Established in 1997, Comba Telecom Systems Holdings is a leading global wireless solutions provider with its R&D facilities, manufacturing base, and sales and service teams. The group offers a suite of products and services, including base station antenna and subsystems, network systems and 5G+ business services, wireless transmission, and smart manufacturing to customers worldwide.
1. Describe Comba Telecom’s main business segments and revenue drivers.
Comba Telecom’s business comprises four main segments, of which three comprise nearly 92% of total revenue.
The group mainly supplies new 700MHz and 900MHz low-frequency bands and 1.8GHz, 2.1GHz, 2.6GHz and 3.5GHz intermediate frequency band GHz antenna products. In response to the demand for a 4G and 5G integrated antenna for overseas 5G network construction, the group developed the industry-leading multi-antenna common-calibre wave transmission technology platform and access point (AP) antenna in strategic cooperation with the main equipment vendors. In FY2022 ended December 2022, by securing major centralised procurement bidding projects for 5G antenna products from leading telecom operators in China, the segment achieved a record high revenue of HK$3.03 billion ($522 million), an increment of 25.8% y-o-y.
The group has a wide range of network products. This includes small cell products with deep coverage capacities covering scenario-based high-power base sites, sharing of indoor coverage distributed antenna system (DAS) and open radio access network (RAN) products of mobile telecommunication, and 5G fundamental network platform solutions for 5G vertical industry applications. The group offers ScanViS computer vision AI solutions to support smart city development together with automated guided vehicles (AGV) intelligent vehicles and solutions to support factory intelligent chemical applications.
Finally, the group provides mobile communication network product development, planning and design, engineering construction, project management, network maintenance, optimisation and other comprehensive and professional full-cycle services for operators. These services aim to help operators reduce network construction and maintenance costs, thus improving overall service efficiency.
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2. Which markets do Comba Telecom operate in?
What is the focus for each market? Comba Telecom have over 30 offices in China and 10 worldwide, serving more than 100 countries and regions across Asia Pacific, the Middle East and North Africa, Europe, the Caribbean and Latin America, India and the US.
The domestic market in China contributes approximately 66% of the group’s total revenue, while international markets account for 34% of the revenue in FY2022. The three major operators in China represent 46.3% of the total revenue in FY2022.
Comba’s competitive advantage lies in its innovative, unique, cost-effective integrated coverage solutions. It serves the needs of operators as they expand their infrastructure network from extensive to in-depth coverage.
In addition, Comba has applied for more than 5,600 patents globally, and over 3,800 patents have been granted. Over 3,700 patents applied are related to inventions, with more than 2,000 patents granted. With the global shift from 4G to 5G, investments in 5G products and services are increasing. Comba Telecom anticipates growing demand for its offerings in the global market, especially in Asia-Pacific, Europe, India, the US and several other emerging countries.
3. Describe Comba Telecom’s FY2022 financial performance. What factors drove higher revenue and margin expansion?
Comba Telecom achieved significant revenue growth in FY2022, benefiting from the continuous development of global 5G network construction. The group’s revenue increased 8.4% to HK$6.3 billion in FY2022. It saw a turnaround in profit attributable to shareholders in FY2022, amounting to HK$190.2 million, with gross profit increasing by 31.7% to HK$1.8 billion. This was accompanied by a 5.2 percentage points increase in gross profit margin to 29.4%.
Operating expenses for FY2022 decreased by nearly HK$520.4 million, representing a 25.5% reduction, due to optimised production systems made possible by continued R&D. This contributed to a turnaround from loss to profit in FY2022.
Comba Telecom maintained a dividend payout ratio of 30.7% in FY2022, demonstrating its commitment to reward shareholders. The company exercised prudence in managing credit risk and bank borrowings while maintaining a positive operating cash flow. This was demonstrated by the low gearing ratio of 12.7%.
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4. What are some recent key highlights and milestones achieved by Comba Telecom?
The group won multiple bids: (i) A base station antenna centralised procurement project by China Unicom; and (ii) A 5G distributed picocell centralised procurement project by China Mobile.
The group launched multiple products: (i) Low-loss, high-efficiency and low-carbon green antenna (HellifeedTM), an innovative green antenna and subsystem for the building of low-carbon networks; (ii) The industry’s first Luneburg lens antenna solution for marine communication coverage for the building of high quality 5G marine communication networks; (iii) Smart heavy-duty forklift truck AGV with expanded application scenarios; and (iv) the industry’s first 5G cloud industrial base station together with China Mobile and other companies.
5. What are some of Comba Telecom’s growth strategies?
Comba Telecom plans to deepen its presence in Singapore and surrounding regions by establishing Singapore as a key hub in the APAC region. The group will continue to expand into international markets and deepen the relationship with its existing key telecom operators’ customers to increase market share.
The group will continue to partner with international mobile operators and world-leading manufacturers of core telecom equipment to construct networks in key regions. Comba Telecom’s philosophy is to provide cost-efficient, good quality, as well as low-carbon, eco-friendly and energy-saving products to meet the needs of telecom operators. The group is actively planning to bid for future centralised procurement projects related to antenna products.
Aside from offering advanced 5G application solutions to customers globally, it will tap into the still-substantial demand for 4G network construction in various countries and regions with unbalanced network development. At the same time, the group will continue to expand the Open RAN ecosystem, seek strategic partners, explore new sales channels and conduct joint product R&D to grow the Open RAN business.
6. What are some ongoing market opportunities and trends, and how is Comba Telecom leveraging them to strengthen your businesses?
Telecom operators are expanding their network infrastructure from extensive to in-depth coverage. The group has competitive advantages in unique scenario-based and cost-effective integrated coverage solutions and anticipates increased business opportunities. The group achieved major technological breakthroughs in product development through R&D investments.
In response to the low-carbon and environmental protection strategy and low-cost network construction philosophy adopted by operators, the group developed a low-loss, high-efficiency, low-carbon green antenna and integrated high-power cell remote coverage solution.
Tapping onto the demand for 5G+ applications, the group developed FLeX5, an intelligent computing platform that connects “5G network + broad internet of things + Multi-access Edge Computing Platform (MEP) + AI” engines.
By providing underlying network and platform solutions for specific industries, the company promotes 5G applications in vertical sectors such as industry, mining, energy, medical, and education, enabling smart industry upgrades.
7. What is Comba Telecom doing to fulfil its sustainability commitments?
Comba Telecom’s new green antenna solutions aims to create value for customers, corporations and society.
For customer value, the new generation antenna solutions allow operators to save around 23 million to 34 million kWh of electricity per annum for every 10k base stations. This contributed to releasing carbon emission reduction goals and helped operators reduce operating expenses. It reduces 10% to 20% of station sites, increases 1dB to 2dB in-depth and sea coverage level, and lowers 30% of antenna failure nodes.
In corporate value, Comba anticipates a 20% increase in straight through rates and a 30% reduction in return rates with improved quality and efficiency.
As for social value, carbon emission reduction is expected to be between 13k to 20k tonnes annually. The group anticipates an approximately 50% reduction in pollution and a reduction of solder emissions by approximately 35%. The new-generation antenna solutions have a 100% recycling rate. The group was awarded the 2022 EcoVadis Sustainability Silver Medal as recognition for the series of innovative solutions, including developing smart, efficient and green 5G networks.
8. Why should investors take a closer look at Comba Telecom?
Besides a profit turnaround in FY2022, the group is confident in its growth in the coming year, and believes that wireless communications will continue to be the core and necessity of businesses and society. Comba Telecom’s products, including base station antennas, network system and services, has a high market share and extensive footprint in China and international markets.
As businesses emphasise environment, sustainability and governance (ESG), Comba Telecom’s sustainability pursuits have lowered operators’ costs and created more opportunities for them in private networks. With the evolution and progress of 5G+ verticals, Comba Telecom believes it is well-positioned to leverage this trend and maximise its growth.
9. What are the mid to long-term expansion plans for Comba Telecom?
Comba Telecom will continue to grow its business in the Asia Pacific region. This year, the secondary listing of Comba Telecom on the Mainboard of the Singapore Exchange (SGX) signifies a key strategy to establish Singapore as a key Asia Pacific hub. The group is preparing for a spin-off and separate listing (proposed spin-off and listing) of Comba Network Group on the Shanghai Stock Exchange SciTech Board.
The group indirectly holds approximately 79% equity interest in Comba Network. The proposed spinoff and listing will provide the Comba Network Group with various benefits, including unlocking its value and increasing its brand image. The group will enjoy the benefits of the proposed spin-off and listing as Comba Network remains the group’s subsidiary.
10. With many economists predicting a slowing economy and a recession in the near term, how is the group preparing to ride out this storm?
Groupe Speciale Mobile Association (GSMA) forecasts a rise in global unique mobile subscriptions from 5.4 billion in 2022 to 6.3 billion in 2030, with 54% of connections being 5G. Investment in 5G RAN is expected to grow by over 10% by 2023, primarily in India, Europe, and other markets.
In China, 5G deployments have continued to create sustained demand for base station antennas, while urban and indoor 5G coverage drove demand for broad room division products. Internationally, developing countries are scaling up 5G networks by replacing base station antennas. Developed countries are entering the next phase of 5G deployment, leading to increased Basic Serving Arrangement (BSA) demand.
Comba Telecom strategically diversifies its market presence by expanding into new markets and acquiring customers while aiming to enhance its market share among existing customers. As a result, the company’s FY2022 international sales grew by close to 10% year-on-year. Operators actively promote infrastructure network construction plans for comprehensive, in-depth coverage, with 85% of applications expected to be indoors by 2025.
Comba Telecom offers a wide range of products and solutions, including the innovative ‘green antenna,’ well-positioned to meet the increasing market demand.
Candace Li is a research analyst with the Singapore Exchange