and amortization at around 6.1% in 2000. CCET plans to issue three-year debentures worth not more than Bt4,000 million in the first half of 2001 to repay short-term loans.
Cal-Comp Electronics (Thailand) PLC (CCET) Issue Rating CCET#1: Bt4,000 million senior debentures due 2004 BBB
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