Concepcion Industrial Corp (MV $325M): Philippines’ #1 HVAC (Aircon and Refrigerator) Company in An Under-Penetrated Domestic Market 23.1% ROE and Trading at EV/EBIT 9x, EV/EBITDA 8.6x
Concepcion Industrial Corp (PSE:CIC) is Philippines’ #1 market leader in air-conditioner (36.7% market share) and refrigeration (25.6% market share) which are under-penetrated appliances in the country, with household penetration rates at 6% and 35% respectively, amongst the lowest in Southeast Asia where its neighbours have at least twice the penetration rate, representing significant untapped market potential. Established in 1962 after obtaining an exclusive license to distribute Carrier brand in the Philippines and later forming a manufacturing JV with Carrier in 1997, CIC has more than 50 years of track record in manufacturing and selling these products for both consumer and commercial use. CIC’s manufacturing facilities in aircon and refrigerators are the largest of their kind in the country, with a production capacity of 500,000 and 300,000 units annually respectively. CIC provides end-to-end solutions from production to distribution to aftersales services network that spreads across the logistically-challenged country. New business include acquiring a 51% effective interest in Otis Philippines (elevator and escalator, building and industrial solutions) in Mar 2014 and forming a 40:60 JV with Midea (000333 CH) in Nov 2013. CIC was listed in the Philippines Stock Exchange in Nov 2013 at P26 per share. CIC is 71.4% owned by the Concepcion family by various members, including the family of Jose S Concepcion who also owns 20% of consumer brands company RFM Corp (PSE: RFM).
1) What Makes It a Wide-Moat Business?
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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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