Dutech Holdings

[CityFarmer]

I think that the tie-up with Droege Group has added value for Dutech with a much greater presence in Europe. Revenue from Europe has increased from RMB 77m in 2010 to RMB 485m in 2015. In the same time frame, revenue from Europe has increased from 21% to 41% of the total revenue for Dutech on a geographical basis. Currently, Droege Group holds 2 out of the 7 board seats that Dutech has. 

In addition, since the merger with Format (which was a subsidiary under Droege Group), they have mainly acquired European companies (i.e. DTMT and Krauth). Given Droege Group's status as a family-owned investment company with over 25 years of corporate value-enhancing experience in Europe, it seems plausible that Droege Group's connections have given access for Dutech to acquire these companies (on the cheap).

This ties in with the value enhancement strategies which Droege Group has identified for Dutech in the link below, i.e. targeted acquisitions and increasing depth of value-addition and product range with the diversification of product range to include higher value-adding intelligent terminals. 

http://www.droege-group.com/en/what-we-d...io/dutech/

Thus far, revenue has increased across the board in the major markets which Dutech is currently operating in. It will be interesting to see whether the synergies with the subsequent acquistions will translate to future growth in earnings for Dutech (similar to the case with Format) or that they will result in diworsification with higher recurring costs and corresponding fall in profit. Of course, as a shareholder, I hope more for the former.

The tie-up with Droege (and private investor Robert Stone) are favorable when analyzing the shareholding structure of the company. The tie-up was due to acquisition of FORMAT, which was done by equity. It is likely Droege played a instrumental role, in further acquisitions in Europe.

We agreed that FORMAT acquisition is a great success. The DTMT was done in 2014, and the impact is yet-to-be-seen. We have seen improvement of 2 pct point of GPM, in FY2015, but it is likely still far from targeted performance.

(vested, and happy to see fellow shareholders around)

[opmi]

Just reading up only.

US Diebold is merging with Wincor.

And Diebold has a China JV. Also has a China JV partner, Inspur. See pg 30.

http://www.diebold.com/-/media/diebold/d...y-2016.pdf

Dont know if Dutech can retain its biggest customer Wincor after the merger. But Merger confirm have vendor rationalization.

[CityFarmer]

Just reading up only.

US Diebold is merging with Wincor.

And Diebold has a China JV. Also has a China JV partner, Inspur. See pg 30.

http://www.diebold.com/-/media/diebold/d...y-2016.pdf

Dont know if Dutech can retain its biggest customer Wincor after the merger. But Merger confirm have vendor rationalization.

I am yet to read in detail on the info provided. I reckon, the merger is at a different level of supply-chain of ATM/Self-Service products

Diebold - mostly on S/W and Services, and the core competency
^
Wincor (integrator) <- Dutech (supplier)

The merger of Diebold+Wincor, with drive synergy to reduce cost, thus capture higher market share. As a supplier to the merged company, with higher market share, is favorable, right?

What do you think?

(vested in Dutech)

[opmi]

Just reading up only.

US Diebold is merging with Wincor.

And Diebold has a China JV. Also has a China JV partner, Inspur. See pg 30.

http://www.diebold.com/-/media/diebold/d...y-2016.pdf

Dont know if Dutech can retain its biggest customer Wincor after the merger. But Merger confirm have vendor rationalization.

I am yet to read in detail on the info provided. I reckon, the merger is at a different level of supply-chain of ATM/Self-Service products

Diebold - mostly on S/W and Services, and the core competency
^
Wincor (integrator) <- Dutech (supplier)

The merger of Diebold+Wincor, with drive synergy to reduce cost, thus capture higher market share. As a supplier to the merged company, with higher market share, is favorable, right?

What do you think?

(vested in Dutech)

I think it is positive IF Dutech remained as a vendor. I guess lower margin, but higher volume.

For Diebold, I dont know if Dutech supply to Diebold JV in China or Diebold in USA. 

Need to find out more.

[TTTI]

Just reading up only.

US Diebold is merging with Wincor.

And Diebold has a China JV. Also has a China JV partner, Inspur. See pg 30.

http://www.diebold.com/-/media/diebold/d...y-2016.pdf

Dont know if Dutech can retain its biggest customer Wincor after the merger. But Merger confirm have vendor rationalization.

I am yet to read in detail on the info provided. I reckon, the merger is at a different level of supply-chain of ATM/Self-Service products

Diebold - mostly on S/W and Services, and the core competency
^
Wincor (integrator) <- Dutech (supplier)

The merger of Diebold+Wincor, with drive synergy to reduce cost, thus capture higher market share. As a supplier to the merged company, with higher market share, is favorable, right?

What do you think?

(vested in Dutech)

I think it is positive IF Dutech remained as a vendor. I guess lower margin, but higher volume.

For Diebold, I dont know if Dutech supply to Diebold JV in China or Diebold in USA. 

Need to find out more.

I think the merger is a good thing for Dutech.
Don't forget that Dutech has an economic moat by being doubly certified. From my understanding of manufacturers (not necessarily for safes only), the clients are loathe to have to change manufacturers. This is because the process to appoint a manufacturer is not exactly a straightforward one. There are several checks involved, manufacturer has to first give a prototype for client to assess, changes or customization is the norm, there is a lot of back and forth throughout the process. This whole process can take over a year before it is finalized.
It goes to follow that there are costs and manpower hours involved.
Unless Dutech has screwed up terribly, I don't see why the merged entity wouldn't utilise Dutech.
On top of that, Dutech actually has a fairly diversified client base.
Customers include Hitachi, Diebold Nixdorf,Liberty Safe & Security Products Inc., Tractor Supply Co., Costco Co., Glory Ltd., SGI, Bauhaus, Schaefer Shop, Trumpf, and Amada.
So there's no concentration risk for now.
I have no visibility as to it's margins, but traditionally Dutech has pretty high GPM.
GPM:
2011: 21.99%
2012: 21.78%
2013: 23.71%
2014: 24.42%
2015: 28.64%

Net Profit Margins:
2011: 7.94%
2012: 5.66%
2013: 9.77%
2014: 13.84%
2015: 9.88%

Only with certain competitive edges, or if u are in a very exclusive industry, can you enjoy this kinda margins.
<Vested>



https://thumbtackinvestor.wordpress.com/

[CityFarmer]

I have no visibility as to it's margins, but traditionally Dutech has pretty high GPM.
GPM:
2011: 21.99%
2012: 21.78%
2013: 23.71%
2014: 24.42%
2015: 28.64%

Net Profit Margins:
2011: 7.94%
2012: 5.66%
2013: 9.77%
2014: 13.84%
2015: 9.88%

Only with certain competitive edges, or if u are in a very exclusive industry, can you enjoy this kinda margins.
<Vested>



https://thumbtackinvestor.wordpress.com/

You can get the High Security GPM figures from Chairman's message, and Operating Profit Margin from segment info. The High Security segment GPM was 32% and OPM was 16% in FY2015.

[TTTI]

I have no visibility as to it's margins, but traditionally Dutech has pretty high GPM.
GPM:
2011: 21.99%
2012: 21.78%
2013: 23.71%
2014: 24.42%
2015: 28.64%

Net Profit Margins:
2011: 7.94%
2012: 5.66%
2013: 9.77%
2014: 13.84%
2015: 9.88%

Only with certain competitive edges, or if u are in a very exclusive industry, can you enjoy this kinda margins.
<Vested>



https://thumbtackinvestor.wordpress.com/

You can get the High Security GPM figures from Chairman's message, and Operating Profit Margin from segment info. The High Security segment GPM was 32% and OPM was 16% in FY2015.

Sry, I meant that I have no visibility on how it's margins will be like specifically for the merged entity client, but traditionally Dutech enjoys high GPM and NPM.



https://thumbtackinvestor.wordpress.com/

[sykn]

I notice that so far, they have paid dividends only once a year, at the 1Q results. In this last 1Q report, they gave dividend of 1 cent, which was less than the 1.5 cents given out last year. But it is interesting that they call it interim dividend; does this mean that they are intending to pay dividend twice a year from now on?

[CityFarmer]

I notice that so far, they have paid dividends only once a year, at the 1Q results. In this last 1Q report, they gave dividend of 1 cent, which was less than the 1.5 cents given out last year. But it is interesting that they call it interim dividend; does this mean that they are intending to pay dividend twice a year from now on?

All dividends declared in quarterly report, is interim dividend. All previous dividend declared in previous 1Q reports, were also interim dividends, right?

I am not sure why the company reduces the dividend? May be more M&A in the pipeline, or as more interim dividend within this year?   

(not vested)

[sykn]

Ok, thanks for the clarification. The business looks good, but because it's S-chip and I've been burned before, have to be very careful, as always. Cheers.