Monday, September 20, 2010

K1's BIllion Dollar Target

Now don't get me wrong because there's nothing absolutely wrong with having personal goals and targets. Without ambition, without goal and targets, one lacks the motivation to strive to be a better person. And it's certainly great to see a company setting out targets because with the targets set, the company strives to be a better company.

On today's Business Times, there's an article on K1's Billion Dollar Ambition.

  • K-One confident of RM1b annual revenue

    By Goh Thean Eu Published: 2010/09/20

    K-ONE Technology Bhd (0111), an electronics product designer and developer, aims to grow its annual revenue to RM1 billion within five years, more than 10 times of what it achieved last year, as it does more jobs for existing customers and diversifies into new businesses.

    "We have done extremely well in the first half of this year, and we expect to do much better in the second half. Based on what we are experiencing, we believe the momentum is sustainable ... Over the next five years, we aim to become a billion-ringgit company," its executive chairman Edwin Lim told Business Times in an interview.

    "To compete in the global arena, you need to at least have that kind of magnitude," he said.
    Still, becoming a billion-ringgit company is not enough in the electronic product design industry, as that will only make K-One a medium-sized player.

    Lim said K-One has been growing at a "tremendous pace" since its beginning about 10 years ago.

    "Since we started 10 years ago, we have grown by triple digits or high double-digits per year. We were flying, but more like a sparrow. As you know, like a sparrow, you can fly, but not that high.

    "Today, we are moving into a new phase of growth. We are no longer a sparrow, but more like an eagle, we fly higher,"
    said Lim.

    About 80 per cent of K-One's revenue is derived from its three main pillars: mobile phone accessories, consumer electronics and computer peripherals.

    Although each of the segment has been growing, Lim believes that the company can do more.

    "We see a lot of potential in other industries such as solar-powered products as well as household appliances. These will be the new business segment of the company's product portfolio," he added.

    Within three to five years, Lim hopes that the new segment will contribute 30 per cent to its total revenue.

    So far, it has done several small projects in household appliances such as designing one of the components of a washing machine.

    Lim said this is a good start as in time, its customers will start giving them more jobs, just like what it is experiencing now with other existing customers.

    "We managed to grow our revenue last year despite the global economic slowdown. Our customer base is still the same, but the difference is that we do more projects with them. The fact that we managed to deliver, serve them and still be around during the global financial crisis has somewhat increased their confidence in us," said Lim

    Read more: K-One confident of RM1b annual revenue here

And as usual... the focus is on REVENUE.

Now I am never a fan of companies who set their goals on REVENUE.

Revenue is just nice to see, nice to watch. The meat is in the profits. Without profits, what's the use?

It's like footy. You see a team scoring goals, lots of goals. But it also keeps conceding lots of goals. And when that happens, these teams don't win as much games and points as they should ( ahem! :P ) and ultimately the dropped points will cost them championships!

It's so same with REVENUE. Again, a company with growing revenue sure looks impressive. Company is bigger because it's doing more business but without the profits, what's it good to its minority shareholders/investors? Does the shareholder get rewarded for a company's revenue growth?

Ah... some say... why so negative?

With revenue growth, profits should increase sooner or later.

Let's look what K1's revenue growth since listing. ( Yes, I have to say it's VERY impressive.)

For its fy 2005, K1 had a saves revenue of 32 million. However, since K1 was listed in early 2006, I would really discount those 2005 numbers and use fy 2006 revenue of 45.3 million as the initial yardstick. In fy 2009, it did 84 million!!!

And current trailing twelve months revenue is 114.8 million!

Yes, it's very impressive!

Now in fy 2006, K1 had profit of 6.080 million.

Let's look at K1's profit growth since fy 2006.


How?

Discount the fy 2009 cos of the global crisis.

Current ttm profit is only 6.341 million. Ok fy 2010 is looking good, first half profits is already 3.8 million and on an annualised basis, it should hit some 7.6 million or so,

So in fy 2006, it earned 6.080 million. This year, K1's earnings 'might' reach 7.6 million.

Now that's not really as impressive as their sales revenue growth, yes?

How?

In my flawed opinion, I would rather see companies like K1 focusing on 'profit' growth rather than sales growth.

Achieving sales growth is always much easier. Just sell it cheaper!

Achieving profit growth is a totally different ball game and as a minority shareholder or potential investor, isn't this what's wanted and desired?

ps: 1 billion target within 5 years? Some more 'confident'! Sure bo?

8 comments:

David Koay said...

I think they have been talking about achieving RM1 bil revenue target within 5 years since like end 2007? So, by right, they should achieve that by 2013? Hehe :p

TK said...

Can!

Sell CAR
Sell BIG CANON

Moolah said...

David: Is that so?

Let me check. :-)

K C said...

2010ttm revenue 115 m and profit margin (PM)6.3 m, giving a profit margin of 5.5%. Hm, an electronic kind of company giving PM 5.5%? Notion's PM is 21%. Even Dufu one is 10%. 5.5%? Is it Giant's, Jaya Jusco or other supermarket kind of business relying on high turnover, low profit margin? Moola is right. It is the profit margin which is important, not turnover. I normally will not look at a company if margin is less than 10%. How to get good ROE if PM is low unless the company leverage high and become risky?

K C said...

Oh yeah, I wonder what they earn enough to pay for loan interest or not, not to mentioned about paying dividend to shareholders.

tklaw said...

This guy has a big big dream. The existing minority shareholders must be very happy since the company would experience gigantic growth in the next half decade.

The company would transform into an eagle...wonder how he could build larger wings to surf smoothly in the sky. How to grow big given such a tiny profit margin....through building up more debt or right issues? MI should prepare to go for long long term investment and bear with negligible dividend.

solomon said...

If KNM can, why K1 cann't? Just use leverage M&A...

But looking at consumer computing sector, it might be a bit difficult in Malaysia, but possible in China or India??

Moolah said...

LOL! Leverage M&A?

hmmm... let's see....

K1 can go 'chiak' P1.

K1 > P1 = KP1.

can ah?

:P