|OPTEX GROUP (6914)|
OPTEX GROUP Co., Ltd.
TSE 1st Section
Electric equipment (manufacturer)
5-8-12, Ogoto Otsu, Shiga
* Stock price as of the close on February 24, 2017. Number of shares at the end of the most recent quarter excluding treasury shares.
ROE and BPS are from the last year-end.
* Estimates are those of the Company. From the current fiscal year, the definition for net profit has been changed to net profit attributable to owners of parent.
OPTEX GROUP holds subsidiaries including OPTEX FA CO., LTD., which deals with FA related sensing business, CCS Inc. which holds the global top share in the LED lighting business for image processing, RAYTEC LIMITED (UK), which has attained the largest global share (about 50 %) for supplemental lights for CCTV, and FIBER SENSYS INC. (US), which deals with optical fiber intrusion detection systems.
Business DescriptionThe Company's business is composed of its main Sensing Solution (SS) business (security-related business, automatic door-related business, and EMS-related business), Factory Automation (FA) business (sensor for industrial machine), Machine vision lightning (MVL) business (LED lighting device and system for image processing), and Other business (operation of sport clubs). (The names and segment changed when the Company changed its system to a holding company.)
Advantages :Diversified Technologies/Expertise on Sensing and Unique Sensing AlgorithmTo produce stable and reliable sensors, it is essential to build on a number of elemental technologies and expertise, as well as 'algorithms' to control physical changes. The company takes advantage of its technologies/expertise suitable for intended applications and its unique sensing algorithm to secure the largest share in global market.
HistoryOPTEX was established in 1979 and developed the world's first automatic door sensors using infrared rays in the following year. Back then, most of the automatic doors were using pressure sensitive rubber mats, which contained sensors, and sensors using infrared rays were very innovative. The company also showed unrivaled abilities in product maintenance and implementation, and captured the top share in the automatic door sensors market in only three years since its inception (currently, about 60% share in the domestic market). The company expanded operations and listed on the over-the-counter market (equal to listing on JASDAQ) in 1991. Then it listed on the second section of Tokyo Stock Exchange in 2001 and moved to its first section in 2003.
Recently, it has been working on enhancement of solutions based on image processing technologies and high-end security systems. In 2008, it acquired ZENIC INC., which specialized in contracted development of IC/LSI for image processing systems. Furthermore, it acquired FIBER SENSYS INC. (US) in 2010 and RAYTEC LIMITED (UK) in 2012 respectively. In May 2016, the company reorganized CCS Inc. (6669, JASDAQ), which has the largest share in the global industrial LED lighting field, into a subsidiary. On Jan. 1, 2017, the company shifted to the holding company system, with the aim of advancing to next-generation management and pursuing group synergy.
The Company sets a goal of ROE of 10% or more as an important management index and aims for recovery to more than 8%.
|Fiscal Year December 2016 Earnings Results|
Sales increased due to the effect of M&A, while profit decreased due to exchange rates and increased SG&ASales increased 11.6% yoy to 31,027 million yen. Sales for existing business (crime prevention and automatic doors) declined due to the influence of exchange rates (minus 1,800 million yen), however strong FA business and contributions from the reorganization of CCS Inc. and Gardasoft Vision into subsidiaries (plus 5,300 million yen by two companies) led to a record high sales.
Operating profit decreased 4.6% to 3,015 million yen. Despite the effect of increased sales (2,800 million yen) and the improvement in cost rate (400 million yen), profit decreased due to the increase in SG&A (2,900 million yen) caused by the addition of new consolidated subsidiaries and the influence of exchange rates (300 million yen).
◎Sensing BusinessJapan: Sales of outdoor security sensors for residential use targeted at security companies were sluggish, leading to a decline in sales.
AMERICAs: Sales of outside perimeter security sensors targeted at important facilities were strong, but sales declined due to the influence of exchange rates and sluggish sales of residential sensors in North America.
EMEA: Sales of outdoor security sensors primarily in Southern Europe were strong on the local currency basis, but sales declined due to the influence of exchange rates.
Asia: Sales of security sensors in Asia and Oceania were weak.
Japan: Due to weakened demand in stores, sales of automatic door sensors remained at the same level.
AMERICAs: OEM sales for major automatic door manufacturers in North America remained at the same level in volume terms. Although the market share increased in Canada, sales declined due to the influence of exchange rates.
EMEA: Like in AMERICAs, OEM sales for major automatic door manufacturers were robust in volume terms, but sales declined due to the influence of exchange rates.
◎FA BusinessJapan: Sales of organic EL, semiconductors, rechargeable batteries, electronic components, LED lights for quality testing (for the food industry), image sensors, displacement sensors were favorable.
EMEA: Sales of general sensors were weak, but sales of displacement sensors were strong.
Asia: Sales of displacement sensors for smartphones in China and the solar panel industry were favorable, but overall sales declined due to the influence of exchange rates.
◎Machine vision lighting BusinessJapan: Opportunities to receive orders increased due to expansion of testing rooms and efforts to propose solutions.
AMERICAs: As a result of business activities in North America, new transactions increased, but there was a delay in equipment investment in the manufacturing industry leading to weak sales.
EMEA: An upswing in the semiconductor market in Europe led to an increase in sales to major clients.
Asia: Sales were strong in Singapore, Malaysia and Thailand, but sales in China became sluggish due to economic slowdown.
◎EMS BusinessSales declined due to the decrease of entrusted projects, but profit exceeded the results of the previous year.
For the same reason, accounts payable and debts increased, and total liabilities rose by 3.7 billion yen yoy to 9,026 million yen.
Due to the strong yen, foreign currency translation adjustment declined, but retained earnings and non-controlling shareholders' equity increased. Consequently, net assets rose by 3.0 billion yoy to 28,654 million yen.
As a result, equity ratio dropped by 13.0% from 78.0% at the end of the previous term to 65.0%.
Financing CF declined further as a result of payment of long-term loan payable and increase in dividends paid.
Cash position did not changed so much.
|Fiscal Year December 2017 Earnings Estimates|
Double-digit growth of sales and profits in all business segmentsSales are estimated to increase 14.7% yoy to 35.6 billion yen. All business segments including Security-related business, Automatic door-related business, FA business and Machine vision lighting business are expected to increase sales. Sales from CCS Inc. and Gardasoft Vision will contribute to the growth throughout the fiscal year.
Operating profit is estimated to increase 22.7% yoy to 3.7 billion yen. Operating profit margin is also projected to increase.
The dividend amount is estimated to be 45 yen/share, the same level as the previous term. Payout ratio is projected to be 31.2%.
(Security-related business)Japan: The Company will strengthen the sales of "disaster prevention lighting" products. It will also increase the number of new transactions by promoting sales targeting public agencies.
AMERICAs: The Company will ensure to acquire transactions for "large important facilities". It will also expand the sales of outdoor security sensors for energy-saving and low cost houses.
EMEA: The Company will firmly maintain the market share of outdoor security sensors. It will launch new products related to outdoor security sensors for the residential market targeting Southern Europe.
Asia: It will strengthen the sales of machine security sensor targeting Southeast Asia.
(Automatic door-related)Japan: The Company will provide a wide range of product lineup that is in compliance with new safety regulations. It will also launch high value-added products equipped with an image sensor.
AMERICAs: The Company will launch new products that are in compliance with new safety regulations which will come into effect. OEM sales of its core sensors to major customers in North America will start.
EMEA: Same as AMERICAs, the Company will launch new OEM devices for major customers in Europe. It will increase product lines that are in compliance with EN regulations.
◎FA businessJapan: The Company will focus on expanding sales of displacement sensors, fiber sensors, and LED lighting targeting the electronics industry.
EMEA: The Company will focus on expanding the business in Europe by suppling displacement sensors to OEM and strengthening sales promotion.
Asia: The Company will increase the number of sales offices and strengthen the sales network to fortify its position in the Chinese market.
◎Machine vision lightning businessJapan: The Company will further strengthen the capacities of solutions using lens, camera, etc. It will elevate the level of proposals to the customers and strive to be different from the competitors.
AMERICAs: The Company will strengthen the local support system and strengthen the capacities to respond to growing number of custom-orders. It will focus on business expansion in Mexico.
EMEA: The Company will aggressively visit customers to increase new and existing customers. It will strengthen its sales capacities and increase the number of custom-order sales.
Asia: The Company will find sales agents that are influential in China. It will find new markets in Malaysia, Thailand and Vietnam.
|Interview with Chairman Kobayashi and President Oguni|
<Chairman Kobayashi>The main purpose of the transition is to create an environment to regain strong growth potential.
Q "Please tell us the purposes of becoming a holding company and your thoughts about the transition".
A "The main purpose is to create an environment where we can demonstrate our venture spirit and regain strong growth potential."
Our corporate group has the No.1 global share in the fields of security and automatic-door. Our cash position is also strong. These factors form a stable foundation of our businesses.
They are surely great advantages, but I was not satisfied with our "speed" and "growth potential" in the stable environment and a large scale of business.
In order for us to regain our growth potential with our unique character of "being No.1 in niche areas", I thought it would be better for us to flexibly manage small organizations, instead of a large organization.
For example, an employee with the entrepreneurship spirit can propose a business idea. If the idea appears promising to the executives, the proposed person may be encouraged to establish a subsidiary (internal venture) within the holding company structure to take up the challenges. It is also possible that the executives establish a company in a new field and solicit an employee who wants to become the new company's president.
As these types of movements become more active, there will be more employees who are inspired to give new ideas. I hope that the awareness of "raising standards, compete and grow" among employees will lead to demonstration of venture spirit, increasing speed and enhancing growth potential.
While encouraging employees to come up with innovative ideas to break the status quo, I would like to continue penetrating the ideas that we have been cherishing since the establishment of the Company such as "Self-actualizationt", "Independence" and "Diversity" into our group companies.
Q "What would you like to expect from new President Oguni".I used to work with Mr. Oguni at a company before I established OPTEX. I was engaged in development and he was in sales. We worked together at training and for customer care. He began working at OPTEX immediately after it was established. So I would say he is almost a founding member.
A "I would like him to lead our corporate group that has entered a new stage with his strong leadership."
I highly value his excellent communication capacity and management skills that helped OPTEX FA, which was separated, elevate to the current level. He is a very aggressive person. I believe he is the best person for our corporate group to regain the venture spirit.
While Mr. Oguni and I will complement each other with our strengths, I would like him to lead the OPTEX GROUP which is in the new stage with his strong leadership.
<President Oguni>As the Chairman Kobayashi said, I worked with him about 40 years, and we understand each other in various aspects of businesses very well. It is very important for the future management that we have common ideas for business, goals and visions.
Q "Please tell us your thoughts as you became the President."
A "I would like to pass on the idea of the founder and grow OPTEX GROUP into a much larger group."
There is nothing that we need to change drastically. The transition to a new management system is going very smoothly.
I would like to pass on the idea of the founder and grow OPTEX GROUP into a much larger group.
Q "What do you think is your mission as the new President?"The most important mission is to achieve results that meet the expectations from our shareholders and investors.
A "My mission is to achieve results that meet the expectations from shareholders and investors. I will focus on creating an environment for it."
Our company has a goal of achieving "sales of 50 billion yen, and an operating profit of 7.5 billion yen" during the fiscal year ending December 2019, which will commemorate our 40-year anniversary. We must achieve this goal.
What do I need to do?
My goal is to create a corporate group filled with venture spirit.
Unfortunately, as the Company's scale increases, we are losing the venture spirit. I would like to return to the origin and cultivate a corporate culture in which employees take up challenges without fearing failures in the entire corporate group.
In order to achieve it, we need to create an environment where each group company can easily operate and push forward with their business while aiming at total optimization. I would like to focus on creating such an environment.
Becoming a holding company is one of the most important measures to create such an environment and some changes have already been seen.
For example, the President of OPTEX Co. Ltd. is Mr. Kamimura, who is also a board member of the holding company. With a goal of "speeding up", Mr. Kamimura is aggressively assigning young people to director-level positions. The company has become about 10 years younger and it is filled with lively atmosphere.
Through various measures including human resources and remunerations, I would like to promote this type of movements.
Q "What are current issues and your countermeasures?"For our corporate group's main fields, "security" and "FA", we are expecting to have a huge shift under the concept of "Industry 4.0" which is aimed at minimizing the cost by "IoT" in which everything is connected via the Internet and significantly enhancing the level of digitization, automation and virtualization. There are many opportunities in front of us.
A "We will always capture the latest technology trend in both security and FA fields and lead the market."
One major issue that we are faced with is to catch up with the technology trend in these fields and lead the market. I recognize that we are standing on a very important crossroads.
The importance of sensing, which is our core competence, is expected to grow not only in the security and FA fields but also in other fields. By further brushing up our strengths, we will differentiate ourselves from other companies.
In order to always catch up with the latest technology trend, we should promote research and development of sensing in the fields of security, automatic door and FA. Furthermore, we may even need to take advanced measures such as establishing, for example, a "sensing institute" in the future to pursue entire sensing technologies.
Meanwhile, for the communication field, which is unfortunately not our strength at this point, I believe it is important to collect information from various routes and conclude agreements with other companies to establish alliances.
(Note by the report writer: For specific activities for "Security" and "FA", please refer to "5. Medium-term management policy".)
Q "At last, please give us a message to shareholders and investors".We will vigorously carry out IR activities more than ever and share various information with our shareholders and investors to seek their understanding on our strengths, characteristics, future potential and growth potential.
A "Please look forward to the growth of OPTEX GROUP which will continue challenging as it is going through the "Company's Second Inaugural Period".
We also would like our shareholders and investors to understand that the results may not be achieved within a short period of time, even though every one of us in the entire corporate group will work hard to respond to their expectations. We appreciate support from medium to long-term perspectives.
Please look forward to the growth of OPTEX GROUP which will continue challenging as it goes through the "Company's Second Inaugural Period".
|Medium-term Management Policy|
It will work on "expansion of existing businesses", "strengthening operations" by sharing human resource capacity, productivity and information resources, and "business structure reform" including partnership, collaboration, M&A and system solution services. Specifically, the Company will expand collaboration with Mitsubishi Electronics in the field of FA and strengthen alliance with Axis Communications, which is a major surveillance camera manufacturer in the field of security.
(A) Growth strategiesThere is an issue with detecting abnormality just by a sensor from an accuracy point of view (e.g. triggering the false alarm). For example, in UK, the police rushes to the site only after the sensor detects abnormality and a camera image is confirmed. In the USA, there is a false alarm fine system for the police in place in some states.
Furthermore, not only for residential use, the need for high-end visual verification is increasing in the emerging countries where infrastructure development for important facilities is accelerating amid frequent terrorist attacks in the world.
In response to the expansion of the needs for visual verification, it is expected that the global surveillance camera market centered around the network security cameras will grow at an annual rate of 15% by 2018.
The Company Group will collaborate with a major global security manufacturer to develop, launch and sell products equipped with a "sensor" to detect, "camera" to shoot images, and "wireless" function to send the information digitally in the residential market.
In the high-end market, it will promote sales of new solutions for "outdoor security" which they occupy the top share in the global market under the concept of "Internet of Sensing Solution (IoS)".
◎Factory automationIn the field of Factory Automation (FA), the Company will pursue a synergy effect of "Sensor business" of OPTEX FA and "Machine vision lighting business" of CCS.
For sales and proposal, the collaboration will make it possible to make comprehensive proposals for highly value-added products, collaboratively explore new customers, and make new solution proposals. For development and manufacturing, it is expected to gain more speed, better quality and improved efficiency of production. Currently, both companies are spending a great deal of time to work on the collaboration by hosting various study groups and harmonizing two corporate cultures.
Sales of the "Machine vision lighting business" for FA in Japan (40% share) and overseas (20% share) were a total of about 8.2 billion yen in 2016. It is planning to reach 20 billion yen in 2021 (70% domestic share and 50% overseas share).
Through synergy, it aims to be the overwhelming number one in the global market share in the machine vision lighting industry.
The "Sensor business" of the Company provides FA sensors for quality control and automation of manufacturing lines at factories. Its strengths are research and development capacities that enable them to produce high quality and low price products, collaboration with SICK AG, one of the global leading manufacturer of sensors (Germany), global marketing in over 60 countries, and fabless business model specialized in research and development and marketing to establish a highly profitable structure.
The Company will further grow these strengths and strengthen and expand the factory automation field including machine vision lighting.
(B) Management benchmarks and performance goalsThe management benchmarks for the OPTEX GROUP are "Sales growth rate of over 15%", "Ordinary profit margin of over 15%" and "ROE of over 10%".
To raise the ordinary profit margin, the Company will continuously work on reducing costs and minimize the influence of foreign exchange by raising domestic sales ratio and expanding overseas manufacturing system.
The goals of the Company for 2019 are sales of 50 billion yen and operating profit of 7.5 billion yen.
M&A and business collaboration are also under consideration to expand its business.
In the short-term perspective, we would like to pay attention to the progress of recovery during this term.
In the medium to long term, we would like to pay attention to the innovation process and measures to achieve innovation to become a "corporate group filled with venture spirit", which is a goal of the President Oguni.
|<Reference:Regarding Corporate Governance>|
◎ Corporate Governance ReportThe latest revision date: January 31, 2017
DisclaimerThis report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and come from sources that we judge to be reliable. However, we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.
Copyright(C) 2017 Investment Bridge Co., Ltd. All Rights Reserved.