Well-balanced Board structure and management team
The Board is comprised of three executive directors with extensive industry experience, and two non-executive directors. The non-executive directors have strong local knowledge in auditing, accounting and tax, and experience in ASX listed companies, which will allow them to guide the company in compliance and governance matters. The Company also employed a bilingual CFO who has extensive experience in Australian financial services industry and corporate governance.
Recognised technological know-how and R&D
China Track currently holds 16 patents and a High-Tech Enterprise Certificate granted by the Chinese government. The Group is committed to its own research and development projects as well as partnership initiatives with industry partners and universities in order for continuous and systematic innovation. China Track’s R&D expenditures in 2016 were around $1.89 million; and this figure is expected to increase to $2.5 million in 2018.
Fujian WMT holds an exporting licence and around 80 per cent of the Group’s products are exported. China Track therefore has flexibility to complete trades using currencies other than RMB, which may be subject to currency control in China. In addition, the Group is planning to relocate its sales department to Hong Kong where international trades can be settled in foreign currencies and the funds are freely transferable.
Strong ﬁnancial performance and high dividend yield
The return on equity1 was over 47% in FY2016. Revenue and NPAT in FY2016 increased by 20% and 17% respectively. The targeted dividend pay-out ratio is between 40-60% of statutory NPAT. The estimated unfranked dividend yield is up to 6%2.
Great market prospects with "One Belt, One Road" policy supports
The "One Belt, One Road" (OBOR) initiative of the Chinese government is likely to lead to a significant stimulus in construction activity, not just in most provinces of China (18 out of 34 provinces are impacted) but also in a range of other countries, particularly in Western China, Central, Southern and South-East Asia and East Africa. This increase in construction activity will likely lead to growing usage of construction equipment in these markets, ultimately feeding through into growing demand for parts and components. The value of the aftermarket for crawler equipment is estimated at approximately $7.3 billion annually (including both undercarriage and other parts and components).
China Track’s products are primarily used in construction and mining. Since a large proportion of China Track’s products are sold to these OBOR countries, China Track will be benefited from the implementation of the OBOR initiative. The Company also plans to further grow its distribution networks and market share in these countries.
Australia has large mining and agricultural sectors, in which the Group's products are widely used. Currently, China Track is only selling 1% of its total exported products to Australia. It plans to expand its market share in Australia by acquiring an Australian distributor with a strong reputation and established distribution channels. The Company also intends to acquire or invest in Australian businesses in industries related to construction equipment, which will add value to the Group's overall business.