T3EX — Interim / Quarterly Report 2020

Jan 20, 2021

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Stock Number:2636TT
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T3EX Group’s Investor Conference

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Legal Disclaimer
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• The information contained in this presentation, including all forwardlooking information, is subject to change without notice, whether as a result of new information, further events or otherwise, and T3EX Holdings. (the “Company”) undertakes no obligation to publicly update or revise the information contained in this presentation.

• The financial, business, and Q&A statements of the company made by this presentation may differ from actual future results.

• Investor should not regard the above forward-looking information as legally binding but as information subject to change. No guarantees regarding the completeness, accuracy, and reliability of information contained are made explicitly or implicitly. They are not intended to represent complete statement of the company, industry or future development.

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Outline
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01 Company Overview

02 2020 Operating Performance

03 Logistics Market Review and Outlook 04 T3EX Group’s Future Prospectus

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Company Overview

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Core Products
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Core
Products
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Group Members
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Supply Chain
International Logistics China Domestic Logistics
Finance
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Services	Multi-modal transportation including ocean freight, air freight and railway	Supply chain management – ocean freight, air freight, warehousing, delivery	Import Custom Brokerage & Warehousing	B2B2C Warehousing & Distribution	Supply Chain Finance
Markets	Long Distance Routes within N. America, Europe, New Zealand, Australia, Africa, India and Intra-Asia Routes	Intra-Asia	China	China	China
Branches	Taiwan: 4 China: 31 Hongkong:1 Northeast Asia: 3 Southeast Asia: 13 Total: 52	Taiwan: 8 China: 5 Hong Kong:1 Singapore: 1 Total:15	China: 6	China: 4	China: 3

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*7 Brands / 29 Subsidiaries / 81 Branches

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Business Scale (2020FY)
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205,000
65,000 Tons
Shipments
Customs Clearance Air Freight Volume
81 Trucks 332,000 TEU
Truck Fleet Ocean Freight Volume
17 Warehouses
1,864 Staff
120,000 m [2]
Warehouses & Size Headcount
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332,000 TEU

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Synergy Created via Holding Structure (2012 ➔ 2020)
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Operating Scale

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• 29 subsidiaries

• Revenue grew by 83% (8.3 billion15.2 billion)

• Operating Expense Ratio decreased by 2% (14%12%)

• Market Value increased by 265% (13.7 billion50 billion)

Front End

• Diversified products, comprehensive market coverage

• Diluted the risk of having only single product

• Increased service scope for customers

Middle Platform

• Increased economies of scale, as well as bargaining power

• Product mix synergy

• Integrated backend support that results in cost saving of customs, warehousing, transportation personnel

Back End

• Enhanced financial structure

• Decreased financing costs

• Minimized operating risk

• Employee career development & reward system

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2020 Operating Performance

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Consolidated Revenue
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2020FY revenue grew 35% YoY

Consolidated Revenue (Unit: NTD billions)

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15.15
11.54
11.26
10.54
9.74
2016 2017 2018 2019 2020
(Unaudited)
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Operating Performance of 2020Q3
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Accumulated Revenue of 2020Q1-Q3 grew 124.7% YoY, while accumulated EPS grew 80.6% YoY

Unit: NTD thousands	2020	2019	YoY
	Jan. to Sept.	Jan. to Sept.
Revenue	10,292,550	8,294,540	24.09%
Gross Profit	1,736,240	1,492,992	16.29%
Operating expense	1,257,607	1,280,040	-1.75%
Operating income	478,633	212,952	124.76%
Non-operating income and expenses	-20,020	37,028	-154.07%
Net income	366,835	197,046	86.17%
EPS(dollars)	3.07	1.7	80.59%
Gross Margin	16.87%	18.00%	-1.13%

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Revenue Breakdown by Business
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	Ocean Freight	Air Freight		Domestic Logistics
			China-Europe/ China-Russia Rail Transport
2020 Revenue Breakdown (unaudited)	52%	33%	5%	10%
2019 Revenue Breakdown	53%	30%	4%	13%

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Volume Breakdown by Business
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Ocean Freight

Rail

8,538

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+11.3% 332,086
298,330
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Air Freight

+409%

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1,677
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69,550

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-6%
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Rail(CY/TEU)
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Ocean(CY/TEU)
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65,396
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488,615
-2.5%
476,7
53
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Ocean(CFS/CBM)

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2019
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Air(Tons)
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2020(Unaudited ~~)~~

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29,033
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+703%
3,615
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Rail(CFS/CBM)

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Revenue Breakdown by Geography
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2019 2020(Unaudited)

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+39% 10,868
7,807
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+23%
+36%
2,678 -7%
2,169
1,317
971
311 290
Taiwan Southeast Asia Northeast Asia
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China & Hong Kong

Unit: Millions NTD

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2021 Financial Structure Analysis
Book value per share can potentially increase by NTD$6.17 to 6.67
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*BVPS: Book value per share

*All of the following numbers are forecasts and not actual financial results

BVPS increase by $2.39

BVPS increase by $1.5 to 2

BVPS increase by $2.28

Financial Investment

Mainly long term investment in publicly traded shipping companies that is booked under Other Comprehensive Income (OCI), which has amounted to 42 million NTD up to Q3. As stock price continues to rise in Q4, we expect an increase in OCI as well, which in turn contributes to our book value.

Capital Fundraising by issuing 10 million shares

Raising NTD300 million capital which result in 8.05% dilution of shares.

Issue 3 million shares of Convertible Bonds

Raising NTD 315 million with the convertible price NTD 39.5 per share. The total shares of converting increase 7,595,000 shares which result in 5.76% dilution of shares.

Note: Total outstanding shares are 131,835,000 which include fundraising and converting shares from convertible bond. 15

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Historical Dividend Policy
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Yield Ratio of Cash Dividend

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7.7%
6.4% 5.8%
5.6%
3.6%
2015 2016 2017 2018 2019
Dividend Paid Out Ratio
67% 72% 72%
63%
60%
2015 2016 2017 2018 2019
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Logistics Market Review and Outlook

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Q4

Q1

Q2

The surging needs of PPE delivery caused high demand of air cargo spaces, and freight prices increased over 400%

Global Covid cases continued to peak, and purchasing power in USA and Europe remained strong, causing severe ocean container shortage, further encumbered by insufficient port labor resulted in explosive growth in ocean freight prices

Q3

Work from home & inventory restock created strong import demand from USA and Europe, which in turn fueled the growth of ocean, air, rail freight market

The global pandemic outbreak caused citywide lock-downs and supply chain cutoffs. The logistics market slumped heavily as a result

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The T3EX Published Forecast vs. Actual Performance
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Published Date: 6/16~7/31

Actual Performance by the end of 2020

T3EX Group’s performance:

T3EX Holding’s performance:

The Group’s 2020Q2 performance will rebound from Q1’s dip and experience an explosive growth, we expect the global economy will recover in 2020Q3, so overall we hold an optimistic outlook for the Group’s 2020H2 performance

Forecast

The Group’s revenue, gross profit, and net profit all reached record highs

Actual

Published Date: 6/2~7/31

Ocean Freight Business:

The U-shape rebound of ocean freight market will occur in 2020Q3. Following the growth of air freight, the ocean freight volume and prices are expected to increase monthly, and become the main growth driver in 2020H2.

Ocean Freight Business:

All ocean freight routes grew multiple times. Strong cargo demand resulted in double digit growth.

Container shipping companies' profit reached 10-year high. The company’s ocean freight revenue from 2020H2 grew 67% YoY.

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The T3EX Published Forecast vs. Actual Performance
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Published Date: 6/16~7/31

Actual Performance by the end of 2020

Air Freight Business:

Air Freight business:

The launch of new electronic products, grounded belly cargos, and increased semi-conductor demand fueled by remote communication needs, result in cargo space shortage, thus keeping freight rates high

Forecast

During 2020H2, air freight rates remained high, and the Company’s air freight revenue grew 37% YoY.

Actual

Published Date:6/2~7/31

China-Europe Rail Business:

Clients transferred orders to China-Europe rail transport, we expect Q3 to follow Q2’s excellent performance, and we have an optimistic outlook for the entire year

Forecast

Published Date:6/2, 10/23 China Domestic Logistics:

Since June, China domestic warehousing and transportation business have been increasing steadily. In 2020Q3, as the China domestic market demand recovers, logistics business profits will improve as well

China-Europe Rail Business:

Space shortage caused the freight rate to rise 80%~100%, and the Company’s 2020 freight volume increased over 400% YoY

Actual

China Domestic Logistics:

Since 2020Q3, T-Cube logistics became profitable and continued to be profitable in Q4, achieving the annual profit goal of 2020

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Ocean Market Analysis in 2020 by Long Haul Route
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Date resource: SCFI, T3EX holdings

Strong space booking needs and peak in Covid-19 cases resulted in shortages in space, containers and labor, freight rates continue to increase multiple times

The Trend of Long Haul Route in 2020

6000

In 2020Q3, import demand was strong, and booking orders grew exponentially, causing space shortage and high rates for N. American routes

In 2020H1, due to the 5000 impact of Covid-19, shipping companies executed blank sailing to 4000 sustain freight rates, all ocean route rates sank

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3000

Since Oct., lack of containers and congested ports caused Europe route rates continues to rise. Till 12/31, the rate has rise 4X.

2000

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1000

Q1

Q2 Q3 Q4

W1 W3 W5 W7 W9 W11W13W15W17W19W21W23W25W27W29W31W33W35W37W39W41W43W45W47W49W51W53

0

UWSC UWEC Europe

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Ocean Market Analysis in 2020 by Southeast Asia
Route
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⁻ In response to shortage of containers and freight ships for Europe & N. America long haul routes, a lot of cargo is re-directed to Southeast Asia routes, ~~together with~~ increased exports from the region, the freight rate began to increase since November, it has surged to 933USD/TEU by 12/31, and increase over 500%

• ₋ The Group’s Southeast Asia business has experienced high growth. For example, T3EX Vietnam 2020 in grew 59% YoY

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Q1 Q2 Q3 Q4
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Date resource: SCFI, T3EX holdings

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Air Market Analysis in 2020
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The Trend of Air Freight in 2020

Unit: USD/KG

25 Urgent PPE demand caused freight rate to increase 10X 20 As global pandemic 15 surged, over 60% belly cargos were grounded, which caused severe 10 space shortage

PPE + work from home + new electronic products  fueled air freight space demand, and in turn sustained the high freight rates, which is 3X-5X compared to 2019

5 0 ~~Q1 Q2~~ Q3 ~~Q4~~ USWC USEC Europe Asia

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China-Europe/ China-Russia Rail Market
2020 Analysis
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Ocean and Air Freight market were impacted by Covid-19, which caused severe space shortage. Since April 2020, a lot of cargos were redirected to ChinaEurope/China-Russia railway transportation.

China-Europe/ China Russia Trains

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12,400
8,225
50%
2019 2020
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Containers (Thousands)
1135
725
56%
2019 2020
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Data resource: China State Railway Group Co., Ltd.

China-Europe/China-Russia rail has also faced shortages of container and warehouses, as well as congested depots. The freight rate has been adjusted 3 times and increased by 80%~100% in 2020.

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China Domestic Logistics Market Analysis 2020
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Q4 Q3 Following the trend in Q3, China’s domestic spending Q2 power kept growing. T-Cube Q1 Domestic needs Logistics’ revenue rebounded which grew substantially propelled the growth and achieved the China implemented of import, customs, annual profit goal. strict protocol to contain warehousing and the virus, while the transportation. T- pandemic spread to US Cube Logistics, the and Europe, which Company’s delayed cargo import to domestic logistics China. The domestic subsidiary, turned market in China began profitable this to recover. quarter. 25

The outbreak of Covid-19 within China caused the cut-off of cross-city transportation. Domestic expenditure declined, which impacted warehousing and transportation.

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Logistics Market Outlook in 2021H1
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urope, some , so utes	urope, some , so utes	Demand: V chartered f approxima needed to months, bu available Supply: Va air cargo c grounded, high, like t	Demand: V chartered f approxima needed to months, bu available Supply: Va air cargo c grounded, high, like t
Ocean			Air
Rail
			Domestic Logistics
		The vacci and admi expected will rebou Chinese N Weekend surge aga expected

Demand: Low inventory level in USA and Europe, and vaccine transportation needs will force some air cargos to be redirected to ocean cargos, so we expect space booking to remain strong

Demand: Vaccines are transported globally via chartered flights, according to IATA report, approximately 8,000 Boeing 747 cargos planes are needed to deliver vaccine the next 18 to 24 months, but only 2,000 planes are currently available

Supply: Lack of containers and labor will continue; freight rate of USA and Europe routes will remain high

Supply: Vaccine transportation will occupy most air cargo capacity, currently 60% of belly cargo is grounded, we expect air freight price to remain high, like the PPE demand in 2020Q2

2021(F)	Supply	Demand	Gap
Alphaliner	3.9%	3.5%	0.4%
Drewry	4.5%	8.9%	-4.4%
Clarksons	2.8%	5.4%	-2.6%

Demand: Freight rate of Europe routes remains high; some customers will move cargos from ocean freight to rail for the shorter delivery time

The vaccine has just started to be distributed and administered, so international travel ban is expected to continue. China domestic demand will rebound strongly, especially during Chinese New Year and Labor’s Day Long Weekend in May. Unless the pandemic cases surge again in China, the domestic demand is expected to strive.

Supply: China-Europe rail space supply expected to be tight due to air freight and ocean freight cargo transfer

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Logistics Market Outlook in 2021

To be monitored closely for the second half of 2021: 1. Global Covid-19 situation

1. Global vaccine rollout progress

2. U.S. trade policy towards China under the Biden administration If the virus is effectively contained in 2021H2, global economies will stabilize and recover, and we can expect a positive outcome in 2021

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T3EX Group’s Future Prospectus

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Logistics Industry Transformation and Strategy
Post China-USA Trade War and Post-Covid
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Duo Headquarters, Duo Growth Engines

After supply chain restructuring, there are duo economic cycles, including the China domestic consumer market – domestic manufacturing and consumption; and the other “made in Taiwan and Southeast Asia” for America consumption economy

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Raising sufficient capital to expand market share post-Covid

In the post-Covid era, many forwarders and logistics companies that lacked cash or human resources will be bankrupt or close down

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T3EX Group’s Future Growth Driver
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China-Europe Rail business and China domestic warehousing and transportation will be the new growth driver

The new U.S. administration will continue the US-China trade war, thus fueling Southeast Asia’s explosive growth

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T3EX Group’s Future Development Strategy
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Expand the scale of supply chain finance business in the post-Covid era

Form strategic partnerships with Northeast Asia partners through M&A or JV to develop wider warehousing and transportation networks in Asia

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The Operating Strategy of Duo Headquarters
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Shanghai Headquarter Taipei Headquarter (China Market) (Non-China Market)

1. Enhance one-stop logistics service in China 1. Capture the opportunity of returning

(Import + Custom Clearance+ Warehousing + Transportation + Supply Chain Finance), Taiwanese manufacturers from China, and increase investment in import logistics business increase investment in Taiwan

1. Develop Africa and Latin America market via JV 2. Increase investment in Southeast Asia market and closer partnerships with overseas agents 3. Strengthen long haul route business from Asia

2. Develop comprehensive China-Russia / Chinato USA and Europe Europe railway business 4. Expand network locations within Asia

3. Expand supply chain finance business 5. Deepen collaborations with WPG Holdings 5. Build digital B2B2C warehouses 目標

Target

1. Average gross margin reaches 20% in the next five years

2. Ocean freight, air freight and domestic logistics will each account for 30% of total gross profit 3. China and Non-China revenue will each account for 50% of total revenue

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Thank You