SGX research series: 10 in 10: Willas-Array ready to tap growing demand for electronic solutions
1. For more than three decades, Willas-Array Electronics (WAE) has focused on the distribution of electronic components in Hong Kong, a business known for intense competition, rapid change and low margins. How was the group able to survive the shifting economic and technological cycles?
In the past decade, in order to pursue higher margins and better returns, we made a strategic decision to not compete on price, but to differentiate ourselves by investing in engineering resources and sales networks. This allowed us to “get to market” faster and provide better technical support to our customers.
We believe that our current approach remains sound and will continue to pursue opportunities in higher margin products and services while maintaining tight cost controls across all our segments.
2. Can you share more about how providing value-added services has given you an edge over your competitors?
WAE’s journey with our customers starts even before an order on component parts is placed and continues beyond order fulfilment.
Our value-added services include working with customers on product design, from building prototypes to advising them on the components required. WAE will then supply the component parts, and will also continue to partner clients on their product improvements.
3. Moving forward, what are the growth areas you have identified for the group? What is your strategy to ensure business sustainability? Our focus will continue to be on China’s domestic consumption market, particularly in the automotive, home appliance, and industrial segments.
We plan to focus efforts on the development of products with higher energy efficiency (e.g. inverter application), and in line with global efforts for environmental protection, leverage on the electrification of cars in the automotive industry to achieve growth. We also plan to support the adoption of 5G and Internet of Things (IoT) for smart homes and smart cities.
We will continue to be prudent in our financial management and maintain a dedicated team to manage and monitor our inventory.
4. Could you elaborate on your investment strategies and how they have developed in recent years?
We believe that as we advance towards smart cities and homes, demand for electronic components in our home appliances will rise too. Similarly, electrification and digitalisation of vehicles will further increase the electronics content in each vehicle and is thus a driving force behind our investment commitment.
Our past efforts to identify and invest in growth segments — for example the automotive segment, which achieved higher revenue compared to FY2019 despite the slowdown in China’s vehicular sales and production — have partially offset the decline in sales from other more affected segments as the Covid-19 pandemic affected global economies.
5. As the industry evolves, what is the one thing that has been constantly on management’s minds to ensure that the company remains relevant?
The group owes our success over the years to the dedication and commitment of our employees. We believe strongly in talent retention as well as attracting the best talent to help us navigate and stay ahead of the changing industry landscape.
As a company, we constantly invest in staff training to upgrade employee skills to ensure that we keep pace with the needs of the industry. We are fully committed to help our employees fulfil their career and personal potential.
6. The group’s customers are mostly from the Greater China region. Do you have plans to expand your geographical reach?
The group has focused our efforts in China since our incorporation and have built long-standing relationships with a strong network of customers.
China has a huge domestic market for electronics and is also a major supplier for the rest of the world. The country is advancing rapidly in the development of new products and technology, with the ability to manufacture faster and cheaper. We believe that China, with its size and growth, still offers great potential and opportunities for WAE.
7. In FY2020, the group’s revenue fell 13.9% year-on-year to HK$3.2 billion [$2.4 billion] while net attributable loss widened to HK$72.6 million. What was the cause of the weaker performance?
In FY2020, our business was weighed down mainly by the US-China trade dispute and poor market confidence. However, we are extremely encouraged that because of our
past efforts to identify and invest in growth segments, we were able to partially offset the decline in sales from other more affected segments.
Automotive: Revenue increased by 8.4% y-on-y to HK$485.7 million in FY2020, as car makers increase electronic content of their vehicles to ensure better features and performance.
Home Appliance: Revenue increased 18.8% to HK$643.6 million in FY2020. This is attributable to our investment in inverter applications, as China continues to focus on energy saving products.
Industrial: Revenue declined 10.2% y-on-y to HK$ 879.7 million in FY2020. However, we remain optimistic that this segment will improve in the long term as the industrialisation of city infrastructure, national energy saving initiatives and factory automation gain traction in China.
8.How have the challenges of the US-Sino trade war and political unrest in Hong Kong affected the group?
We observed that the Chinese government has moved away from export-led growth to focus on domestic consumption, as a result of the US- China trade dispute. It has stepped up efforts to boost economic growth, through cuts in taxes and bank reserve requirements, as well as speeding up infrastructure projects.
9. In view of the Covid-19 pandemic, what does the group think of its prospects in the coming years?
The “new normal” of working from home has increased the demand for electronic solutions required for home offices and the usage of home appliances. We also noted the increase in demand for smarter features and energy-saving functions. The reduction in air and road traffic also lessened pollution and led to renewed calls for sustainable clean energy solutions.
We stand ready to work with our customers to increase automation as well as the electronic content of their products and solutions.
10. Moving forward, what is WillasArray’s value proposition to its shareholders and potential investors?
We believe that our value proposition can be summed up as follows:
• Strong fundamentals with demonstrated resilience over the past decades;
• Wide product range for different segments;
• Extensive and growing network in China;
• Long- lasting relationships with suppliers, customers, banks and various stakeholders;
• Sound management policies, including strict financial discipline and tight capital management;
• Regular dividend payouts over the years.