GBM — Investor Presentation 2021

Apr 27, 2021

Goldsun Building Materials Co., Ltd.

I. Company Profile
II. 2020 Operating Results
III. 2021 Business Outlook
IV. Medium to Long Term Operation Highlights
V. Important Appendix
　　　　　April 27, 2021

I. Company Profile
Company information
Invested in Wellpool (stock code 8424), with 51% in shareholding in 1984.
Established Taipei Port Terminal Company in 2009, and officially started operations in 2016.

Established a ready-mix concrete plant in Suzhou from 2003-2005
Established Jin Shun Maritime Limited in 2012
Established Yuan Shun Maritime in 2013
Established Gimpo Marine Co., Ltd. in 2018
At present, we have 6 dredging ships, and import 6-10 million tons of sand and gravel a year
Established in 1954. Listed in the Taiwan Stock Exchange since 1978. Current capital at NT$11.8 billion.

A leader in Taiwan's ready-mix concrete market.
28 ready-mix plants in Taiwan, accounting for 16% of market share.
Revitalization of the corporate group's land assets and innovation of construction business.

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Notes:

II. 2020 Operating Results
2020 Operating Results

(I)

The consolidated revenue was NT$ 18,878 million, which was NT$ 127 million less than NT$ 19,005 million of that in 2019.
The bases for comparison between the two terms were different as there no longer has revenue from the cement plant in Fujian in 2020.
Domestic concrete increased NT$ 1,750 million, Fujian cement dropped NT$ 1,550 million, and Suzhou concrete decreased NT$ 110 million.

The sold volume of domestic concrete was 6,350 thousand M3, although was 210 thousand M3 less than 6,560 thousand M3 of that in 2019, but the ASP has raised NT$ 342 (17.9%) (which was NT$ 1,688  2018, NT$ 1,908  2019, NT$ 2,249  2020. )

(II)

The gross profit margin of the year 2020 was 17.36% and the consolidated gross profit margin was 16.6%, of which the gross profit margin in Q4 has reached 19.85% (approximately 20%), whereas the consolidated gross margin as effected by the decreased in both ASP and gross profit margin of Suzhou region, has dropped to 17.7%, but as the price of cement in Suzhou region has been raised since February 2021, which has made up for the increase , the gross profit margin is expected to go up quarter after quarter.

(III)

The delivery of concrete in Suzhou in Q4 of year 2020 has reached 660 thousand M3 cubic meters, which was a new high in single-season over past years, the 1,558 thousand M3 cubic meters of annual delivery was 6.6% more than 1,460 thousand cubic meters of that in 2019.

(IV)
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2020 Operating Results

(V)

In terms of individual financial statements, the investment income has grown steadily:
Investment income ≒ Operating expenses + interest income and expenses

Orders received has exceeded 8 million M3 cubic meters, which was a new high over past years, about 1.2 times of the 6.5 million M3 cubic meters of annual delivery, that was 1.5 times of orders received of more than 5 million M3 cubic meters in previous years.

(VI)

The strategy of “delivery by priority” was a success, as gross profit and profits have been significantly increased, the conditions of collections also got better, with a slightly declined A/R days, whereas “Net cash flow from operating activities” has increased from 800 million in 2019 to 2,840 million in 2020, providing an abundance in funds that could be used as capital expenditure (for expanding plants, researching and developing new concrete products) or for profit planning of capital reduction by cash to improve EPS.

(VII)

Our exclusive R & D technology has won us the “Taiwan Concrete Institute Award of Engineering Excellence” for three continuous years, which made us the designated supplier of high-end concrete for electronics factory, as well as that of the proton and heavy ion therapy center of major medical institutions.

(VIII)
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III. 2021 Business Outlook
2021 Business Outlook

(I)

(1) The real estate market has recovered, (2) Establishment and expansion of electronics plants in the cluster, (3) More urban revitalization projects were released, whereas the number of orders received in hands was a new high, which have made each quarter with no peak and off peak differences, except for the quarter affected by the Lunar New Year long breaks. (Q1 used to be an off-peak quarter and Q4 a peak quarter in the previous years), the annual delivery is expected to have an obvious growth.

The sharp increase in delivery of Taiwan and mainland in January (delivery in Taiwan has exceeded 600 thousand M3 cubic meters, and that in the Chinese mainland was 210 thousand M3 cubic meters) had resulted in consolidated revenue of NT$ 2.082 billion; however, due to the effects of Lunar New Year long breaks in February (which was in January last year), the consolidated revenue merely amounted to NT$ 1.052 billion, YOY and MOM had dropped 10.3% and 49.5%, respectively, that was normal for fewer business days.

(II)

The operating status had returned to the active level in March (delivery in Taiwan has exceeded 610 thousand M3 cubic meters, and that in the Chinese mainland was 160 thousand M3 cubic meters), that received consolidated revenue of NT$ 1.958 billion, with YOY and MOM increased 39.3% and 86%, respectively.

(III)
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2021 Business Outlook

The consolidated revenue in Q1 was NT$ 5.093 billion, which was NT$ 1.158 billion more than NT$ 3.935 billion of that for the same period past year, which was an increment of 29.4%.

(IV)

(V)

The delivery of domestic and Chinese mainland concrete in Q1 were 1.61 million M3 cubic meters and 370 thousand M3 cubic meters respectively, compared with 1.57 million and 0.134 million of that for the same period last year, have increased 2.5% and remarkably grown 177.5%, respectively.

As the price and volume of the domestic concrete in Q1 were rising, the revenue was in result a new high in single-season in past years and according to the schedule of current orders received, there seemed to be an incline to rise in the revenue over each season, which brought optimistic in operations.

(VI)
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Medium to Long Term Operating Highlights
IV. Medium to Long Term Operation Highlights

(I)

The trend (business opportunity) of demand for concrete is just the beginning and should last for a while.

1

The law of “survival of the fittest” has been well revealed while we were facing the challenges of the pandemic. The success in fighting against the pandemic outbreak by Taiwan, which was also the beneficiary under the US-China trade conflict, with its accumulation in technology bases of the semiconductor field, that was not replaceable by merely a blind capital expansion; although the TSMC is increasing its capital expenditure to support its fab expansion plans.
The “Great South, Great Development” policy will be invested with NT$ 900 billion of funds within the next 4 years, for measures of public infrastructure, tax preference, and star-up assistance in Yunlin, Chiayi, Tainan, Kaohsiung and Pingtung as to balance the regional development, also, there will have two science industrial parks established in Pingtung and Chiayi, respectively, which aimed to form a science corridor in the great south with Southern Taiwan Science Park, Chiaotou Science Park and Shalun Smart Green Energy Science City. Currently, Taiwanese fabs are actively in the deployment of the third-generation semiconductor, which is expected to be significantly employed in emerging applications of 5G mobile technology, wireless electric vehicle charger, fast charging and wireless transmission of solar power, etc.
The Powerchip Semiconductor Manufacturing Corp (PSMC) has established 12-inch wafer fabs in Tongluo Science Park in Miaoli, which was significant in terms of formation of semiconductor industrial cluster in Taiwan’s Silicon Valley on the west coast.
The Executive Yuan has planned to promote for the establishment of specialized zone of semiconductor material in Kaohsiung, in order to build up the “S” corridor of semiconductor material in the south. (connecting South Taiwan Science Park, Luzhu Science Park, Chiaotou Science Park, Nanzih Technology Industrial Park, Dashe Industrial Park, Renwu Industrial Park, Industrial Parks in Daliao District, Linyuan Industrial Park, and that in Siaogang District.
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Medium to Long Term Operating Highlights

2

The emerging industrial parks will drive the demand and prosperity of the surrounding construction and real estate properties. Industry migration + Construction in place + Population migration = New town.

3

In order to resolve the problems of demand for industrial land, the program of the renewal of factories and offices will accelerate to create energy-saving, smart, energy storage-enabled and functional factories and offices.

4

The Ministry of the Interior has actively amended laws to establish floor area ratio incentives for urban renewal. At present, the renewal of old buildings, offices and factories has experienced significant growth. In the future, more residential projects will be released. According to the statistics of the Ministry of the Interior, there are 4.36 million residential properties more than 30 years old, presenting business opportunities worth 13 trillion.

Major Nationwide Development Projects (individual cases):
(1) Taoyuan Aerotropolis
(2) Danhai Newtown (Danjiang bridge, Danbei expressway)
(3) Taipei Port Development Project
(4) Wenzaizun Redevelopment Zone in New Taipei City
(5) Readjustment of Urban Land Consolidation of Vicinity on Both Sides of Erchong Floodway and Tucheng Delayed Development Area
(6) Surplus Land Development of Shuinan Economic and Trade Park and Wuri Station
(7) Development of land adjacent to rapid transit system in Taichung and Kaohsiung
(8) Development of Pingshi Section, Chunghua East Road Redevelopment Zone in Tainan
(9) Land Development of Peripheral Area of Kaohsiung Marriott Hotel

5
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Medium to Long Term Operating Highlights

In response to the government's "Eastern District Gateway Program," the development of the Nangang Depot will create substantial asset appreciation and realize future benefits.

(II)

We have sufficient assets. They were acquired back in the day, so the cost is low. They have room for growth in capital gains, which will bring stable cash flow and non-operating income. The recent sharp appreciation of the Taiwan Dollar has made the benefits even more apparent.

(III)

The synergy of the one-stop-shop approach for importing sand and gravel by the Taipei Port Terminal Company Limited should have seen within the short or medium term.

(IV)

(V)

The newly purchased Rende Flagship Plant in Tainan was estimated to has a production volume of 600 thousand M3, which in line with the governmental policy of the “Great South, Great Development,” would have shown its effect in a timely manner. (May increase the production volume up to about 10%)
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五、 Appendix

Appendix
A.Consolidated income statement summary for the last three years:

1

Unit of amount: NT$100 million
| Item/Year | 2018 | 2019 | 2020 | 2020 Q4 |
| --- | --- | --- | --- | --- |
| Operating revenue (Note 1) | 186.45 | 190.05 | 188.78 | 56.75 |
| Operating gross profit | 14.08 | 12.90 | 31.33 | 10.05 |
| Gross profit margin (%) | 7.55% | 6.79% | 16.60% | 17.71% |
| Operating expenses | 9.58 | 9.26 | 8.09 | 2.48 |
| Operating Expense Ratio (%) | 5.14% | 4.87% | 4.29% | 4.37% |
| Non-operating income and expenses (Note 2) | 0.90 | 9.07 | 3.82 | 0.75 |
| Pre-tax net profit | 5.40 | 12.71 | 27.06 | 8.32 |
| Net profit after tax | 5.91 | 11.86 | 25.51 | 7.44 |
| Earnings per share (NT$) | 0.37 | 0.80 | 1.90 | 0.59 |

Note 1: 2018 and 2019 include NT$2.798 billion and NT$1.546 billion in revenue, respectively, from the plant in Fujian, while there is no such revenue in 2020.
Note 2: Non-operating income and expenditure: About NT80 million in cash dividends are recorded every year. In 2019, there is income from the disposal of cement plants in Fujian and the building in Zhongli. In 2020, there is a refund of overpaid royalties from Taipei Port Terminal.
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Appendix
B.Income statement summary for the last three years:

1

Unit of amount: NT$100 million
| Item/Year | 2018 | 2019 | 2020 | 2020 Q4 |
| --- | --- | --- | --- | --- |
| Operating revenue | 114.02 | 127.28 | 144.95 | 39.70 |
| Operating gross profit | 4.37 | 10.21 | 25.16 | 7.88 |
| Gross profit margin (%) | 3.83% | 8.02% | 17.36% | 19.85% |
| Operating expenses | 5.51 | 5.71 | 5.13 | 1.34 |
| Operating Expense Ratio (%) | 4.84% | 4.49% | 3.54% | 3.38% |
| Non-operating income and expenses (Note ) | 6.19 | 6.73 | 5.03 | 0.88 |
| Pre-tax net profit | 5.05 | 11.22 | 25.06 | 7.42 |
| Net profit after tax | 5.15 | 11.02 | 24.73 | 7.20 |
| Earnings per share (NT$) | 0.37 | 0.80 | 1.90 | 0.60 |

Note: Non-operating income and expenditure: Approximately 80 million in cash dividends are recorded each year, and 618 million yuan of investment income is recognized in 2018: of which Fujian Cement is 306 million, Hunan Cement is 151 millionWellpool and Kunyung are 154 million, which will be punished in 2019 Fujian Cement Plant and Zhongli Building will be accounted for the share of benefits. In 2020, there is a refund of overpaid royalties from Taipei Port Terminal..
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Appendix
C. List of investment income for the last three years:
| Investee Compane/ Year | 2018 | 2019 | 2020 |
| --- | --- | --- | --- |
| Fujian Cement | 306,360 | (369,262) | 0 |
| Hunan Cement | 151,312 | 152,616 | 139,067 |
| China ready-mix | 88,628 | 188,515 | 147,799 |
| WELLPOOL(50.7%) | 85,228 | 89,364 | 74,125 |
| Taipei Port | (102,263) | (148,702) | 116,529 |
| Cash dividends | 61,134 | 77,415 | 81,863 |
| Other companies | 88,632 | 485,107 | 22,939 |
| 合　　計 | 679,031 | 475,053 | 582,322 |
(Note1)
(Note 2)
Note1: In June 2020, the "Taipei Port Company" returned 168 million yuan of royalties.
Note2: In 2019, “Other companies" included income 478.634 million from the disposal of cement plants in Fujian.
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D.Structure of consolidated revenue of
Goldsun Building Materials in the past
three years
(after internal revenue write-off)
Appendix

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Unit: NT$ 100 million

2018
2019
2020

Business unit
/
Year
Year
Year
Year

111.19
59.6%
125.2
65.9%
142.8
75.6%
-
　　Taiwan Business Unit
Concrete

18.61
10.0%
16.6
8.7%
14.3
7.6%
-
　　Taiwan Business Unit
Other

28.7
15.4%
32.8
17.3%
31.7
16.8%
　　China ready-mix business

28
15.0%
15.5
8.2%
0.0%

China cement business

186.5
190.1
188.8
Total

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Notes:

E.Product cost structure of the concrete
industry
Appendix
Raw material costs can account for more than 83% of production costs so that the control of sources of materials is the key.

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Appendix
F.Main sources of sand and gravel for the
domestic concrete industry
(I)
Taipei area: Imported sand and gravel (mostly from China), domestic sand and gravel (Hualien and Taitung [Hualien River system and Liwu River system]) (Yilan [Lanyang River system]), Sanxia and Taoyuan underground, and some from Da-an River (transported by trucks on their returning trips) and others.

(II)
Taoyuan, Hsinchu, and Miaoli area: Local rivers (Dahan River system, Houlong River system, and Zhonggang River system), underground and a small amount from Da-an and Dajia (transported by trucks on their returning trips).
(III)
Taichung, Yunlin and Chiayi area: Local rivers (Da-an River system , Dajia River system, Zhuoshui River system, and Dadu River system), imported sand, underground and mountain streams. Note 1
(IV)
Tainan and Kaohsiung area: Local rivers (Gaoping River system)
Due to the cost (transportation) factor, the use of gravel aggregates shows differences in regions.
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Note 1: The quality of materials from dredging works in mountain streams is relatively low, and the materials are used to supply other industry peers for the construction projects in mountain areas.

Notes:

Touqian River
Houlong River
Dan-an River
Dajia River
Dadu River
Zhuoshui River
Bazhang River
Gaoping River
Xiuguluan River
Hualien River
Guan-Yang River

G.Distribution table of materials
sources from China
Appendix

Luoyuan County
Minhou County (Songmen, Qingzhou)
Shihu
Shijing
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Notes:

Nanping City
Sanming City
Longyan City
Zhangzhou City
Xiamen City
Quanzhou City
Putian City
Fuzhou City
Ningde City
Lianjiang County
Matsu Islands

Taipei City
Taoyuan City
Hsinchu City
Miaoli County
Taichung City
Taroko National Park
Yilan County

H. Construction project price index in the past two years
- Ready-mix concrete
Appendix

Chart:

Category	Prince Index
Apr,2019	116.0
May	116.0
Jun	116.3
Jul	117.1
Aug	117.5
Sep	118.0
Oct	118.5
Nov	119.2
Dec	120.7
Jan,2020	122.4
Feb	125.0
Mar	127.5
Apr	128.3
May	128.8
Jun	128.9
Jul	129.0
Aug	129.3
Sep	129.3
Oct	129.3
Nov	129.2
Dec	130.0
Jan,2021	130.4
Feb	130.6
Mar	130.9
---	---
Price Index	116.0
Source: National Statistics of the ROC
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I.Reconstruction opportunities worth 13 trillion for 4.36
million houses nationwide that are more than 30 years old
Appendix
Number of tax-registered residences more than 30 years old nationwide and in six special municipalities
| Item Region | Total number of properties (residences) | House average age (years) | Number of houses more than 30 years old (residences) | % of all houses more than 30 years old |
| --- | --- | --- | --- | --- |
| Nationwide | 8,810,119 | 31 | 4,365,243 | 49.55% |
| Taipei City | 899,693 | 35.49 | 634,959 | 70.58% |
| Tainan City | 701,063 | 32.95 | 349,020 | 49.78% |
| Kaohsiung City | 1,072,440 | 31.57 | 546,968 | 51.00% |
| New Taipei City | 1,636,188 | 29.43 | 756,385 | 46.23% |
| Taichung City | 1,045,910 | 28.51 | 407,704 | 38.98% |
| Taoyuan City | 854,508 | 26.3 | 291,956 | 34.17% |
| Source: Real estate information platform of the Ministry of the Interior. Table by reporter Yi-Ping Hsu | | | | |
According to the real estate information platform of the Ministry of the Interior, of the 8.81 million houses nationwide with household registration in 2020 Q2, 4.36 million of them are more than 30 years old, which meet the criteria for urban renewal and old buildings renovation. Assuming that each rebuilt property averages about 30 pings at NT$100,000 per ping, the opportunity for construction would value as much as 13 trillion, nearly 70% of last year's GDP.
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