Net Profit Soars by 126%

HONG KONG —  SMIT Holdings Limited (“SMIT” or the “Company,” together with its subsidiaries, the “Group”) (stock code: 2239), a global leading CAM supplier and a major mPOS supplier in China, has announced its annual results for the year ended 31 December 2016 (the “Year”).

Highlights
– Net profit soared by 125.7% to US$7.5 million for the year ended 31 December 2016
– Excluding listing expenses, net profit rose by 40.8% year-on-year to US$9.4 million for the year ended 31 December 2016
– A final dividend of HK$0.015 per share was recommended by the Board
– For the CAM business, as the European market gradually recovered, in addition to the start of mass scale sales in emerging markets led by India, the Group successfully grasped development opportunities presented by the new DVB-T2 technology in the industry. Through DVB-T2, broadcasting operators are able to extend its coverage from free-to-air TV channels to paid TV channels and this has boosted CAM sales
– In the mPOS business, the Group has strengthened its cooperation with existing customers; invested resources in R&D to upgrade existing mPOS products and introduced new products such as intelligent POS and intelligent cash registers; actively expanded the prepaid card top-up solution and has been awarded a number of safety and security standards certifications

Leveraging its industry-leading position and deployment strategy, the Group reported net profit of US$7.5 million, a 125.7% surge from 2015. During the Year, the Group recorded revenue of US$59.1 million and gross profit margin rose by 2.7% year-on-year to 39.7%. Over the years, the Group has continued to streamline its operations and focus on the development of its core business and enhance its operating efficiency while reducing expenses. Excluding listing expenses, the Group recorded net profits of US$9.4 million, representing a year-on-year growth of 40.8%. Basic earnings per share were US$2.7 cents (2015: US$1.5 cents). The Board recommended payment of a final dividend of HK$0.015 per share.

Mr. Huang Xueliang, Chairman and Chief Executive Officer of SMIT, said, “Given our leading position in the global CAM market and the Group’s integrated technical capabilities and solid business relationship with industry participants, the Group will continue to work with industry partners and broadcasting customers to develop new projects. Meanwhile, the Group is actively seeking opportunities to establish strategic partnerships to develop new projects and further diversify its business. It will also pursue strategic deployment and expansion of business in more sunrise industries.”

Thanks to the development of new growth drivers among its existing clients and the Group’s active efforts in exploring new markets and clients, the Group’s CAM sales revenue recorded a modest increase of approximately 1.8% over the previous year to US$38.0 million in 2016, accounting for around 64.4% of the Group’s total revenue. For the CAM market, the European market has gradually picked up, mass scale sales in India and other emerging markets have also commenced, and the Group has successfully grasped development opportunities presented by the new DVB-T2 technology in the industry. Through DVB-T2, broadcasting operators are able to extend its coverage from free-to-air TV channels to paid TV channels and boost CAM sales. As a result, CAM sales revenue in Europe grew by approximately 30.5% year-on-year. Driven by the uptake of sales in emerging markets led by India, CAM sales revenue in other regions surged by nearly 61.2% which has also let to the commencement of mass-scale sales.

During the Year, the Group has developed new customers including the largest German broadcasting operator MEDIA BROADCAST and the leading Romanian broadcasting operator RCSRDS. The Group has also strengthened its strategic partnership with its existing customer Irdeto, the world leader in digital platform security, to jointly develop new markets and new customers. Furthermore, the Group has developed the exclusive project of CAM with USB plug, which is expected to bring substantial benefits and revenue. In the future, the Group plans to work closely with its industry partners to continue to develop new business opportunities while also exploring new applications in CAM technologies.

As a result of the PRC government publishing a policy regarding regulations on risks associated with non-bank payment institutions in the first half of 2016, the Group’s mPOS products recorded revenue of US$21.1 million, accounting for approximately 35.6% of total revenue. The policy will benefit the industry to develop as a whole and become more regulated and healthy in the long term. The mPOS market became more stable and the overall industry picked up gradually in the second half of the Year.

During the Year, the Group strengthened its cooperation with its existing customers and has invested resources in R&D technology to upgrade existing mPOS products. For example, the Group has upgraded current mPOS products with iBOXPAY, a leading provider of mobile commerce and financial information solutions in China, optimized product and safety performance, and improved cost-effectiveness; and extended in-depth cooperation in the development of intelligent POS, intelligent cash registers and other new products in order to boost shipments and sales growth. In addition, the intelligent POS and intelligent cash register project between the Group and the Urumqi Bank has entered into the technical cooperation stage, and the project to upgrade and customize the Xuelian Quick Pass products for the Urumqi Bank has also entered into the design process.

In respect of new customers and new products, the Group has actively expanded the prepaid card top-up solution, and is currently undergoing preliminary discussions with the City Commercial Bank and the Rural Commercial Bank in China, drawing the attention of a number of medium-sized banks within the financial sector. The implementation of this solution is expected to further expand the Group’s customer base. In addition, the Group has also been awarded a number of safety and security standards certifications, so as to lay a sound technical foundation for exploring overseas markets.

Looking ahead to 2017, with the gradual stabilization of the global economy, the Group will enhance its cost-effectiveness by further optimizing its internal controls, and will continue to actively explore new markets to develop new customers. The Board is optimistic about the business prospects of the Group in 2017. For the CAM business, by capitalizing on its leadership position in the global CAM market and the development opportunities in the market, the Group will continue to actively develop more new projects. As a major supplier of mPOS devices in the PRC, the Group will actively explore new markets for medium-sized commercial banks under the new standards of the industry. And will invest resources in product upgrades and R&D, so as to maintain the leadership and competitiveness of the Group and the market-leading technology of its products, and explore new customers and new cooperation opportunities.

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