Targeting ‘several acquisitions’
Laguna-based firm Cirtek Holdings Philippines Corp. is seeing “explosive growth” in the mobile data usage segment, company officials claimed on Tuesday, not just in the Philippines but also across Southeast Asia.
Jerry Liu, Cirtek chairman and president, said the firm was looking to ramp up business in line with a seven-year expansion plan focused on improved products and efficiencies and potential acquisitions.
The latter, Liu said in a briefing, aims to complement Cirtek’s existing manufacturing lines and product offerings.
“We have several acquisition targets in the pipeline. That is why we are interested to come into the market to raise capital,” he said.
“In the technology sector, the CAGR [compounded annual growth rate]is 45 percent. You will never see an industry that has a CAGR of 45 percent. This is a great opportunity in front of us,” Liu added.
Anthony Buyawe, Cirtek chief financial officer (CFO), said subsidiary Cirtek Advanced Technology and Solutions Inc. (CATS) would contribute significantly to revenues in the next seven years.
“We have two main subsidiaries, CEC (Cirtek Electronics Corp.) and CATS. For CEC, we’re seeing steady growth. But we’re really seeing significant growth in CATS, mainly on the explosion in mobile traffic data in the next few years,” Buyawe claimed.
“Moving forward, we’re assessing, actively seeking higher technology available in other countries if it makes sense for us. In seven years, CATS will contribute very significantly to our core business,” he added.
CEC is the group’s semiconductor and electronics manufacturer.
Asked if the company would keep to its aim of acquiring bite-sized firms worth $40 million to $50 million, Liu said: “Maybe higher. We’re not looking for just one [company]. Currently, I think after we go to the market, we have to really expand the business.”
“Our acquisitions will be very much related [to current core business]… We are interested to use the similar technology to expand into Southeast Asian countries,” he said.
“Our acquisition is not limited to the country, We’re also looking at other global locations. We’re looking at advanced technological countries. Southeast Asia is a good manufacturing base.”
Buyawe said that if needed, Cirtek would consider putting up manufacturing hubs in markets where a long-term presence was important.
“We are looking to establish more footprints in the Asean region. If in the future it will make more sense to put up units in other areas, it’s something we will look into. But our focus now is our sales and marketing presence in the region,” he said.
“The capex [capital expenditures]that we’ll raise from the follow-on offer will expand our capacity, enable us to adopt new technologies, allow us to be more efficient,” he added.
Aside from regional expansion, CATS Executive Vice-President Michael Liu said the company was looking to close a deal with a US-based company in the same mobile data space.
The focus on the mobile data segment has its roots in bright growth prospects worldwide, Buyawe said, considering that “there will be huge surge in mobile traffic” in the next few years.
Pete Gayson Sto. Domingo, CATS director, said that based on an Ericsson report, average data usage across the globe would increase to as high as 1 gigabytes per second from the current 30 megabytes per second.
“In 2014, the average data user spent 359 megabytes monthly. By 2019, an average user will use 2.8 gigabytes per month and the current local telcos cannot support that. This huge growth is driven by videos — streaming video, Skype calls — everything’s already in videos. That’s gonna blow up and the only way to keep up is to upgrade,” Sto. Domingo said.
Cirtek is seen to raise up to P2.8 billion from a planned follow-on offering of 120 million common shares — 80 million in base offer shares and 40 million for oversubscription.
The final price will be determined on October 21 following book-building from October 7 to 20. The offering period run from October 23 to 30 and the shares are expected to be listed at the Philippine Stock Exchange Main Board on November 5.
The estimated net proceeds of P2.783 billion after offer and listing related fees and taxes will be used for strategic acquisitions (P630.7 million), capital expenditures (P631.9 million), payment of financial obligations (P278.2 million) and working capital requirements (P314.1 million).
First Metro Investment Corp. and SB Capital Investment Corp. are the joint lead underwriters.
The Laguna-based firm booked first half profits of $3 million, 42 percent up from a year earlier.
It expects robust growth on forecasts that the global semiconductor industry will grow between 5 percent and 8 percent in 2015.
Cirtek, which began operations in 1984 and was incorporated in 2011, is involved in manufacturing semiconductors and electronics. It caters to over 70 regular customers and is a 100-percent export company that ships its products to Asia-Pacific (21 percent), Europe (33 percent) and North America (46 percent).
In the past five years, Cirtek grew revenues by an average of 17 percent, higher than the industry average of 5.3 percent.