GLOBAL TEK — Investor Presentation 2020

Aug 27, 2020

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Investor Presentation August 2020

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A Creative Total Solution Provider in Global Niche Markets

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 Founded in 2000 & Listed on the TWSE on February 5th, 2018 (Ticker: 4566 TT)

 Employees: 800+

• Founders + management team shareholdings are more than 50%

 Revenue: NT$3.8bn in 2019 with +15% 2015-19 sales CAGR

• Our business: Precision metal machining for automotive safety system components,

• powertrain system components, industrial applications and aviation

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Automotive Safety System Components Powertrain System Components
Revenue (NT$million)
Industrial Applications Aviation
4,500
100%
4,000 8% 8% 9% 12% 13% 10%
3,500 80% 25% 20% 22%
25% 27%
3,000 42%
60%
2,500 30%
34% 34%
2,000 40% 39% 37%
1,500 32%
1,000 20% 42%
33% 35%
500 24% 23%
2,208 2,676 3,335 3,427 3,826 1,620 16%
0 0%
2015 2016 2017 2018 2019 1H20 2015 2016 2017 2018 2019 1H20
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Source: TEJ and GlobalTek

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These Are the Key Topics in 2020

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The COVID-19 impact the entire world. Challenge does not change the core, it strengths them.

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Supply Chain Resilience

Risk Mitigation Sustainability

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Global Tek 3D Business Model

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 Define:

By focusing on emerging trends of each niche market and understanding customers’ crucial need and build a strategic partnership by providing VA/VE service

• Design:

• Internal: We recruit talents, establish professional organization and offer full services for customers in each niche market.

• External: Through GlobalTek Alliance, we establish a cluster and create the best performance.

 Desire:

• We aim to become top three strategic partner of core customers in each niche market.

• Through collaboration and sharing, we will create a sustainable group.

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Agenda 01 We’ve Seen the Bright Spot Beyond 2020 Target Niche Markets to Fuel Sales Growth: 02 1. Automotive, 2. Medical device, 3.Industrial, 4. Aviation

03 Our Long-term Goals

04 Robust Financial Performance

5

We See Reason to be Optimistic Post-2020

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• Our business model stood up well to the challenging conditions created by the pandemic:

• The Global Tek ‘s diversification and alliance business model allowed us to outperform our peers. Our 1H20 sales declined 13% yoy vs. peers’ -18% to -35% yoy.

• Global customers emphasize on supply chain partner’s diversification, professional services and financial health during U.S.-China trade war and global pandemic.

• GlobalTek will continue to explore new applications in each niche market, enhance our one stop total solutions with competitive edge and reallocate resources for expansion.

• Based on our solid foundation of automotive business, we’ve entered Electric Vehicle (EV) market through our collaboration with the world’s leading automotive manufacturers, including Nidec, BorgWarner and others.

• Due to clear strategy, stable management team and preparations, we expect automotive demand to grow strongly in 2021. We also expect our industrial business to keep its growth momentum, including electric bicycle (e-bike) and high-end bicycle. For the challenging aviation segment, we’ll be resilient and continue to seek opportunities.

• Components for medical devices is a new business area where we see strong potential for growth. Based on our track record in automotive and aviation, we are collaborating with a leading China medical device maker as China localized medical device manufacturing.

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Target Niche Markets to Fuel Sales Growth

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Diversified and Solid Revenue Foundations

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• Engine Components

Medical MIS* Device Stapler

• Thrust-reverser Components, Sensor and Linear Components etc.

Aviation

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Industrial
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• Electric & High-end Bicycle Parts

• Oil & Gas Equipment

• Semiconductor Components

• AI Robotics Components

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Automotive
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• EV Components

• Powertrain System Components

• Safety System Components

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*Note: Minimally Invasive Surgical (MIS)

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Tier 1 Customer Portfolio

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Industrial Applications
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Automotive and EV
Components
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Automotive Safety
System Components
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Aviation
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Our customers have a 65%+ share of the global airbag market

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Medical Devices
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1. Automotive: We See Strong Potential for High Demand Growth in 2021

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Automotive Components

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Gearing up for Robust Demand Growth from Automotive in 2021

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• Automotive applications accounted for 48% of our 1H20 sales, including safety system and powertrain system components, accounting for 16% and 32% of 1H20 sales, respectively.

• We are developing components for EV, including motor casings for Electric Power Systems (EPS), collaborating with the global No. 1 motor manufacturer, Nidec.

• We believe that 2Q20 was the bottom for our automotive business. Demand has recovered in July & August and based on current order indications from our clients, we expect strong demand growth in 2021.

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Motor Casing to Tap into ADAS and EV Applications

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• We are collaborating with Nidec to develop casings for EPS motors for Advanced Driver Assistance Systems (ADAS).

• We are support existing tier 1 and OEM customers, such as BorgWarner, to further penetrate the global EV market.

• Future applications include motor casings for EV and electrical braking systems.

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• Global no.1 EPS brushless DC motor  Provide motor casing for Electric maker with 25% market share Power Steering (EPS) power-pack

• 2020 automotive segment sales  Machining capabilities include target: US$6.5bn-US$9.3bn precision stamping and molding design

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Source: Nidec

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2. Medical Devices: Our New Growth Driver

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Medical Device

We Expect Strong Growth from Medical Devices

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During July 2020, we started our medical device business and collaborated with CAK, a leading MIS stapler manufacturer in China.

• “Made in China 2025 strategy” and other strategic plans are supporting the localization of medical devices.

• The China Minimally Invasive Surgical Instruments and Accessories (MISIA) and MIS stapler market reached RMB18.5bn and RMB4.6bn in 2019, respectively.

• The China MISIA and MIS stapler market is forecast to grow at a 19% and 23% CAGR between 2020 and 2024, respectively, driven by localized production.

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RMB bn China MIS stapler market
50
China MISIA market
41
40
35
29
30
24
20
19
20 16
14
11 12
10 10
8
10 6
5 5
2 2 3 4
0
2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
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Source: China Insights Consultancy

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3. Industrial: Sustainable

Growth Likely To Continue

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Industrial Instrumentation

The Growth Momentum in Industrial is Likely to Continue

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• Industrial is the most resilient and diversified segment of our business and contributed 42% of our 1H20 sales.

• As Global Tek continues to pursue growth opportunities among niche markets, we expect electric bicycles and AI robotics to be the new growth drivers for the Global Tek diversified and alliance business model.

• Existing industrial businesses, including semiconductor, oil & gas and high-end bicycle were less impacted by COVID-19 pandemic.

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Source: Emerson, Fox, Gates and Boston Dynamics

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Cycle-to-Work to Drive Our Industrial Growth

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We saw demand from e-bikes and high-end bicycles surge as COVID-19 changed lifestyles and attracted government subsidies into the area:

• The Global bicycle market is forecast to grow at a 5% CAGR between 2020 and 2025.

• The Global e-bicycle market is forecast to grow at 10% CAGR from 2020 to 2025.

• We expect 2H20 electric and high-end bike demand to be stronger than 1H20 while the growth momentum should continue in 2021 and beyond.

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USD bn Global e-bicycle market Global bicycle market
80
68
70 65
61
58
60 56
54 53
50
40
30 26
23
21
19
17
20 14 16
10
0
2019 2020E 2021E 2022E 2023E 2024E 2025E
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Source: Expert Market Research, Research and Markets and Gates

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AI Robotics Demonstrate Our Industrial Innovation

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We are committed to exploring innovative industrial applications, and AI robotics is one of our new growth drivers within the industrial segment:

• Global Tek is the key supplier of electronics housings for Boston Dynamics, the world’s leading AI robotics manufacturer.

• The Global robotics market is forecast to grow at a 20% CAGR from 2019 to 2025.

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USD bn Global Robotics Market
180
158
160
132
140
120 111
92
100
77
80
65
54
60
45
38
40
20
0
2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E
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Source: Fior Markets and Boston Dynamics

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4. Aviation: Facing the Headwind, We Seek Opportunity

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Aviation System Components

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Seeking New Opportunity in Aviation Applications

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• Aviation applications accounted for 10% of 1H20 sales, including landing gear parts, engine accessories, flight control actuators and proximity sensor components.

• Though COVID-19 impacted the aviation industry, GlobalTek’s resilience, risk mitigation and financial strength remain intact to support our aviation clients.

• We will continue to seek new aviation business amidst the trends of Tier 1 outsourcing, Asia manufacturing and LEAP engine ramp-up. Besides strengthening five-axis machining capabilities, through vertical integration and horizontal collaboration, we’ll continue to offer one-stop full services. Based on our strong track record and reputation, we target more engine, actuator and sensor system components.

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Thrust Reverser Jack Head

Heat Exchanger Components For LEAP Engines

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Our Long-term Goals

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GlobalTek Vision 2023

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Top Line Growth Target Higher Than Industry Growth
Target
Improve Efficiency, Product Mix
20-25% Gross Margin and
and Reduce OPEX Rate
5-10% Operating Margin
After CAPEX, Establish Supply Target
Chain Campus and M&A 50% Dividend Payout Ratio
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Robust Financial Performance

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1H20 Review and Outlook Beyond 2020

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1H20 Review

• Revenue was NT$1.6bn, declined 13% YoY.

• Automotive safety system accounted for 16%, automotive power train system accounted for 32%, industrial application accounted for 42% and aviation accounted for 10%, respectively.

• Due to strong demand from bicycle and semiconductor, the industrial sales contributed more than 40% of total sales for the first time.

• Gross margin was 21%; Operating margin decreased to 4% from 1H19’s 5%, due to sales decline.

• Non-op income was NT$2.4mn, declined 96% YoY, due to foreign exchange loss.

• Net income was NT$48mn, declined 60% YoY. EPS was NT$0.71.

Outlook Beyond 2020

• We saw recovery since 2H20 and expect higher growth momentum in 2021.

• Automotive demand has recovered since 2H20 and to grow significantly in 2021.

• Revenue from Industrial segment would continue to grow.

• Aviation is challenging but we expect global customers continue their outsourcing as a result of U.S.-China trade war and global pandemic.

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Financial Highlights

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Revenue (NT$million) Net profit after tax (RHS)
NT$mn NT$mn Gross Margin (%) Operating Margin (%)
4,500 250 23.8
218 218 25.0 22.8 22.9 21.6
4,000 20.9
20.1
200
3,500 198 20.0
3,000
150
15.0
2,500
130
2,000 111 3,335 3,427 3,826 100 10.0 8.0 9.6 7.4
1,500
2,676 5.4
1,000 2,208 48 1,620 50 5.0 4.2 3.5
500
0 0 0.0
2015 2016 2017 2018 2019 1H20 2015 2016 2017 2018 2019 1H20
EPS ROE (%) (RHS)
NT$ Cash dividend per share Payout (%) (RHS)
NT$
4.0 16.0
14.0 4.0 80
3.5 12.5 11.6 14.0 79.5
11.5
3.0 12.0
3.0 70
2.5 10.2 10.0
60.8
2.0 8.0 2.4
2.0 50.5 60
3.4 3.3 3.3 2.0
1.5 4.6 6.0
1.6
2.4 46.1
1.0 2.0 4.0 1.0 50
1.0
0.5 2.0
0.7
0.0 0.0 0.0 40
2015 2016 2017 2018 2019 1H20 2016 2017 2018 2019
Source: TEJ and Capital IQ
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2015-1H20 Income Statement

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NT$mn	2015	2016	2017	2018	2019	1H20	YoY (%)	YoY (%)	YoY (%)	YoY (%)	YoY (%)	YoY (%)
							2015	2016	2017	2018	2019	1H20
Revenue	2,208	2,676	3,335	3,427	3,826	1,620	9.8	21.2	24.6	2.7 11.6 -13.3
Gross Profit	502	637	764	688	826	338	35.3	26.9	19.9	-10.0	20.1	-11.4
Operating Expenses	-326	-379	-517	-543	-620	-282	20.4	16.4	36.4	14.0	14.3	-2.9
Operating Profit	177	258	247	145	206	56	75.4	46.1	-4.4	-49.6	41.7	-38.7
Pretax Income	142	205	291	315	284	58	104.6	44.1	41.9	8.3	-9.8	-63.4
Tax Expenses	-31	-75	-92	-97	-66	-11	20.5	138.2	23.4	4.8	-32.1	-72.9
Net Income to Parent	111	130	198	218	218	48	155.1	17.4	52.5	10.0	0.1	-60.3
Basic EPS (NT$)	2.04	2.36	3.41	3.33	3.29	0.71	108.2	15.7	44.5	-2.3	-1.2	-61.0
Key Financial Ratios (%)
Gross Margin	22.8	23.8	22.9	20.1	21.6	20.9
Operating Expense Ratio	14.8	14.2	15.5	15.8	16.2	17.4
Operating Margin	8.0	9.6	7.4	4.2	5.4	3.5
Effect Tax Rate	22.1	36.5	31.8	30.7	23.1	18.0
Net Margin	5.0	4.9	5.9	6.4	5.7	3.0

Source: TEJ and Capital IQ

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2015-1H20 Balance Sheet

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NT$mn	2015	2016	2017	2018	2019	1H20	YoY (%)	YoY (%)	YoY (%)	YoY (%)	YoY (%)	YoY (%)
							2015	2016	2017	2018	2019	1H20
Total Assets	2,422	3,002	4,052	4,478	4,908	4,717	9.7	24.0	35.0	10.5	9.6	2.5
Cash	279	502	670	902	1,334	1,489	39.6	80.4	33.4	34.7	47.9	45.5
AR & NR	606	726	901	861	978	773	-1.6	19.9	24.0	-4.4	13.5	-19.9
Inventories	426	484	714	897	863	757	11.1	13.5	47.5	25.7	-3.8	-9.7
Fixed Assets	820	800	844	856	1,000	1,050	11.0	-2.4	5.5	1.5	16.7	23.8
Total Liabilities	1,335	1,837	2,395	2,374	2,731	2,631	-12.6	37.6	30.4	-0.9	15.0	5.1
AP & NP	389	680	597	554	627	462	-5.6	74.9	-12.3	-7.1	13.1	-13.4
Total Equity	1,087	1,166	1,658	2,104	2,177	2,085	59.9	7.3	42.2	26.9	3.5	-0.6
Key Financial Ratios
A/R Turnover Days	100.9	90.9	89.0	93.8	87.7	98.6
Inventory Turnover Days	86.7	81.5	85.0	107.3	107.1	115.4
A/P Turnover Days	85.7	95.7	90.6	76.7	71.9	77.5
Cash Conversion Days	101.9	76.6	83.4	124.5	122.9	136.5
ROE (%)	12.5	11.5	14.0	11.6	10.2	4.6
ROA (%)	4.8	4.8	5.6	5.1	4.7	2.1

Source: TEJ, Capital IQ and Company Data

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Disclaimer

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• The information contained in this confidential document ("Presentation") has been prepared by GlobalTek (the "Company"). It has not been fully verified and is subject to material updating, revision and further amendment.

• While the information contained herein has been prepared in good faith, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers gives, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this Presentation, or any revision or supplement thereof, or of any other written or oral information made or to be made available to any interested party or its advisers (all such information being referred to as "Information") and liability therefore is expressly disclaimed. Accordingly, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers takes any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness or injury of the Information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Presentation or the information.

• Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any transaction and the right is reserved by the Company to terminate any discussions or negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent.

• This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters.

• This Presentation includes certain statements that may be deemed “forward-looking statements”. All statements in this discussion, other than statements of historical facts, that address future activities and events or developments that the Company expects, are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, continued availability of capital and financing, general economic, market or business conditions and other unforeseen events. Prospective Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements.

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