Transcription of Finance News Network Interview with Enice Holding Company Limited (ASX:ENC) Director, Ross Benson Carolyn Herbert: Hello I’m Carolyn Herbert for the Finance News Network and joining me from soon-to-be listed wireless telecommunications technology business, Enice Holding Company Limited
(ASX:ENC) is its Director, Ross Benson. Ross, welcome to FNN.
Ross Benson: Thank you Carolyn.
Carolyn Herbert: Can you start by giving us an introduction to the company?
Ross Benson: Enice is a vertically integrated wireless technology and services company in China. There are three main business units: antenna products, advanced solutions and engineering services. Our CTO is a PhD in wireless technology and microwave technology. Our CEO is a PhD in wireless telecommunications and we have a 15-year operating history, and a profitable operating history. In China, the addressable market for the business leading up to the year ended December 2019, is estimated to be $AUD80 billion.
Carolyn Herbert: What do you see as the key drivers of the business in China and globally?
Ross Benson: The drivers for Enice, both in China and globally are almost the same, and they are mobile connectivity and data growth. So these drivers in China are particularly exciting, because on top of those, you have a government that is very focused on rolling out wireless technology and mobile telephony, to the masses. And you have probably the most exciting and burgeoning consumer market in the world.
And this market and the new consumers in this market have gapped straight past traditional technologies, into an evolving and strengthening demand, into wireless devices. So we see the drivers in China, as stronger than virtually any other country in the world.
Carolyn Herbert: What’s the company’s client base in China and the market for its key products?
Ross Benson: The three key clients in China are the major telcos, and both in China and outside China, major telcos are our major customers. China Mobile, China Telecom and China Unicom. The two major products and technologies that we have are in the antenna division, and also in what we call network optimisation and maintenance. The technology, which we will monetise in what we call advanced solutions or network monitoring and maintenance, is very disruptive.
China Mobile last year for example, spent RMB100 billion on network optimisation and maintenance. And they’re very significant labour component. So our wireless monitoring technology, we believe, will be monetised very well in the Chinese market.
Carolyn Herbert: What’s the growth strategy?
Ross Benson: The major growth strategy for Enice is to expand our reach into the China domestic market, in the antenna products and the advanced solutions. We do also see alongside that, the opportunity to develop our export market, predominantly in the area of antenna products. And at the moment, we’ve just reached US certification for our what we call DAS antenna products, which has the lowest pin rating for antennas in the world. That simply measures the amount of noise that’s generated, when you’re transmitting data and communications down that limited spectrum. So this is very positive for the company at the moment.
Carolyn Herbert: Now to your IPO. How much are you looking to raise, when are you expected to list and, what will the company’s market cap be on listing?
Ross Benson: We’re looking to raise a minimum of $25 million and the IPO round closed on Friday last week. And I can confirm that we raised more than the minimum. The IPO date this time is scheduled for the 30
th of October. The basic use of funds for the IPO round will be to fund the organic growth strategy that I mentioned before. Some further investment in R&D and also to reduce some debt.
Carolyn Herbert: Can you provide a snapshot of the company’s financials?
Ross Benson: I can indeed. As I mentioned before we’ve got a 15-year operating history. Looking forward to the December 2015 year, I can say that we’ve got a very strong balance sheet. If you look at some of our ratios, they’re all very strong in a comparable set, interest coverage of 4.8 times, debt to equity of under 0.8. We have an EBIT margin of approximately 15 per cent, an NPAT margin of 10. We have forward estimated revenue to the December 2015 year, which is also the subject of an EY Independent Insurance Report looking forward, of approximately $AUD90 million.
So our forward December 2015 NPAT at this stage, is $AUD9 million. And to put it in perspective for valuation matrix, that puts us at approximate PE of 12 times, an EV/EBITDA of 7.8, and EV to sales at 1.2. So in the comparable set of companies globally in wireless technology, we’re priced very well for the Australian market.
Carolyn Herbert: Finally Ross, what’s the focus for the company over the next 12 months?
Ross Benson: First and foremost, the focus of the company is to deliver value to the shareholders. We believe we’ll do that through a continued growth in our headline revenue, and maintaining our profit margin. So we’re very excited looking forward. And I think the most significant thing that will occur in the company for the domestic business in China in the next 12 months, is you’ll see the monetisation of some of the very exciting disruptive technology we have. Which is really serving the telecommunication companies in China, which is being driven by the demand, by the China consumer market.
Carolyn Herbert: Ross Benson, thank you for the introduction to Enice.
Ross Benson: My pleasure Carolyn.
Ends
