Basso (MV $264m): Global #1 ODM Maker of Pneumatic Power Tools
ROE 18.5% and trading at EV/EBIT 10.8x with 5.3% dividend yield
Basso (TWSE: 1527) is the world’s largest pneumatic power tool ODM producer with global market share of 20-25% and its operating profit margin is higher than that of its branded clients because of its negotiating and pricing power, technological prowess and vertically-integrated business model from upstream tooling design/ manufacturing to downstream final assembly. Around 44% of FY14 revenue came from pneumatic nailers which are mainly used in housing construction and renovation, with a focus on the higher-end professional segment rather than the price-competitive DIY segment. About 37% of revenue came from auto power tools such as pneumatic impact wrenches. Basso also utilize its magnesium alloy die casting technology in pneumatic tools to produce aluminium-magnesium alloy bicycle frames for leading bicycle parts providers such as SRAM, contributing to 7% of revenue (8% in 1H15, up from 5% in 2010). Basso was co-founded in Jul 1983 as a trading company and distributor of pneumatic power tools. by chairman Wilson Lai after his retirement as Chief Judge of Taiwan’s Taichung District Court. Nearly a decade later in 1992, Basso merged with a pneumatic power tool manufacturer, transforming itself from a pure trading company into an ODM/OEM supplier for global leading power tool brands. Son Eric Lai is VP of Sales and R&D. Lai family control 30-35% of the company. Basso was listed first on GreTai in 1999 and relisted on main board in 2000.
1) What Makes It a Wide-Moat Business?
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