Cirtek Posts 23% Net Sales Growth in 2Q2016

Laguna—(PHStocks)—Cirtek Holdings Philippines Corp. (PSE: TECH), a Laguna-based technology company that provides complete manufacturing solutions for complex radio frequency (RF), microwave and millimeter wave products and semiconductor devices, announced its results for the three months and six months ending 30 June 2016.

Performance Highlights

• Achieved strong results for 2Q 2016 (three months ending June 30 2016) with consolidated revenue of US$17.5 million and net income after tax (NIAT) of US$2 million, representing increases of 23% and 10%, respectively, compared to 2Q 2015.
• Core earnings (i.e. earnings from business operations excluding earnings from nonrecurring items) in 2Q 2016 amounted to US$2 million, up by 10% from US$1.8 million in Q2 2015.
• The increase in revenue for 2Q 2016 was due to the growth of the Company’s broadband and antenna systems business (Cirtek ATS). Semiconductor sales continued to be stable.
• For 1H 2016 (six months ending June 30 2016), consolidated revenue amounted to US$32.5 million, a 15% increase compared to the same period in 2015; NIAT amounted to US$3.5 million, an 8% growth compared to the same period in 2015.
• The sales contribution of the RF/Microwave/Millimeter wave business accounted for 37% of the company’s 1H 2016 consolidated revenues, compared to 28% in the same period in 2015. As the company continues to move up the technology value chain, the revenue mix is expected to shift more towards newer businesses, while the semiconductor business is expected to continue its steady growth.

Financial Condition

• The company continued to registered solid financial performance, achieving record sales and NIAT for 1H 2016.
• The company continued to maintain a healthy balance sheet in 1H 2016, with current ratio at 2.7x, debt to equity ratio at 0.47, and interest cover at 10x.
• The company continued to achieve solid margins in 1H 2016; gross profit margin was 18%, NIAT margin was 11%, and EBITDA margin was 16%.

Market Outlook

• The global millimeter wave technology market is expected to grow at a CAGR of 45%, with a total addressable market of US$12 Bn by 2020. Increasing usage of millimeter wave in backhaul networks, demand for innovative applications in the radar and security applications, increasing demand for bandwidth intensive applications and consumer electronics applications are the major drivers for market growth.
• At mid-year, analysts have lowered their estimates for worldwide semiconductor revenue in 2016. Forecasts range from a decline of 0.6% to a slight growth of 2%. According to Gartner, “The lowered estimates for PCs, ultramobiles and smartphones is reducing the demand for semiconductors in 2016.”
• The growth drivers are expected to come from the following: (1) industrial/automotive, (2) niche markets such as aerospace and medical, (3) cloud computing and cloud infrastructure, (4) consumer technology retail sales driven by the Internet of Things.

Company Outlook

• Cirtek ATS. For the RF/Microwave/Millimeter wave business, the Company intends to continue to deliver high-end box build finished products, test-board fabrication, test solutions, and product support businesses required by its customers. It is also developing proprietary wireless products and components for the wireless communication industry. The Company expects to begin manufacturing and selling its products by 4Q 2016. On the Antenna Systems Business, the Company will continue to expand its high capacity, multi-port, multi-band antenna business with Quintel.
• Services. Leveraging off its in-house technology capabilities, the Company has set up a new subsidiary that will provide wireless infrastructure solutions, both connectivity and content, to large enterprises using internally-manufactured multi-gigabit, millimeter wave backhaul equipment and high-capacity broadband wireless access technologies. The Company is presently working with two leading Philippine conglomerates to provide robust wireless connectivity solutions for their nationwide businesses and outlets.
• Semiconductor Business. The company expects steady results for 2H 2016, with additional orders coming from its top 10 customers. The Company is presently undergoing qualification from a top 5 global semiconductor manufacturer.
• After completing its 3rd building, the company is preparing to construct a 4th building in anticipation of growing business for both Cirtek ATS and CEC.
• In recent months, the company was visited by top officials of major companies to discuss potential business and partnerships.
• The company is currently evaluating acquisition opportunities that will either significantly scale up its manufacturing operation, give it access to high-end R&D capabilities, or enter into new markets.