30 September 2016



Update: 30th Sept 2016

Continued Strong Momentum in Wire Segment

Komax has returned 18% since we initiated a position in the company in 16th June 2016. (see initiation report published on 16th June 2016).

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Komax announced impressive 1H16 financial results with revenue growth of 20% YoY to CHF 178m. 1100bps, 700bps and 200bps of the growth rate were attributed to organic, acquisition and FX respectively.  The strong organic growth was due to the robust demand from the global automotive industry where strong US and Asia sales compensated for the slight weakness in Germany due to the Volkswagen scandal. EBIT growth was slightly lower at 15% mainly due to CHF 1.7m of restructuring cost relating to the exit of the module testing business and the refocussing of harness testing at the sole location of Porta Westfalica in Germany. Net Income (from continuing operations) rose by 43% YoY to CHF 22.3m due to the sharp decrease in financial expenses due to the lack of one-off loss from FX.

Komax also completed the sale its troubled Medtech division to GIMA, a subsidiary of IMA Group in March 2016. With the sale, financial and management resources can now be fully dedicated to increasing Komax’s leading position in the wire segment. The company made a number of targeted acquisitions during the last 6 months (Thonauer Group, SLE Electronics, Kabatec) and continues to be on the lookout for good companies in the wire segment which can complement and extend its technological expertise.

With 1H16 orders coming in at CHF 174m (+5.6% YoY) we expect a pause in Komax’s revenue growth for 2H16. We see a continuation of the structural revenue growth trend in 2017 driven by the increase in the automation of wire process, the number of wires per vehicle and the increasing sophistication of wiring systems. Management also communicated ambitious medium term targets (2017-2021) of achieving revenue of CHF 500 – 600m which implies annual growth of 7 – 11% (including acquisitions). Medium term EBIT target of CHF 80 – 100m which is a marked improvement of EBIT margins from the current level of 13% also signifies a continued emphasis on cost control and the focus on increasing the proportion of higher value-added products.