CUB Elecparts (MV $785m): World’s Aftermarket Leader in Automotive Tire Pressure Monitoring System (TPMS) Expanding into ADAS Market
ROE 49.4% and trading at EV/EBIT 16.9x, EV/EBITDA 15.6x

CUB Elecparts (TSEC: 2231) is the global leader in TPMS (tire pressure monitoring system) sensor product in the automotive aftermarket segment with its unique patented universal TPMS solution which has 98% coverage ratio, the highest compatibility in the world, enabling tire shops and aftermarket operators to reduce inventory and free up working capital and replacement work using CUB TPMS is quicker and easier for onsite technicians. CUB is also the exclusive supplier to Wal-Mart since 2015. In North America, CUB claims 50% market share in standalone auto tire shops and in regional auto tire chain stores. CUB will benefit from car safety regulations which required TPMS to be fitted in new cars in the US (2007) and Europe (2012) with more countries following suit. CUB Elecparts was established in 1989 by Mr. S.C. Yoo. It started from manufacturing automobile switches, which include those for dimmers and headlights, power windows, ignition and combination switches. The company expanded into automobile sensors in 2000, producing sensors for oil pressure, crankshaft position, camshaft position and vehicle speed. It leveraged its knowledge base in automotive sensors to break into the TPMS manufacturing in 2003. After years of efforts, CUB launched the first generation of its TPMS products in 2008, and the successful breakthrough third-generation universal TPMS in 2013. With the acquisition of microwave vehicle radar specialist Harbinger Technology in Jan 2016, CUB looks to expand into the multi-billion Advanced Driver Assistance System (ADAS) market and will start shipping its first ADAS solution in July 2017 from its automated production line in Shanghai Pudong plant. CUB will also launch its advanced 77 GHz radar sensors in 3Q to 4Q 2017 and commit to mass production in 2018. At present, CUB is working with 2 automotive clients for this advanced 77 GHz radar sensor products, including targeting the Japanese truck market. The company currently owns 2 factories in Taiwan and Shanghai. The company got listed in the OTC market in 2009 and mainboard in 2010. The founder’s family is the biggest shareholder with 52.2% stake.

1) What Makes It a Wide-Moat Business? Fundamental Dynamics Behind 49.4% ROE

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