Electronics component distributor is investing in AI, IoT space to drive future growth and move up value chain.

 

IN SPITE of the uncertainties brought on by Covid-19, electronics component distributor Excelpoint Technology has posted a strong rebound from earlier trade war woes.

 

Its net profit for FY20 was US$10.3 million - more than six times the US$1.6 million achieved in FY19. This comes as demand for semiconductors surged on the back of accelerated technology adoption, resulting in a global chip shortage.

 

But its chairman and group chief executive Albert Phuay told The Business Times that the mainboard-listed company, which has weathered various crises over the past three decades, is not depending on the rising tide to lift its fortunes. Instead, it is focusing on new opportunities brought about by the pandemic and moving up the value chain.

 

Mr Phuay has set an ambitious goal of hitting US$2 billion in revenue in the next two to three years - almost twice Excelpoint' s full-year revenue of US$1.1 billion for FY2020.

 

Change in lifestyles

 

Excelpoint is a business-to-business platform for the sale of electronic components such as chips. The company adds value by creating technology solutions for mobile phones, computers and various types of industrial equipment.

 

With more people working and studying from home in the past year, Mr Phuay said demand has been " huge" .

 

" These changes will likely persist even after the pandemic ends," he noted.

 

Demand also came from customers in cloud applications, communications, data centres, and medical equipment. With Covid-19, the business went one step further by expanding into tracing devices and temperature sensors - a growth area that powered its profit surge last year, said Mr Phuay.

 

The biggest demand came from its manufacturing partners in China, with about 55 per cent of revenue coming from the market as it bounced back quickly from Covid-19.

 

Nurturing startups

 

Even as the company focused on new areas of growth, one key focus for Excelpoint over the past few years was on how to move up the value chain to strengthen its value proposition.

 

This led to the birth of its investment and entrepreneurial arm known as PlanetSpark, which recently launched an innovation centre to nurture Singapore-grown hardware tech startups in the artificial intelligence (AI) and Internet of Things (IoT) sectors.

 

Mr Phuay said: " This is a dream of Excelpoint for many years."

 

The innovation centre is a collaboration with Enterprise Singapore under which both sides invest an initial S$5 million to accelerate the growth of more than 30 startups in the next three years.

 

PlanetSpark' s managing director is Phuay Li Ying, Mr Phuay' s daughter. She is also deputy director of corporate development at Excelpoint.

 

The innovation centre seeks to drive Excelpoint' s next phase of growth by investing in areas complementary to its core business and strengths, she said.

 

As the business views AI and IoT as having " huge market potential" , the team decided to make this emerging segment its new strategic focus, she added.

 

PlanetSpark was first set up as an entity to look at investments in startups to complement Excelpoint' s technologies and research and development (R& D). But she realised early on that what these startups need is not simply funding, but market access.

 

" It' s not about the money - money is quite accessible to startups in a country like Singapore," she said. " They need guidance and connections."

 

This is where Excelpoint, having been in the business of electronics distribution for more than 30 years, can come in.

 

PlanetSpark' s role is that of an accelerator with the aim of helping its startups commercialise their innovations. This comes as startups face many hurdles on their path to commercialisation as the AIoT (where AI meets IoT) hardware segment is competitive, fast-paced and requires a long gestation period, said Ms Phuay.

 

PlanetSpark will be able to connect these startups to engineering capabilities, industry resources and market intelligence to help them deliver a proof-of-concept within six months, instead of the usual two to three years.

 

Not only will the startups get a leg up, the business will also benefit by moving up the value chain as the solutions to be developed will then be offered to Excelpoint' s channels and customers. This sharpens its technical capabilities and provides more value-add for customers, positioning the business to capture opportunities in the AIoT space.

 

The centre has five startups in its inaugural batch: spacetech startup NuSpace thermal sensing solutions firm Nexwah Technology facial recognition startup Seventh Sense Excelpoint-invested CLOPTech, which is developing wireless connectivity solutions and Meridian Innovation, a developer of thermal imaging solutions.

 

These startups pay S$20,000 to participate in the six-month programme, with subsidies from Enterprise Singapore.

 

" We are looking at this from a commercial standpoint, so we are hoping that this is not just a money burn," she said. " We hope that through what we do, we will churn out new businesses for the startups, and in turn Excelpoint will also benefit."

 

She said that most of PlanetSpark' s investment goes into the building of engineering capabilities, which is paramount. She expects to break even after the second year.

 

AI, IoT to drive growth

 

Looking ahead, Mr Phuay said that they hope for Covid-19 to come to an end and for borders to be reopened. This is despite the pandemic giving the company' s performance a lift in 2020.

 

" To do business, face-to-face (interaction) is very important," he said. " With new opportunities from the changing lifestyles of consumers, I remain positive and confident in the electronics industry."

 

Ms Phuay said the company foresees upbeat future demand in AI, high performance computing, electric vehicles and 5G wireless networks, as well as industrial applications arising from them. These segments will the main drivers of growth, she noted.

 

The group will also continue to focus on investments in its technical capabilities to keep its edge.

 

" We need to make sure Excelpoint is always a driver of technologies, not a follower," said Mr Phuay.

 

Earnings of electronics components distributor Excelpoint Technologies soared by some 1841.5% to US$8.29 million ($11.1 million) in 2HFY2020 ended December from US$427,000 in the previous year.

 

On a fully diluted basis, this translates to earnings per share of 6.92 US cents in 2HFY2020, versus 0.36 US cents in 2HFY2019.

 

This comes as revenue for the second half of 2020 was up 18.3% to US$598.7 million, from US$506.1 million in the previous year, following higher sales from its business units in Singapore and Hong Kong.

 

For the full-year, revenue inched by 13.5% to US$1.1 million, from US$977,000 also due to higher sales in Singapore and Hong Kong.

 

This in turn drove the company' s gross profit margin up by 11.3% to US$60.3 million.

With a 77% contribution, the highest income came from Hong Kong and China at S$854.5 million. Southeast Asia &ndash which includes Singapore &ndash contributed US$164.8 million, or 15.1% of income. 

 

Meanwhile 3.2% or US$35,479 came from India while the remaining US$50,876 or 4.6% was from the other markets that Excelpoint operates in.

 

The group also benefited from an increase in other income to US$1.5 million in FY2020, mainly due to the government grants recognised in the year.

 

In this time, costs such as sales and distribution was stable, while its general and administrative expenses were up by 11.7% to US$16.4 million, due to higher staff costs.

 

The group had also benefitted from a 47.4% decrease in interest expenses to US$2.9million, due to lower interest rates.

 

Overall, Excelpoint' s earnings was up by 546.6% to US$10.3 million in FY2020, up from US$1.60 million in FY2019.

 

Earnings per share for the year came in at 8.63 US cents in FY2020 compared to 1.34 US cents in the year before.

 

Albert Phuay, chairman and CEO of Excelpoint is happy that the group has delivered a good set of results for 2020, despite the challenges that came with the pandemic.

Going forward, he says that China remains an important market for the group given its strong positioning as a manufacturing powerhouse.

 

Phuay also expects to see an increase in demand for semiconductor chips and solutions across Excelpoint&rsquo s key segments in line with the global shift towards a more digital lifestyle.

 

Aside from this, he says the group will continue to strengthen its value-add and business strategies according to evolving global needs. One way it hopes to do this is through its recently set up PlanetSpark Innovation Centre.

 

&ldquo The solutions developed by the innovation centre alongside our local start-ups, as well as Excelpoint&rsquo s core capabilities in the sensors and communications segments, will position us well to harness opportunities in the Artificial Intelligence and Internet of Things space,&rdquo adds Phuay.

 

With cash and cash equivalents of US$39.2 million at end FY2020, up from US$14.5 million in the previous year, Excelpoint seems well buttressed to see through its plans.

 

The group has also declared a first and final dividend of 3 US cents per share for FY2020. By comparison, no dividend had been paid out in FY2019.

 

Mainboard-listed Excelpoint Technology&rsquo s entrepreneurial and strategic investment arm, Planetspark, has launched a hardware accelerator platform, PlanetSpark Innovation Centre at Changi Business Park.

 

The centre was officially opened by Minister for Trade and Industry Chan Chun Sing on Jan 12.

 

The centre is dedicated to help Singapore tech startups speed up market deployment of their innovations in Artificial Intelligence of Things (AIoT).

It will bring together innovators, hardware and software providers, venture capitalists, small and medium enterprises (SMEs), manufacturers and potential customers, and provide a one-stop ecosystem to help startups develop their AIoT solutions.

 

The centre is backed by Enterprise Singapore (ESG) and Excelpoint, and it will invest an initial $5 million for its research and development (R& D) expansion and development of technology platforms. The latter will allow technopreneurs are able to integrate their hardware innovation to develop solutions based on real-world problem statements.

Phuay Li Ying, Managing Director of PlanetSpark, says, &ldquo Through my work at Excelpoint, I see many Singapore hardware startups face challenges in accessing technologies from industry leaders, gaining market knowledge and finding channels to enter the regional market.&rdquo

 

Albert Phuay Yong Hen, chairman and group CEO of Excelpoint adds, &ldquo In the fast‐ evolving electronics industry, speed to market is key and Excelpoint has always placed our focus on value‐ adding to our partners. We have built strong relationships with our partners and invested in strengthening our technical capabilities for over 30 years. With PlanetSpark, we are taking our value‐ add to the next level."

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