Combine Will International Holdings Ltd: Diversification out of China September 18, 2018 1288

  • Cost savings from cheaper labour force in Indonesia
  • Diversifying out of China gives Combine Will an edge over other vendors
  • Current share price of $1.05 represents a PE of 10.2 based on 1H18 annualised earnings

What is the news?

We attended Combine Will International Holdings Ltd (Combine Will) grand opening of its Combine Will Industrial Indonesia factory (CWII). It is their first factory to operate out of China. The factory is 30,000 square metres and located in the Central Java Sragen Regency.

Company Background

Combine Will was listed on the mainboard on the Singapore exchange in 2008. Combine Will is an original design manufacturer (ODM) & original equipment manufacturer (OEM) that supplies corporate premiums, toys and consumer products. Combine Will also supplies plastic injection and die-casting moulds and is a distributor of machinery and precision tools for mould making. ODM/OEM accounts for 83% of revenue, machine sales account for 13% and moulds & tooling 4%. Clientele includes multinational companies ranging from toys, fast-moving consumer goods to international fast food chains. Combine Will operates six factories in China with a combined strength of 10,000 workers. The Indonesian factory currently employs 1,500 workers and should double by 2019.

Diversifying out of China and into Indonesia

CWII enjoy higher cost efficiencies as labour intensive production processes are relocated to Indonesia. It made economic sense to the management and is furthermore supported by one of Combine Will’s key customer who is an international fast food giant. Combine Will is one of the few vendors that supply toy premiums to this multi-billion dollar company. The timing cannot be more apt as trade tensions between US-China is at its peak. The Indonesian presence gives Combine Will an edge over other vendors as the customer is seeking vendors with geographical diversification.

Site Visit highlights

Manufacturing process. Combine Will uses injection moulding for its plastic parts. Injection moulding is a method of casting plastic by using intense force. The raw material is forced into a mould, and once the material is hardened, it is cast out from the machine. This process is also known as the shape-forming process and can be used on aluminium, ceramic and steel. See (Fig. 3 & 4).

Cheaper labour cost in Indonesia for its labour-intensive production. In the manufacturing process, automation is to mould basic plastic parts (Fig. 5 & 8). However, there is a limit to automation due to constant changes in the design of the toy premium. The labour intensive processes are in assembly, spray printing, packaging and customization.

Order visibility. Combine Will have been working closely with their major customers for approximately 26-years. The factory is earmarked for major customers and should provide some visibility of orders in the future. Combine Will to date manufactured around 2bn toys.


The current price of S$1.05 represents a price to earnings of 10.2 based on annualised 1H18 earnings.

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About the author

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Alvin Chia
Research Analyst
Phillip Securities Research Pte Ltd

Alvin covers telecommunication and technology sector.

He graduated with a bachelor of commerce, majoring in Accounting and Finance from Monash University.

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