[SALUTICA] One of 冷眼's biggest holding counter  - Should you invest or the worst is yet to come? Here's my opinion.

Based in Ipoh, Salutica is known as a vertically integrated consumer electronic manufacturer, primarily producing Bluetooth stereo headsets, non-Bluetooth products such as light guides, smartwatches, camera sub-parts, smart home controllers and in-house brand - FOBO including tyre-pressure monitoring systems for light vehicles and multi-axle vehicles as well as tracking devices.

Newest technology with Bluetooth 5 is set to be the next BIG thing in the IoT space. With 2x the speed and 4x the range, the devices will consume lesser battery power and hence power consumption will reduce.

Salutica's products have competitive advantages compared with the other brands in terms of more advanced chipset, better noise cancellation and high audio quality. Their recent launched of OEM headset product (co-developed with European design partner) by their customer in August 2019 have received good reviews despite pricing above USD150 which is said to be targeting the premium range segment of customers.

Here's are what I gathered: 

1. Strong R&D Team

Salutica performance is backed-up by strong R&D team that is said to be the backbone of the company's business.

Salutica is not an ordinary contract manufacturer or EMS (Electronic manufacturing services) player in the market. Their selling points lies within the R&D team that is able to provide creative ideas and manufacture innovative products which is align to their customer's expectations.

They also have their machineries ready for production and assembly without relying or outsourcing some of the processes to third party. They have their own in-house capabilities such as product design, product testing, product commissioning, manufacturing and assembly.

2. Hearable technology

Salutica is targeting hearble market. Hearable technology is referred to as hybrid technology, which combines the advantage of wearable technology with hearing devices. Hearable devices in different industrial applications are now enabled with built-in voice-enabled virtual assistant and wireless communication features.

Global hearable market is expected to reach $93.9 billion by 2026, growing at a CAGR of 17.2%. WHO also estimates that the annual global cost to society of untreated hearing loss is $750 billion. As shown by statistics, the future is bright for Salutica, if partnering with multiple global giants, given its relatively small player in the electronic industry.

Recently, Salutica has shared its plan to co-develop hearables with a Netherland's design partner. Barring any unforeseen circumstances, the latest product development project will reach its mass production by 4Q FY2020.

Besides, new businesses such as sleep science (sensors for mattresses), smart homes (sensors for controllers and switches) and next generation headsets will also be their next focus in addition to the TWS Bluetooth earphone and headset which are still the Group's main revenue contributer.

3. COVID-19 impact

During MCO period, Salutica's business is affected but the quantum is not material enough to miss the expectation from its customers. Going forward, Salutica has resumed its full production capacity from 29 April 2020 and is expected to launched a new version of cordless Bluetooth headset this year.

4. Financials

Salutica is in a net cash position and has a healthy balance sheet. However, Q4 for Salutica is normally the worst quarter in a year since 2017. Besides, MCO that has restricted Salutica to operate their factory is expected to have severe impact to the financials results to be released in August 2020.

However, the sales volume is expected to recover starting FY2021 with higher volume of sales of mouse (due to lockdown) and hopefully higher margin to be maintain from sales from new-generation wireless headsets in America which gained from favourable forex as well.

Technical wise, it is above 50-days moving average and today's closings is at Ichimoku cloud's baseline with increasing volume. With tomorrow gap up will confirm the uptrend of Salutica.

5. Malaysia's savvy investor - Fong Siling

With the back-up of Malaysia's famous investor - Fong Siling at 2.69% shareholdings in Salutica which makes him the second largest investor, this company atleast will catch some attention from the value investors circle.

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All information provided here should be treated for informational purposes only. It is solely reflecting author's personal views and the author should not be held liable for any actions taken in reliance on information contained herein.

No buy call. No sell call. No bullshit. Only content.

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