Per reporter: Wang Jing Per editor: Dong Xingsheng
As a well-known enterprise in the Apple industry chain, Yang Jianwen, the founder of Bourne Optics, is very low-key, in addition to rarely accepting media interviews, they rarely attend events. How the company developed into a global mobile phone screen glass leader and won large orders from terminal manufacturers such as Apple and Samsung is a mystery to the outside world. But with the disclosure of the prospectus, the "hidden" company gradually surfaced.
From last year to this year, Bern Optics, which continues to sprint the listing process, has set a number of firsts in the industry. Frost & Sullivan data show that in 2020, Bern Optics is the world's largest provider of smart device appearance structure and module solutions by shipment value, accounting for 17.6% of the market share.
But it is worth noting that at present, Bourne Optics still has some hidden worries. For example, rely too much on a single business and the top five customers. In addition, some risk events have also become a difficult problem facing Bourne Optics: becoming an executor; failing to pay housing provident fund for employees as required; and casualties caused by accidents.
The road to listing is bumpy
According to the official website of the Hong Kong Stock Exchange, Biel Crystal Holdings Limited (hereinafter referred to as "Bern Optics") submitted a listing application on the Hong Kong Stock Exchange on 31 January 2022 to be listed on the Main Board of the Hong Kong Stock Exchange, with the joint sponsors being JPMorgan Chase, HSBC and CICC. It is understood that in addition to the development of new materials, new technologies and new businesses, the funds raised will also be used to develop automobile-related businesses. Earlier, Bern Optics had submitted a listing application to the Main Board of the Hong Kong Stock Exchange in July 2021.
According to public information, Bourne Optics was founded by Yang Jianwen and his wife, Lam Wai-ying, as a Hong Kong-funded private enterprise with a history dating back to 1987. At that time, Yang Jianwen established a production plant in Shenzhen, Guangdong Province, to produce glass covers for mechanical watches. In 1992, Fuji Optics Co., Ltd., the predecessor of Bern Optics, was incorporated in Hong Kong.
At present, the main business of Bourne Optics is the production of ore glass panels, touch screens, camera optical glass, mobile phone metal shells, glass back panels, high-end sapphire watch panels, ceramic accessories and other products. In addition to supplying screens for Apple's mobile phones, Bern Optics is also a supplier to Samsung, Google, Xiaomi and other enterprises, and its products are used in smartphones, tablets, AR/VR glasses and automotive fields.
Image source: Bern Optics official website
Looking back at the development of Bern Optics, at the beginning of this century, plastic covers were still commonly used in mobile phones, but Bern Optics began to explore the use of glass covers for mobile phones to improve their durability. This move brings new business opportunities to Bern Optics. In 2004, Bourne Optics received an order from Motorola for 1 million mobile phone glass covers, and the company's business focus began to shift to providing glass cover solutions for mobile phones.
In 2007, Bern Optics ushered in the opportunity to grow and develop. That year, Apple launched the first generation of the iPhone, and Bourne Optics established a business relationship with it and provided parts for the iPhone products. Since then, in view of the increasing demand for glass cover solutions from downstream terminal manufacturers, and in order to increase production capacity, Bern Optics has begun to expand its production operations in Shenzhen to Huizhou City, Guangdong Province.
In 2008, Bourne Optics invested more than 3 billion yuan to build Huizhou Industrial Park; in 2016, the total output value of Bourne Optics has exceeded 40 billion, and the total area of factories in Shenzhen and Huizhou has exceeded 1.2 million square meters, with a total of more than 100,000 employees in the two places.
Thanks to the hot sales of smart phones such as Apple and Samsung, the wealth of Yang Jianwen, the founder of Bourne Optics, is also increasing day by day. In the Forbes Hong Kong Rich List released in February 2021, Mr. and Mrs. Yang Jianwen ranked fourth after Li Ka-shing, Lee Shau Kee and Cheng Ka-chun with assets of US$18.6 billion (HK$145 billion).
At present, the strongest competitor of Bourne Optics is Lens Technology, and Zhou Qunfei, the founder of Lens Technology, is inextricably linked to Bourne Optics. According to media reports, Zhou Qunfei worked in the Yang family business for many years and founded Lens Technology after leaving. In March 2015, Lens Technology expanded its production capacity through the listing of the ChiNext Board, and Zhou Qunfei once became the "richest woman in China".
It seems to be in response to the competition brought about by the listing of Lens Technology, and a few months later, Bourne Optics also decided to go public. However, compared with Lens Technology, the road to listing of Bourne Optics can be described as a bumpy road. At the beginning of 2016, Yang Jianwen confirmed that the company had officially launched an IPO project and was expected to raise $2 billion by the end of 2016. But in fact, Bourne Optics was not short of money at that time. "The company has not borrowed any external loans so far." Yang Jianwen once said. However, Apple sales were poor that year, and Bourne Optics' plan to launch was blocked.
In November 2018, Bourne Optics was exposed to subtracting 5,000 temporary workers overnight. But whether there are really so many people, the outside world does not know. However, in a letter to Apple investors, Apple CEO Cook lowered the company's performance expectations for the first fiscal quarter of 2019 (that is, the fourth quarter of 2018), revised down revenue from the previous forecast of $89 billion to $93 billion to $84 billion, and revised down gross margin from 38% to 38.5% to about 38%.
"We expect economic weakness in some emerging markets, but it turns out that this will have a much greater impact than we expected," Cook said in the letter. Emerging markets are mainly reflected in the Greater China market, where iPhone revenue is less than expected, resulting in the company's overall revenue falling short of expectations and leading to a year-on-year decline in revenue. ”
Perhaps affected by Apple's orders, Bourne Optics' listing plan has been delayed again and again. Until 2021, the epidemic superimposed on Huawei's supply chain encountered obstacles, Apple's performance was eye-catching, and Bourne also benefited. Perhaps not wanting to miss an opportunity, in July last year, Bourne sprinted again for an IPO.
The top five customers contribute more than 80% of revenue
In terms of financial data, as of March 31, 2019, 2020 and 2021, Bourne Optics' operating income was 316. HK$2.2 billion, 274.hk.m. HK$6.3 billion, 299.hk.m. HK$1.3 billion, corresponding net profit of HK$15.5 billion respectively. HK$4.4 billion, 18. HK$5 billion, 31. HK$6 billion. For the six months ended 30 September 2021, the Company's revenue was HK$15,012 million and the corresponding net profit was HK$1,520 million.
Image source: Screenshot of prospectus
Compared with rival Lens Technology, Bern Optics still has a gap. From 2019 to 2021, the revenue of Lens Technology was 30.26 billion yuan, 36.94 billion yuan and 45.286 billion yuan, respectively, and the net profit was 2.469 billion yuan, 4.896 billion yuan and 2.088 billion yuan, respectively.
In this regard, a brokerage analyst who did not want to be named analyzed that Bourne Optics is more conservative about expansion, and the singleness of business is higher than that of Lens, "At present, Lens Technology has done a lot of other products and assembly."
By product, smartphone cover solutions are the main source of revenue for Bourne Optics. The revenue share during the reporting period (the years ended March 31, 2019, 2020 and March 2021 and the six months ended September 30, 2021) was 71.4%, 74.3%, 68.6% and 67.9% respectively; the second and third major businesses were wearable device covers and tablet panels, but the revenue share was still relatively low.
However, from the perspective of product sales of smartphone covers, the business has begun to show saturation compared to the other two products. In 2019, 2020 and 2021 (FY ended March 31) and the first half of fiscal year 2021 (the six months ended September 30), the company's smartphone cover sales declined year by year, corresponding to 504 million, 481 million, 476 million and 242 million, respectively. According to the company, the decline from 504 million to 481 million units was mainly due to the decline in customer demand orders and the impact of the new crown pneumonia epidemic.
In addition, during the reporting period, the procurement volume of the top five customers of Bourne Optics accounted for 83.9%, 83.8%, 82.7% and 82.8% of the company's total revenue in each year/period, respectively, exceeding 80%, while the procurement volume of the top two customers in each year/period accounted for 60%, 63.7%, 70.3% and 74.5% of the company's total revenue, respectively, and the company's "dependence on major customers" was more obvious.
In this regard, Bern Optics admitted in the prospectus that the company generally did not obtain a long-term commitment to the actual quantity that the customer will purchase and the renewal contract must be agreed and approved by both parties, and there is no guarantee that the customer will continue to purchase products at the current level or on terms favorable to the company or will not purchase products at all. If the terms of the Company's contracts or purchase orders with major customers are substantially changed, the Company's sales volume may fall significantly, which may have a material adverse effect on the Company's business, results of operations, financial condition and prospects.
In order to prevent risks, Bern Optics said in the prospectus that the company is actively improving its own scientific and technological strength, gradually getting rid of the dependence on mobile phone covers, following the development of emerging industries, increasing the research and development of new technologies and new materials, actively exploring the application of new materials such as metals, sapphires, ceramics in the automotive field, and having a layout in the field of precision instrument screen research and development such as unmanned imaging and lidar.
The above-mentioned brokerage analysts believe that "in the mobile phone industry, Apple's supply chain cannot run away from relying on Apple, which is a common problem in the global supply chain, and the only (way out) is to enter other application fields."
How to avoid business risks?
In addition to business performance, the biggest difficult problem facing Bourne Optics may be the frequent business risks.
The main production bases of Bern Optics are Born Optics Shenzhen and Bourne Optics Huizhou, but Qixinbao data shows that the operating risks of both companies are more serious.
On March 2, 2022, the People's Court of Huiyang District, Huizhou City, Guangdong Province, listed Boon Optics (Huizhou) Co., Ltd. as the executor, and the subject matter of execution was about 2.7443 million yuan. As of March 18, the company was involved in 141 judicial cases, mostly disputes over sales contracts.
The situation of Bourne Optics (Shenzhen) is similar to that of Bourne Optics (Huizhou). Qixinbao data shows that at present, Bourne Optics (Shenzhen) is involved in 130 judicial cases, of which 44.54% of the cases are related to the Shenzhen Housing Provident Fund Management Center. This is because, for several years, Bourne Optics has not paid or paid the housing provident fund in full for employees as required.
Bourne Optics explained in the prospectus that the benchmark adopted by Bourne Optics (Shenzhen) to calculate the amount of housing provident fund contributions did not comply with applicable laws and regulations, so Bourne Optics (Shenzhen) did not pay the full amount of housing provident fund for employees. In addition, Bourne Optics (Huizhou), Bourne Precision (Huizhou), Bourne High-tech, Tongliao Seiko and Bourne Chuangsheng do not contribute to their respective employees' housing provident fund.
"Once an employee has agreed to our contributions to them, we will actively arrange for employees to contribute housing provident fund in accordance with applicable laws and regulations and local practices and policies," Bourne Optics emphasized. From 2019 to 2021 (31 March) and 30 September 2021, Bern Optics made provisions of HK$412 million, HK$383 million, HK$403 million and HK$381 million respectively for our failure to pay the full housing provident fund. We will correct the non-compliance events related to the payment of housing provident fund contributions, and in the future, at the request of the relevant authorities, promptly pay the insufficient amount of the housing provident fund contributions so that the relevant authorities will not impose any penalties on our non-compliance events. ”
In addition, Bern Optics has also had production safety liability accidents. Huiyang District Emergency Management Bureau of Huizhou City issued the "9 19" Electric Shock Fatal Accident Investigation Report of Bourne Optics (Huizhou) Co., Ltd. in 2019, saying that an electric shock accident occurred at the No. 6 sewage treatment station of Bourne Optics (Huizhou) Co., Ltd., which caused one death and direct economic losses of 1.37787 million yuan, which was identified as a general production safety liability accident.
For how to reduce the dependence on the company's top five customers, how to improve the existing risk problems in terms of operation, etc., the reporter called the official website of Bourne Optics, and the operator claimed to be the front desk. "You have a number I can transfer for you, you don't have me and you don't have it." The other party said. Subsequently, the reporter sent the relevant questions to the company's mailbox, but as of press time has not received a response.
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