Article Excerpt:
TWST: What is Comtech Group?Ms. Ni: Comtech is a leading service company to the China tech manufacturing industry and, as I will explain in a few minutes, a good proxy for the overall growth in the Chinese tech market. Our products mainly cover three major industries: mobile, telecom equipment and the digital home entertainment. Specifically, we conduct customized design and services for more than 200 ODM and OEM manufacturers in China, which include virtually all the multinational China subsidiaries, as well as almost all of the major Chinese manufacturers. The company has been around for about 11 years now. Comtech was established by its Founder, Jeffrey Kang, in 1995, and since then the company has substantially grown its operations. Prior to going public we have never borrowed money from either banks or venture capitalists to build our business. Instead, we grew the business from the ground up, utilizing only $50,000 in seed money from our Founder, until the company became public in July 2004. As you can see from our history, all the growth has been organic and we have successfully built the Company with our strong profitability that we have used to fund our operations and expansion initiatives. After the company became public in July 2004 through a reverse merger, the company continued its organic growth strategy and only late last year and early this year did we do a few small joint ventures or acquisitions to complement our core business. Going forward, the growth is still mainly going to be organic, but we will constantly evaluate and consider joint ventures and acquisition opportunities as a means to capitalize on opportunities to augment our revenues and profits.
TWST: Give us an idea of how much activity there is today and what your
projections are. What does that mean as far as competitors trying to
compete with Comtech?
Ms. Ni: Over the past five years, our revenue CAGR has been over 40% and
our earnings CAGR has been over 60%. What drives all this growth? Number
one is the continued increase in the Chinese consumer spending power and
disposable income. The China economy is growing and driving the growth
in our target consumer vertical. From a very high level, the China
economy is growing and consumer spending power is also increasing, which
is causing demand for many high tech products, which is having a
positive impact on our business. The second driver of our business is a
result of the selective process we use to target attractive industries.
We were in telecom 10 years ago during its infancy in China and the
industry experienced very nice growth. Even today, the telecom sector is
still showing solid growth. About five years ago, we expanded into the
mobile business, which also has been a strong revenue driver. Last year,
we entered into the digital home entertainment industry due to its large
market opportunity and high growth characteristics. We have been
successful thus far in that business and, as a matter of perspective, we
increased revenues from virtually nothing last year to 18% of revenue in
this year. I think the reason we are able to successfully grow is
because we stick with our customer base, which encompasses all the large
tech manufacturers in China and follow their lead in developing a new
technology. Additionally, we are focused on the markets that are
directly addressing Chinese consumer demand, as we believe the long-term
growth trends are very favorable in this market. This two pronged
strategy of addressing large market opportunities with our partners and
focusing on consumer-oriented products has allowed us to outpace the
overall industry growth rate while minimizing our overall risk.
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