Chenbro Micom (MV $189m): World’s #1 Independent Server Chassis Maker
ROE 26.6% and trading at EV/EBIT 6.8x, EV/EBITDA 5.8x
Chenbro Micom (TSEC: 8210) is the world’s largest independent server and storage chassis designer and manufacturer with around 9% global market share based on the 10m+ server units shipped worldwide in 2015 and benefitting from the rising demand of large-scale data centers which increasingly require customized integrated chassis solution design which account for 5-20% of total server cost. For every 600 smartphones or 122 tablets, a new server is required to support the data management. Server chassis solution now contribute 92% of Chenbro’s sales, up from 60% in 2006, while PC chassis account for the remaining 8% of sales. Founded in 1983 by Chairman & CEO Maggie Chen, Chenbro started off as the first in the world to make desktop and tower PC chassis and removable motherboard tray. This DNA of innovation has been inherited in later pedestal server in 1999 and rackmount server chassis in 2001, which contributes to Chenbro’s leading position in the industry. Chenbro has long-term world-class customers and partners of all three of the largest server equipment companies IBM, HP and Dell; China’s largest server equipment companies Lenovo/ Legend Holdings, Inspur, Dawning Information Industry, Huawei-HiSilicon, Sugon and the world’s largest security surveillance company Hangzhou Hikvision; and Amazon, Google, Facebook, Microsoft, Oracle, Apple are all Chenbro’s end customers via the local system integrators. Chenbro is not merely a chassis manufacturer, as it takes care of the whole product development cycle from the concept design, tolling and molding for specialty components, to on-site product-assembly/quality control and finally, product testing. Chenbro has accumulated sizable and valuable molding assets and superb design flexibility know-how. Company headquarter is located in Taipei, Taiwan, with around 1,500 employees worldwide, and manufacturing sites in Dongguan and Kunshan in China, Chenbro has set up wholly-owned subsidiaries in the United States, Europe and China, to offer a full range of services including product specification proposal, professional R&D development, customization and production capacity to the customers such as system integrators and channels, while keeping innovation and penetrating into the solutions for data centers, surveillance, large enterprises and education.
1) What Makes It a Wide-Moat Business? Fundamental Dynamics Behind 23.3% ROE
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About The Author: Koon Boon Kee
Koon Boon is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets.
Starting his career at a boutique hedge fund in Singapore and later, at Korea’s largest mutual fund company, Koon Boon started to make headway into the investment arena. In his early successes, Koon Boon was part of the core investment decision committee which achieved 700% in returns (net of fees), in its flagship Asian fund.
A prolific writer and thought leader, Koon Boon has contributed hundreds of articles to Bamboo Innovator and BeyondProxy, an acclaimed series of subscription-based, research-intensive publications for serious investors; and is Managing Editor of the Moat Report Asia, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. He had also presented in top banking and finance conferences in Sydney, Cape Town, HK and Beijing, as well as in the Emerging Value Summit and Wide Moat Investing Summit. His work has been featured in local and international media such as, TEDxWallStreet, Investopia, BeyondProxy, Greatinvestors.tv, Jakarta Post, Straits Times Singapore, TODAY Singapore, Business Times Singapore, as well as a publication in the BoğaziçiJournal.
With the wide occurrences of financial fraud committed by listed firms in China during 2015, Koon Boon went to further his studies, from which he saw a gap in the curriculum for accounting fraud. He went on to pioneer the first-of-its-kind course on Accounting Fraud in Asia, which is now an official course in the SMU curriculum.
Today Koon Boon is the Chief Investment Officer at 8I Holdings Limited, where he is responsible for the sustainable growth and outperformance of listed Asian equities investments in the Hidden Champions Fund.
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