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Baht/$ 34.40/45 (Bid/Ask)
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13,100
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Singer Thailand Plc (SINGER) is a distributor of sewing machines under the Singer trademark, and electrical goods under Singer and other brand names, including DVD players, television and home-theatre sets, air-conditioners, wine chillers, gas stoves, microwave ovens, refrigerators, electric irons, water pumps, computers and multi-purpose oil. Daniel Michel Philiponet was the managing director of Singer (Thailand) Plc from 1995-97 and in 1999 before his retirement. He was reappointed as managing director in February 2007 to the present. Business
Please explain Singer's business model.
Singer is a company selling electrical home appliances mostly in the rural areas of Thailand. We use direct hire-purchase hard selling. This means that we go to villages in a pickup full of products and we knock on doors. Today we have a large sales force of 5,000, so that is how we are operating now in Thailand.
We have developed a strong base, so the question is, how can we expand? With more shops, more sales, more training, and more collectors.
As the majority of Singer's business is from rural Thailand, how does Singer ensure the credit quality of its customers?
To ensure we have good credit controls we have a good system of credit granting, evaluation and control. All of our hire-purchase contracts have two guarantors. The salesman receives commissions on sales and on collections because we want to ensure that he is following his account.
We have credit control officers who use a credit scoring method, a Singer internal blacklist, and they have the national credit bureau. After these steps, an account checker goes to the customer's home to ensure the customer is there, to reconfirm information provided and also to take the opportunity to collect. The branch manager also has to approve the sales.
What is the revenue breakdown per product and brand type? What interest rate does Singer charge?
Refrigerators and washing machines represent close to 60% of our total sales and currently the ownership ratio of washing machines is 53% for all of Thailand, but for rural areas it is far lower at 42%; thus the market is not saturated. We also sell TVs and computers as demand exists in both those product segments.
Today we charge on a monthly basis at 2.8% because we operate in a risky business. Thus our risk needs to be rewarded, and my target is to have a net return on the bottom line of 10% after tax particularly as we have the tax-loss to carry forward for five years.
Singer has also started a trade-in business. Could you explain the dynamics of this?
Today trade-ins represent more than 40% of our business and with these we can enter into a saturated market such as TVs. Initially we were offering to trade-in for Singer branded products. However, when I saw the huge market potential constituted by the replacement market, why should we limit ourselves to only Singer products? If we can offer multi-product, multi-brand, then potentially everyone can be our customers.
There are numerous companies in the installment sales financing industry. How does Singer differentiate itself?
The question you have to ask is how many companies in Thailand sell the way Singer does? None. This is what I call it our company's ''Blue Ocean''. We have analysed the market and seen that there is a huge replacement market and we are pleased that our competition has missed this. Singer will take advantage of this situation to expand rapidly and dominate the market by 2009-10, making the entry costs for anybody extremely expensive.
Financial performance
In the first two quarters of 2008, Singer has recognised positive earnings for the first time in nearly two years. What is the difference compared to before?
Number one, a change in strategy, in the past we entered into the motorcycle market as it was a growing market and then we pushed the sales too far and got into trouble due to collection problems.
When I returned we had to see if the company was ready and capable to make a U-turn back into electrical home appliances and thankfully this has proven to be successful.
The second point is the company's culture of ''out-of-the-box thinking'' to look at the market with different ideas and from different angles. Thus we got into the replacement market with a multi-product, multi-brand strategy and the market size potential exploded.
Third, it is people and internal communication. I found an organisation completely demoralised after two years of big losses. Before, employees were not informed of the company's strategy or business, while today we inform our employees on a monthly basis through a newsletter and even a webcam presentation. You can imagine the strength of a company when all move united in the same direction, aiming at achieving the same goals.
What do you feel are the biggest risks facing your business today?
Our biggest issue is funding to fuel our expansion plans. We are working at it, and expect to obtain the appropriate funding within 2008.
Where do you see Singer in five years from now?
In the past Singer and its two closest competitors had a total of 700 shops and 30,000 salesmen. Today in the same market only Singer exists with 200 shops and 5,000 salesmen so there is a huge market potential for growth.
In five years from now we aim to have 300 shops, 10,000 salesmen, a wider product line offering, and possibly longer hire-purchase conditions. We are confident we can reach this target and once it has been achieved it will be very difficult for competitors to enter as Singer will be in a dominant market position.
The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company, and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle, managing partner of GVC Capital, an investment advisory firm focused on small- and mid-caps in Thailand. For more information, e-mail pon
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