Rechi Precision: Global #4 Air-Conditioner Compressor pumping into new applications and the multi-billion BLDC motor market
Trading at P/B 1.63x, EV/EBITDA 7.2x, EV/EBIT 10.6x, Dividend 6.37%
Rechi Precision (TWSE: 4532 TT) is the world’s #4 compressor manufacturer with 10% market share, up from 3.5% in 2000. Regionally, Rechi has 39% in Taiwan, 30% in North America, 3% in China, 12% in Europe, 9% in Japan, 13% in South America, 14% in ASEAN. Rechi also has niche dominance in compressor for the recreational vehicle (RV) market in North America with 60% market share and over 90% market share in heat-pump dryer in Europe in partnership with Bosch. Rechi’s annual compressor capacity is 15m units, with 3m in Taiwan, 9m in Qingdao and 3m in Huizhou, and has plans to expand by 6m units to 21m units in 2H15. Rechi has a diversified customer base that include Haier, TCL, Midea, Sharp, Sanyo, Carrier, Sampo, Goodman, Bosch, Electrolux, Miele. Rechi is a 25.4% affiliate of Sampo Corp (1604 TT) and other strategic shareholders include Taiwan steel giant China Steel Corp (2002 TT) with 4.91% stake and Japan’s electronics giant Sharp (6753 JP) 4.86%.
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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