Tatung Company
(2371 TT)
Integrity, Honesty, Industry, Frugality
March 2014
W. Y. Lin, President
Executive Summary
 We are Taiwan’s leading provider of integrated
solutions for Mechatronic projects, including
turnkey power generation, smart grid and
corporate energy management systems.
 We are expanding our Mechatronics turnkey
solutions market presence to ASEAN and China.
 We are in the midst of a corporate
restructuring program aimed at reducing debt,
improving cash flow and enhancing
transparency.
 We are actively managing our extensive real
estate portfolio to realize hidden value and
maximize cash flow. Over 95% of this portfolio
is located in Northern Taiwan.
2
Our Top Priorities
It is painfully clear to us that losses in our ODM monitor business,
losses from key investment subsidiaries and high debt levels have
prevented investors from recognizing the value of our core power
business and our land bank. We set our top priorities for the next five
years as:
 Consolidated Financial Structure: Our No. 1 priority is to significantly
reduce Tatung’s consolidated net debt level over the long term. We
also intend to deliver consistent debt reduction on an annual basis.
 Core Business: Consistently maintain blended gross margin above
10%, and strive to reach 15%.
 Investment Portfolio: Dispose of non-core related and/or
underperforming business subsidiaries
 Land Assets: Develop our land assets to their highest and best use.
3
Tatung’s Core Strategic Initiatives
4
Structural
Improvement in
Core Business
Operations
Structural
Improvement in
Tatung
Investment
Portfolio
Asset
Development
Improved Cash
Flow and
Reduced Debt
Tatung’s Core Strategic Initiatives
5
Structural
Improvement in
Core Business
Operations
Structural
Improvement in
Tatung
Investment
Portfolio
Asset
Development
Improve Cash
Flow and
Reduce Debt
6+ Years of Structural Improvement in Core Earnings
By phasing out low-margin products, we have been able to achieve the
following in our core business portfolio:
Higher Overall Gross Margin
• Core operations gross margin reached 9.9% in 9M13 from 5.7%
in 2007.
Reduced Operating Expenses
• SG&A expenses peaked at NT$5.0bn in 2008, and have been held
below NT$3.0bn for three straight years (2010-2012). In 9M13,
SG&A expenses fell to NT$2.0bn.
Improved Operating Profits
• In 2010-9M13, our core operations earned a cumulative
operating profit of NT$352m versus a cumulative loss of
NT$4.9bn in 2007-2009.
6
Revenue Contribution
100%
80%
35%
41%
44%
42%
51%
45%
5%
2007
44%
46%
45%
45%
41%
7%
11%
12%
11%
13%
2008
2009
2010
2011
2012
53%
60%
40%
61%
28%
20%
0%
Systems Group
7
Consumer Group
Power Group
19%
9M13
6+ Years of Structural Improvement in Core Earnings
At the Business Group and Business Unit Level:
• Power and Systems Business Groups: Tatung’s core power and systems
solutions groups accounted for 72% of revenues in 9M13, versus 40% in 2007.
R&D spending devoted to these two groups now accounts for 55% of Tatung’s
total core R&D outlay, versus only 25% in 2007.
• Power: Motor BU exports reached a 6-year high in 2012, growing by 33%, and
leading to the best profit performance for the Motor BU in the past 6 years. In
9M13, Motor BU gross margin reached 18% and operating margin 7.2%,
surpassing 2012 levels.
• Consumer: In the ODM business unit, unprofitable product lines have been
cut (most notably PC monitors), resulting in the elimination of the large losses
posted in previous years. In 2010-2012, losses were cut to below NT$300m
annually, a big improvement over annual losses of NT$1bn+ in 2007-2009. The
ODM business unit now contributes only 7% of total core revenue versus 48%
in 2007.
8
Core Operations Business Performance
Revenue
NT$ mn
Operating Profit
Revenue
Operating Profit
NT$ mn
50,000
500
235
43,072
-
38,609 38,408
37,276
40,000
(64)
32,185
30,264
379
(500)
(197)
30,000
(1,000)
20,000
(1,500)
10,000
(2,000)
(1,951) (1,930)
(2,500)
2007
2008
2009
2010
2011
2012
Note: Based on unaudited company accounts.
9
(992)
17,750
9M13
2007
2008
2009
2010
2011
2012
9M13
Tatung’s Core Strategic Initiatives
10
Structural
Improvement in
Core Business
Operations
Structural
Improvement in
Tatung
Investment
Portfolio
Asset
Development
Improve Cash
Flow and
Reduce Debt
6+ Years of Structural Improvement in Investment Income
Our Achievements:
Disposal of Money-Losing Subsidiaries
• We have shut down or disposed of 4 subsidiaries which posted a
combined cumulative loss of NT$3.5bn in 2007-2011.
Significant Reduction in Debt at CPT
• CPT’s net debt fell to NT$22bn in 9M13, from its peak of
NT$72bn in 2006.
Disciplined Capex Spending at Key Subsidiaries
• We have reduced capex spending at subsidiaries that are in
capital-intensive industries.
• CPT has not built a new plant since 2007, and monthly depreciation
expense fell to NT$0.9bn in 9M13 from a peak of NT$2.2bn in 2009.
• In 2012-9M13, Green Energy Technology’s total capex spending was
NT$0.7bn versus NT$11.8bn in 2010-2011.
11
CPT Has Greatly Reduced its Capital Intensity
CPT - Capex
NT$ mn
CPT - Net Debt
NT$ mn
10,000
60,000
50,000
8,000
40,000
6,000
30,000
4,000
20,000
2,000
10,000
-
FY2008
NT$ mn
FY2009
FY2010
FY2011
FY2012
FY2008
9M13
NT$ mn
30,000
-
25,000
(10,000)
20,000
15,000
(20,000)
10,000
(30,000)
5,000
-
12
FY2009
FY2010
FY2011
FY2010
FY2011
FY2012
9M13
FY2012
9M13
CPT - Net Profit
CPT - Depreciation
FY2008
FY2009
FY2012
9M13
Source: CPT audited consolidated financial statements.
(40,000)
FY2008
FY2009
FY2010
FY2011
CPT: Capex Spending
CPT has maintained the local LCD industry’s 2nd lowest capex-tosales ratio since 2007
Capex to Sales (x)
CPT (2475 TT)
13
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
9M13 Average
3.9
7.7
7.9
4.4
4.7
9.9
5.0
6.4
Wintek (2384 TT)
37.1
24.5
9.6
15.2
13.6
13.0
5.8
17.0
AUO (2409 TT)
13.6
23.2
17.0
18.1
15.0
11.4
6.4
15.1
Innolux (3481 TT)
2.8
12.5
24.2
19.5
8.9
3.5
4.3
10.7
Hannstar Display (6116 TT)
4.8
6.6
2.9
8.9
30.4
16.5
15.5
10.7
E Ink (8069 TT)
2.4
7.6
3.6
5.3
6.9
5.3
6.9
5.1
Investment Income Analysis
NT$m
8,000
6,000
4,000
2,000
Reported Investment Income
0
(2,000)
Normalized: Ex-2011 Beitou property
sale, ex-discontinued/disposed
subsidiaires
(4,000)
(6,000)
(8,000)
(10,000)
(12,000)
2007
14
2008
2009
2010
2011
2012
9M13
1H13
NT$m
2007
2008
2009
2010
2011
2012
9M13
Reported
5,431
(3,229)
(9,634)
(3,692)
1,563
(3,166)
(1,034)
Normalized
5,723
(2,778)
(9,590)
(3,137)
(3,055)
(3,166)
(1,034)
Our Future Plans
• We will continue to dispose of non-core related and/or underperforming
business subsidiaries.
• We will minimize our exposure to capital-intensive industries and seek
continued reduction in debt levels.
• Shan Chih Asset Development (SCAD, a 100%-owned subsidiary) will
continue to realize the value of our real estate assets via development
projects.
15
Tatung’s Core Strategic Initiatives
16
Structural
Improvement in
Core Business
Operations
Structural
Improvement in
Tatung
Investment
Portfolio
Asset
Development
Improve Cash
Flow and
Reduce Debt
Tatung Land Assets - Taiwan
Land Assets
Total
Taipei City
New Taipei City
Northern Taiwan*
Mid-Taiwan
Southern Taiwan
Area (Ping)
464,165
35,506
90,243
326,770
2,700
Area (Sq m)
1,534,431
117,376
298,323
1,080,235
8,925
% of Total
100
7.6
19.4
70.4
0.6
8,946
29,572
1.9
Total area of land holdings: 464k pings or 1,534k sq meters
Book value of land: NT$23.3bn (US$790M @ NT$1 = US$29.5)
Land Zoning
Area (Ping)
Area (Sq m)
% of Total
Land for Development
154,079
509,354
33%
Land for Production
310,086
1,025,077
67%
Total
464,165
1,534,431
*’Northern Taiwan’ does not include Taipei City and New Taipei City.
Note: 1 ping = 3.306 sq m = 35.575 sq ft
17
Nankang Tatung Xiyuan Residential Project
• Land Area: 2,312 ping
• Gross Floor Area: 13,436 ping
• Floor Plan: 148 housing units, 239
parking spaces
• Completion: 1Q 2014
• Revenues and profits to be booked
in 1H2014.
18
Banchiao Phase I Plant Development Plan
•Land Area: 4,095 ping
•Gross Floor Area: 25,433 ping
•Expected Project Timeline: Pre-sale
launch in 2H14, pending final
regulatory approval.
19
Tatung’s Core Strategic Initiatives
20
Structural
Improvement in
Core Business
Operations
Structural
Improvement in
Tatung
Investment
Portfolio
Asset
Development
Improve Cash
Flow and
Reduce Debt
Our Achievements
Substantially Reduced Net Debt
• Consolidated Net Debt peaked at NT$104bn in 2006, and has
since been reduced to NT$55bn.
Reduced Depreciation Expense
• 9M13 monthly depreciation expense of NT$1.2bn is 47% lower
than 2008 peak level of NT$2.3bn.
Disciplined Capex Spending
• 2012 Capex of NT$6.5bn was the lowest since 2004, and 9M13
capex was NT$3.2bn
21
Lower debt, less capital spending
Tatung - Capex
NT$ mn
Tatung - Net Debt
NT$ mn
18,000
100,000
15,000
80,000
12,000
60,000
9,000
40,000
6,000
20,000
3,000
-
-
FY2008
FY2009
FY2010
FY2011
FY2012
NT$ mn
Tatung - Depreciation
NT$ mn
FY2008
9M13
FY2009
FY2010
FY2011
FY2012
9M13
FY2012
9M13
Tatung - Net Profit
5,000
30,000
25,000
-
20,000
(5,000)
15,000
10,000
(10,000)
5,000
-
(15,000)
FY2008
22
FY2009
FY2010
FY2011
FY2012
9M13
Source: Tatung audited consolidated financial statements.
FY2008
FY2009
FY2010
FY2011
The Tatung Vision
23
The Tatung Vision
• We aim to become one of Asia’s leading turnkey providers of integrated
mechatronic systems and energy-saving power solutions.
• Our areas of concentration will be:
*Mechatronics systems
*Power distribution systems employing end-to-end AMI
*Turnkey power generation systems in emerging market countries
*Energy saving initiatives and products
24
Tatung Total Solutions for the Power Grid
Renewable Energy
Smart Substation
Advanced Distribution
Automation
Energy Management
Advanced Metering
Infrastructure
Energy
Storage
Energy Saving
25
Smart Home
Tatung Integrated EMS Capabilities
System Server
Remote
management
Remote
Backup
Central Control/
Energy Mgt. System
Cloud Service
Office Network
Routers
Ethernet
Air
Conditioning
1. Commercial AC
2. Exhaust systems
3. Sophisticated
water cooling
systems
26
LED Lighting
1. LED bulbs for
commercial
applications
2. Remote
monitoring and
management of
energy use
Power
Systems
1. Distribution
network
2. Turnkey power
generation
3. End-to-end
Advanced Metering
Infrastructure (AMI)
Ancillary
Systems
1. Water purification
2. Waste water
surveillance system
3. Air compressors
4. Industrial gasses
5.UPS systems
6.Reservoir water
supply system
Security
Control
1. Electronic security
systems
2. Access control
systems
3.Video surveillance
systems
Our Commitment to Shareholders
• We will minimize our exposure to capitalintensive industries and seek continued
reduction in debt levels.
• We will continue to dispose of non-core
related and/or underperforming business
subsidiaries.
• SCAD will continue to realize the value of
our real estate assets via development
projects.
• We pledge to improve corporate
governance and transparency.
27
Company Financials
28
Five-year Financial Highlights
EPS ( NTD)
ROE %
Net Income (NT$ million)
0.60
4.3
(0.63)
(0.69)
(1.53)
-10.9
(2.10)
-10.2
-16.8
1,380
(1.52)
-11.1
-1,593
-3,481
-3,512
-6,855
-28.3
-9,917
2008
29
2009
2010
2011
2012
9M13
2008
2009
2010
2011
2012
9M13
29
Five-year P&L (Consolidated)
NT$ million
2008
2009
2010
2011
2012
9M13
(IFRS)
YOY (%)
2008
2009
2010
2011
2012
84,494
(18.2)
(36.6)
33.0
(7.4)
(26.6)
2.3
612
8,569
(67.7)
-
-
33.8
(91.4)
-
OP Profit
(14,545) (33,298) (13,803) (11,550) (15,338)
(3,257)
-
128.9
(58.5)
(16.3)
32.8
(72.2)
Income
Before Tax
(17,456) (40,451) (14,325) (11,191) (15,142)
(4,682)
-
131.7
(64.6)
(21.9)
35.3
(61.7)
Sales
Revenue
Gross Profit
187,247 118,733 157,911 146,250 107,356
10,830 (11,662)
5,325
7,127
9M13
Net Income
to Parent
(6,855)
(9,917)
(3,481)
1,380
(3,512)
(1,593)
-
44.7
(64.9)
-
-
(48.9)
EPS (NTD$)
(1.53)
(2.10)
(0.63)
0.60
(1.52)
(0.68)
-
37.3
(70.0)
-
-
(48.9)
30
Five-year Balance Sheet (Consolidated)
NT$ million
TOTAL ASSETS
2009
2010
2011
3Q13
(IFRS)
2012
YOY (%)
2008
2009
2010
2011
2012
3Q13
284,267 253,246 238,050 224,536 201,282 204,085 (12.4)
(10.9)
(6.0)
(5.7)
(10.4)
(6.2)
Cash
31,864
33,315
30,962
31,181
24,603
22,220 (14.2)
4.6
(7.1)
0.7
(21.1)
(15.2)
NR & AR
24,257
19,012
19,024
14,940
14,027
17,429 (48.3)
(21.6)
0.1
(21.5)
(6.1)
8.8
Inventory
26,994
22,665
25,861
24,151
24,494
22,108
0.6
(16.0)
14.1
(6.6)
1.4
(5.7)
Fixed Asset
157,590 136,409 124,205 116,271 105,994
97,077
(7.1)
(13.4)
(8.9)
(6.4)
(8.8)
(6.4)
TOTAL LIABILITIES
181,305 163,218 155,865 148,439 141,529 142,555 (10.5)
(10.0)
(4.5)
(4.8)
(4.7)
(3.5)
Bank Loans
118,253 100,240
93,056
96,728
89,996
86,162
(3.8)
(15.2)
(7.2)
3.9
(7.0)
(8.7)
NP & AP
27,544
25,770
27,341
21,119
21,782
26,523 (35.7)
(6.4)
6.1
(22.8)
3.1
32.5
Accrued Exp
12,699
15,415
12,217
9,216
9,673
8,608 (18.2)
21.4
(20.7)
(24.6)
5.0
14.0
102,962
90,028
82,185
76,097
59,753
61,530 (15.6)
(12.6)
(8.7)
(7.4)
(21.5)
Capital
45,495
55,517
55,521
23,395
23,395
23,395
1.4
22.0
0.0
(57.9)
0.0
0.0
Additional
Paid-in Capital
12,095
10,919
11,481
5,958
5,945
856
0.9
(9.7)
5.1
(48.1)
(0.2)
30.9
(18,538) (32,134) (36,112)
(2,596)
(6,378)
9,845
65.0
73.3
12.4
(92.8)
145.7
(27.0)
28,891 (15.4)
(13.0)
(10.3)
(15.6)
(32.6)
(15.8)
TOTAL EQUITY
Retained Earnings
Minority
31
2008
65,761
57,208
51,322
43,339
29,213
A/R Turnover Days
69
67
44
42
49
Inventory Turnover
Days
56
70
58
66
83
A/P Turnover Days
73
75
64
64
73
(12.0)
Tatung Investment Income
Investment Company
CPT
Green Energy Technology
Elitegroup Computer
Shan Chih Asset Development
Tatung Consumer Products (Taiwan)
Tatung Okuma
Forward Electronics
Tatung SM-Cycle
Tatung System Technologies
Tatung Fine Chemicals
Toes Opto-Mechatronics
San Chih Semiconductor
Chunghwa Electronics Development
Tatung Medical & Healthcare Technologies
Tatung Information Technology (Jiangsu)
Tatung Vietnam (TVN)
Tatung Czech
Tatung Electric Technology (Vietnam)
Tatung (Thailand)
Tatung Science and Technology,Inc.
Tatung InfoComm
Tatung Netherlands B.V.
Tatung - Fanuc Robotics
Tatung (U.K.)
Tatung Atherton
Other Investment Income
Total Investment Income
32
% held
As of 3Q13
23.1
24.3
27.5
100.0
99.1
49.0
26.8
85.3
54.4
46.6
85.0
58.2
99.9
95.7
100.0
100.0
0.0
100.0
100.0
100.0
0.0
0.0
0.0
0.0
0.0
Investment Income
2007
2008
2009
2010
2011
2,233
(3,595)
(9,322)
(3,603)
(2,871)
784
50
339
(419)
218
82
209
39
118
1,122
150
728
459
6,742
11
20
(13)
(320)
(160)
86
73
3
42
54
27
(21)
(125)
(7)
(71)
31
45
39
55
57
81
96
81
73
60
31
14
14
4
(93)
67
22
(26)
0
5
2,106
185
176
216
56
(231)
(111)
7
40
(31)
3
(8)
(8)
6
(18)
(129)
(72)
(395)
(264)
(57)
(121)
(152)
(90)
(96)
(170)
(97)
49
20
198
30
(36)
(42)
(38)
(24)
9
(166)
(66)
13
11
5
(52)
(604)
(1)
(1)
(10)
(214)
(15)
(554)
(1,466)
(85)
(165)
(51)
19
27
19
(239)
(99)
4
23
272
(83)
(226)
(291)
(191)
5,431
(3,229)
(9,634)
(3,692)
1,563
Subsidiaries
Overseas Production Subsidiaries
2012
9M13
(2,716)
(758)
(949)
(423)
100
295
824
231
(259)
(192)
118
152
(89)
(61)
87
61
41
34
3
(32)
4
(28)
(9)
(14)
(13)
13
(14)
(4)
(252)
(114)
(136)
(99)
(21)
(29)
(14)
(12)
16
9
113
(62)
(3,166)
(1,034)
Former Subsidiaries
33