Comba Telecom Systems Holdings Limited

Good morning ladies and gentlemen. On behalf of Comva Telecom Systems Holdings Limited, I would like to welcome all of you joining the 2020 interim results investor presentation web conference. In today's meeting, there will be a presentation followed by a Q&A section. In the Q&A section, if anyone wishes to ask questions, please click on the raise hand button located at the bottom of the screen. Today, we have four senior management joining us today from Hong Kong and Guangzhou. From Hong Kong side, may I introduce the Chairman, Mr. Fok Donglin, the Executive Director and Group CFO, Mr. Kang Chang, the Executive Director and Senior Vice President of the Group, Ms. Huo Xinru, And from Guangzhou, may I introduce the Executive Director and President of the Group, Mr. Xu Huijun. Now, may I invite Mr. Ken Chang, Executive Director and Group CFO, to present the 2020 Interim Financial Highlights. Mr. Chang, please.

Good morning, everyone. I'm here to introduce our financial result for the first half of this year. In the first half, we have the COVID pandemic that affect a lot of industry, including our telecom industry. The 5G target is still on track. However, we have seen that the pandemic have affected the progress somehow. The revenue for us in the first half is 2.2 billion Hong Kong dollar, which is about 18.6% down year on year. The gross profit margin is 32.5%, is 0.8 percentage point up. This is because of two reasons. First is we have been introducing new product. Second is we have been optimizing the operation that result in a higher margin. The net profit to the shareholder is 53 million Hong Kong dollar, which is 35.4% down. Net profit margin 2.4%. Basic earning per share is 2.09 cents per share. We are paying dividend 0.7 cents per share, which result a dividend payout ratio of 33.5%. And let me talk about our operating cost structure. So most of the cost structure have decreased. For example, our finance costs, and means expenses, selling expenses. Finance costs decreased by 12.3 million Hong Kong dollar, down by 23%, because of two reasons. First of all, our net debt have decreased. resulting our giving ratio dramatically decreased from 15.7% to 13.5%. And over the last six months, the interest measured by HIBOR or LIBOR have in general decreased that result in the decrease in the interest expenses. And second of all, the admin expenses decreased by 46 million, down by 16.5%. Selling expenses decreased by a larger degree, by 85 million Hong Kong dollar, down by 30.6%. R&D maintained similar level at 7.8%. There are two expenses that have increased year on year. First of all is the income tax increased by 14.6 billion Hong Kong dollar because of two reasons. First of all, at the end of last year, we have restructured certain businesses. We have aligned certain businesses in different group. and that result in a one off restructuring tax related expenses around 10.9 million Hong Kong dollar. We believe the long term benefit for the restructuring is definitely can offset the short term, shortcoming for the tax expenses. Second of all, the deferred tax asset have decreased resulting a tax expenses of 9.9 billion. If we take out this two non-recurring costs, In fact, our tax income should have come down year on year. Other expenses increased by 45 million because of two major factor. First of all, our AR provision have increased by 31 million. because of more rigorous analysis on the AR side. Second of all, the ETL, our operator, the third largest operator in Laos that we own 51%, the new fixed asset has started to depreciate the beginning of the year. And after taking the 51% stake, the effect, our bottom line is around $14.7 million. And on the balance sheet side, let me make also the highlight here. At the end of April, we have conducted the acquisitions and raised 680 million. And as a result of that, also we have seen the net cash have dramatically improved. Net asset is standing at 4.1 billion Hong Kong dollar, up by 20.3%. NAV per share is 1.49 Hong Kong dollar per share, up by 8.8%. And let me go over the operating matrix. So first of all, let us look at the turnover day. So although we see the turnover day in inventory, AR and AP, have increased by 30 days, 35 days, and 51 days respectively, and is mainly due to the fact that the revenue have declined by 18.6% and the denominator has decreased because of that effect. Inventory, if we look at inventory particularly, inventory has increased by 169 million. This is mainly due to the fact that we have been busy preparing the 5G antenna, which will be shipped in the second half of the year. And we believe that the temporary increase is more like a one-off event. For AR turnover day, It has increased in the number of days, but if we look at the AR absolute amount, the AR actually has decreased by 150 million. AP turnover day, although has increased by 51 days, if we look at the absolute amount on the payable, trade payable decreased by 264 million. other payable decreased by around $400 billion. So altogether, more than $500 billion of the payable amount has decreased. Cash conversion cycle, we still maintain at a low number. Growth giving ratio standing at 15.5% is a 3.1% point improvement. Debt to asset ratio is 57.9%, it's 8% point down. ROE 4.5%, dividend payer ratio 33.5%. So now at our giving ratio measured by the net debt divided by the interest-bearing debt divided by total asset, standing at 13.5%. If we look at the peak, it's around 2018. The peak's standing at 18.9%. And from there, it's about 5.4% down. And now, our grieving ratio is back to the level what we have seen in 2016. And we believe it's a pretty healthy sign. And let us look at the breakdown of our revenue. First of all, let's look at the revenue breakdown by customer. So because of the pandemic, what we have seen is we have a slow progress in the network deployment. And as well, we are also in a transition period from 4G into 5G. So what we are seeing is although on the mainland operator side we have a decrease in the free operators, we have seen China Tower particularly now representing our fourth largest customer in mainland. And now representing 7.7% of total revenue, up by 63.4% year on year because of the indoor network and the last mile network solution demand have increased. International customer have increased by 4.9% year on year. So the market have done particularly well. For example, our Asia Pacific, Europe Middle East, our European market have increased by 10% year on year. Indian market has increased by nearly threefold. Also, we are making progress in the OEM customers as well. So I think we have a pretty good growth profile from second half and onward for international market. For the other businesses, mainly has been dragged down by the railway transit revenue, which represent about 3.5% and down around 18% year on year. and because of the pandemic that slowed down the orders. Now looking at our revenue by businesses, the antenna business down by 45% and besides the antenna business, network system services and others have increased by 7.8%, 11.6% and 30.8% respectively. The down in the antenna business is mainly due to the fact that I previously mentioned we are in a transition from 4G into 5G. And the first half of the 5G deployment, specialized procurement has been slower than expected somewhat. However, we are excited from the second half onward. particularly the 700 megahertz and the 2.1 gigahertz network would demand more of this type of antenna and we are in a great position for the shipment for that from second half and onward. So we believe that we will have a recovery in the second half. Network system up by 7.8%. This is due to continuous, the recurring demand from the indoor and the last mile solution. Services, a similar reason. Also because the indoor and the last mile services demand and also enhance and improve operation efficiency. Other businesses, also worth mentioning, the wireless transmission currently account for 5.3% of revenue, up by almost 250% year on year. And obviously, because of the pandemic, the result is slower than expected. We lose roughly about one to one and a half months of revenue However, we are confident we are in a great position for catch up. First of all, as mentioned, I think we are in much greater shape in liquidity in the net cash position. We have stronger financial profile. And second of all, over the last few years, we have been rigorously invested in R&D capacity and operation enhancement. we believe we are in a much stronger position to capture the 5G opportunity set and beyond. So with that, I will end here. And then our president, Mr. Xu Huijin, will illustrate our business and strategy side. Thank you.

Thank you, Mr. Cheng. May I now invite Mr. Xu Huijun, Executive Director and President of the group to present Industry Development and Company Outlook. 各位投資人好,下面我來介紹一下這塊的這個關於行業的發展的情況以及公司的相關產品及戰略。