Gifts / Sports & Toys

On September 19, Vietnamese toy manufacturers, the foundries of toy giants such as Tomei, Hasbro, Mattel, Spin Master, etc.-GFT International Holdings Co., Ltd. (abbreviated as "GFT International") once again to the Hong Kong Stock Exchange Submit the prospectus and prepare for listing in Hong Kong, China, with BNP Paribas as the sole sponsor. Statistics show that at the end of January this year, GFT International submitted the form to the Hong Kong Stock Exchange and it has now been shown to be invalid.

Revenue in the first half of the year was US$173 million, and gross profit declined

GFT International started its toy manufacturing business in 1999. Since 2007, GFT International has expanded and gradually relocated its main production capacity to Vietnam. It is currently the largest plastic and metal toy production solution provider in Vietnam. Frost & Sullivan will pay for 2020 In terms of annual revenue, the market share is 26.4%; it is the second largest toy manufacturer in Vietnam, with a market share of 15.8%.

GFT International's business model mainly includes injection molding, die-casting, painting, pad printing, assembly and packaging, which can provide customers with one-stop solutions in a cost-effective manner. The company has three production plants in Vietnam and one production plant in China. The production plants have a total of more than 120 assembly lines and a total construction area of approximately 140,000 square meters. The production plant and office employ more than 10,000 employees, of which more than 9,100 are working in the production plant and office in Vietnam.

GFT International’s customers are mainly distributed in Japan, North America, South Korea and Europe’s international toy brands, including Tomy, Hasbro, Spin Master, Mattel, YoungToys Etc., and toy design and marketing companies, such as Tokyo Unique.

The Frost & Sullivan report shows that toy products can be divided into 11 categories, including activity dolls and activity role-playing, dolls, infant/preschool toys, building sets, art and labor, youth electronics, outdoor and sports Toys, plush toys, toy cars, games and puzzles and others. GFT's international product portfolio consists of seven of the 11 toy categories, including the four fastest growing categories (ie, activity dolls and action role-playing, building sets, dolls and youth electronics).

According to the customer's design and specifications to manufacture a variety of toy products, GFT International divides its product portfolio into two major categories, namely plastic toys (including electronic toys) and metal toys.

According to the prospectus, GFT International's revenue in fiscal year 2018, fiscal year 2019, and fiscal year 2020 will be 277 million U.S. dollars, 313 million U.S. dollars, and 350 million U.S. dollars respectively; gross profit will be 45.31 million U.S. dollars, 45.34 million U.S. dollars, and 42.34 million U.S. dollars; except After-tax profits were 17.09 million U.S. dollars, 6.14 million U.S. dollars, and 17.86 million U.S. dollars.

In the first half of 2021, the company’s revenue was 173 million U.S. dollars, compared with 144 million U.S. dollars in the same period last year; gross profit was 20.28 million U.S. dollars, and gross profit in the same period last year was 14.82 million U.S. dollars; profit after tax was 1.44 million U.S. dollars. The profit after tax for the same period of the year was -3.12 million U.S. dollars.

Data shows that GFT International’s revenue has maintained steady growth, but its business profitability has declined. The gross profit margin for the past three and a half years has continued to decline, from 16.3% in 2018 to 11.7% in the first half of 2021. The company attributed the reason to Trade terms with new customers and allocation of more orders to joint production plants.

Five major customers account for over 80% of revenue

ASEAN countries, including Vietnam, are playing an increasingly important role in manufacturing export goods. With commodity exports as the driving force of the Vietnamese economy, coupled with factors such as low labor costs, Vietnam's toy manufacturing industry experienced rapid growth from 2015 to 2019. Its production value has increased from USD 600 million in 2015 to USD 2.1 billion in 2021, with a compound annual growth rate of 35.1%.

As the first company in the toy manufacturing industry to establish large-scale production capacity in Vietnam, GFT International has accumulated rich management and operation expertise and technical knowledge in the toy manufacturing industry in Vietnam, and has the ability to optimize the labor cost structure while maintaining an efficient labor force. These are the key factors for us to successfully obtain substantial orders from our major customers."

Over the years, GFT International has established mutual trust and support relationships with major customers. For example, Tomy awarded it the 2016 Outstanding Contribution Award and 2017 President Award in 2017 and 2018, respectively, recognizing the company as one of its important production partners. Tomy has also been supporting the company's expansion in Vietnam. In 2012, Tomy provided financial support for the purchase of land and construction of production plants to help it expand its production capacity in Vietnam.

Of course, most of the company's revenue comes from a small number of customers, which is also a hidden risk for the company. The data shows that in the 2018/2019/2020 fiscal year and the first half of 2021, the company's sales to its five largest customers were 264 million U.S. dollars, 278 million U.S. dollars, 291 million U.S. dollars and 152 million U.S. dollars, respectively, accounting for approximately 94.9% and 88.7 of each period's revenue. %, 82.9% and 88.1%. Among them, the largest customer is Tomy, whose sales accounted for 34.3%, 28.0%, 21.4% and 25.9% of its revenue, respectively.

Therefore, on the one hand, GFT International maintains a stable relationship with its major customers, on the other hand, it is also strategically committed to continuing to expand and diversify its customer base. In 2016, the company began to manufacture crayons accessories for Crayola; in 2019, the company made a strategic decision to start providing services to and manufacturing toy products for the world's leading toy brand Mattel. "We believe that a strong source of customers will continue to provide us with substantial orders, thereby providing us with important support, allowing us to consolidate our market position as a leading toy manufacturer in Vietnam."

High manufacturing yield is a key success factor for toy manufacturing, which can effectively increase the profits of toy manufacturers. The high manufacturing yields of GFT International in FY2018, FY2019, FY2020, and 2021 were approximately 86%, 89%, 89% and 91%, respectively. In FY2018, FY2019, FY2020, The high final inspection yield rates for the six months of the year and 2021 are about 98%, 99%, 99% and 99%, respectively.

Although the company's production capacity is mainly located in Vietnam (three of the four production plants and two of the joint production plants are located in Vietnam), GFT International strategically maintains its production plant in China to flexibly meet the needs of customers and serve as a backup production base. In addition, the company is headquartered in Hong Kong, China, and the sales office is located in Mainland China. Together, the two provide a central management and sales platform for GFT International.