Zeng Hsing: World’s #1 Manufacturer of Home-Use Sewing Machines
Global Market Share 30%, ROE 18.9%, EV/EBIT 9.6x, EV/EBITDA 8.2x, Dividend 5.3%
Zeng Hsing (TWSE: 1558 TT) is the world’s largest ODM (Original Design Manufacturer) in home-use sewing machine with a 30% market share – out of the 11m units sold worldwide every year, 3.3m are manufactured by Zeng Hsing in 2014, or nearly 1 out of 3 machines, up from 2.95m units in FY2013 and tripled from 1m units in FY2005. Zeng Hsing’s major production sites are in China’s Zhangjiagang (30-34% of capacity), Vietnam’s Ho Chi Minh city (65-70%) and Taichung’s Taiping (1% in mid-to-high-end models). Established in 1968, Zeng Hsing has focused on household sewing machines for the past 40-plus years and does not carry major non-core investments on its balance sheet.
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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