Letter to Shareholders

Now, I hereby thanks to every shareholders on behalf of T3EX group for your cares and supports. The Company still keeps the strong business foundation and sensitive market insight to expand the business scale and increase global operating locations including Taiwan, Hong Kong, China, Japan, Korea, Vietnam, Thailand, Cambodia, Singapore, Malaysia, and Indonesia. By effective group resource integration, the Company not only provide an international logistics services but also provide comprehensive logistics such as customs declaration, warehousing, delivering, and supply-chain management. Via deep local culture cultivation and more potential markets development, the Company anticipates that the brand will step to a level of global market leader.

2018 Review

Expressed in thousands of New Taiwan Dollars 2018 2017 YoY
Revenue 11,536,269 10,537,008 8.14%
Gross Profit 1,963,236 1,924,035 7.24%
Gross Margin 17.02% 18.26% -0.15%
Profit after tax 366,598 252,737 108%
EPS(Dollars) 3.07 2.07 86%

In 2018, our revenue has made a new record, reaching NT$11.536 billion, increasing 9.48% from 2017, and the revenue exceeded NT$10 billion for the second consecutive year. As for our profit, the net profit after tax reached NT$366 million, and the after-tax earnings per share reached NT$3.07, which is our best achievement since listing.

As for products, since the trade war between the United States and China started in the second half of 2018, manufacturers shipped goods in large quantities in the second half of 2018 in order to avoid tariffs. The freight and volume for ocean and air freight market skyrocketed during the second half of the year, the 2018 revenue for shipments by ocean reached NT$6.5 billion, increasing 10% from the same period of last year; gross profit reached NT$1.1 billion, which is about equivalent to the same period of last year. The volume of ocean shipment increased by 12% compared with the same period of last year. The revenue of air freight operations reached NT$3.46 billion, increasing 15% from the same period last year. The gross profit reached NT$470 million, increasing 10% from the same period last year. The volume of air shipment increased 6% compared with the same period last year.

In 2018, the revenue of logistics business was NT$1.56 billion, a slight decrease of 4% compared with the same period of last year. The gross profit reached NT$380 million, a slight increase of 3% compared with the same period of last year. Although the revenue of logistics business decreased slightly, profit grew. This was mainly due to the downsizing of logistics business in the subsidiary in Shanghai, which significantly reduced losses.

2019 Outlook

1. The outlook of ocean freight market:
As the implementation date for 2020 low-sulphur fuel compliance by the International Maritime Organization (IMO) is approaching, shipping companies are speeding up the dismantling of old ships and retrofitting on existing ships to install exhaust scrubbers; according to Alphaliner survey, a little more than 30 container ships each month will be removed from service to retrofit them with scrubbers in the second half of this year. The container ship capacity continues to decline, and it is expected that supply and demand can be balanced this year.

In order to reduce the impact of the trade war between the United States and China on the ocean business, the Company continued to develop non-US routes such as Europe, Africa, the Middle East, New Zealand and Australia, and continue to invest in the Southeast Asian market. As the trade war between the United States and China continues to affect the global economic and trade environment, the global supply chain structure is transferring to different regions. Southeast Asia with its demographic dividend and land resource is benefiting the most. The company has been developing the Southeast Asian market for more than 10 years. Currently, it has established more than 10 branches in Vietnam, Thailand, Singapore, Malaysia, Cambodia and Indonesia. The overall revenue from the East Asia region for the first quarter of the year (including Southeast Asia, Japan and South Korea) increased 113% compared with the same period last year. The group will also set up a new company in the Philippines this year, and continue to develop the ASEAN market in the future.

2. The outlook of China-Europe Railway:
According to the statistics of China Railway, in 2018, there were 6,300 China-Europe train, an increase of 72% each year and approximately the sum of all the China-Europe railways heading from 2011-2017, 80% of the goods are concentrated in Chengdu, Chongqing, Xi'an, Wuhan and Zhengzhou; the 2nd Belt and Road Forum for International Cooperation was held in Beijing on 25th of April in 2019. The 2019 goals for China-Europe railway set by the Chinese government are to promote the utilization of information technology and create digital railways and to strengthen the integration of China-Europe railways and local industries. Therefore, promoting the China-Europe railway business is one of the main objectives of the local government of China.

The company started China-Europe railway business in 2014. In 2019, we founded a railway division and mainly focus on the China-Europe railway business and established teams in 17 cities including Zhengzhou, Dalian, Chengdu, Chongqing, Xi'an and Wuhan. For the first quarter of 2019, the gross profit of China-Europe railway business increased 24% compared with the same period of last year and in April 2019, we booked an entire train from Zhengzhou to Hamburg, German for the first time and the revenue from a single train is nearly $RMB 1 million. We will continue to strive for the business opportunities of booking entire trains by expanding our collaboration with overseas agencies in Russia and Europe in the future to actively promote the China-Europe railway business.

3. The outlook of air freight market:
There has been a slowdown in this year's demand for electronic consumer products and the trade war between the United States and China has caused tension in the global trade environment. Our customers have responded by reducing inventory, thus it is expected that momentum for global trade will slow down this year. However, the Company still facilitates growth in its air cargo business by its own sales abilities, such as attracting orders from the international enterprise customer through our investments in the Singaporean logistics and warehouse company ATP in the fourth quarter of 2018, increase orders by striving for agency opportunities in Europe, China and Middle Eastern markets, and continue to increase volume of logistics services to cross-border e-commerce.

4. The outlook of China domestic logistics:
In 2018, China held its first China International Import Expo in Shanghai. The president of China, Xi Jinping said in his opening speech that China would lower tariffs and reduce the cost of the importing procedures. He announced that China will import goods worth $USD 24 trillion in the next 15 years, and China will be transformed from a “major exporting country” to a "major importing country" and transformed from "world’s factory" to "world’s market." With the promotion of the Chinese government, logistics importing service will be urgently needed. China is currently the country with the biggest demand for logistics services in the world, but most of the resources are scattered and divided, resulting in high logistics costs. Therefore, providing customers with efficient logistics supply chain will be the key to success.

Future operating strategy and development plan

With globalization, global procurement, global production, global circulation, and global consumption have become the growing trend, and the logistics industry is also facing a critical period of transition toward intelligent logistics. The T3EX group supply chain platform expanded its service from business-to-business to business-to-business-to-consumer through its many services such as multimodal transport, warehousing and distribution, e-commerce platform, cross-border e-commerce logistics, customs declaration and supply chain finance. At the same time, integrated logistics, product flow, data and cash flow through big data analysis to gain higher added value. This year, the T3EX group will continue to integrate internal resources and operate on an asset-light strategy. The main priorities are:

  1. Develop various route and market through multimodal transport.
  2. Build smart warehouse of B2B2C.
  3. Develop cross border e-commerce logistics including Inter-Asia, USA and Europe area.
  4. Develop supply chain finance service.

We will continue to strengthen our expertise and create greater values for our shareholders.

Chairman: David Yen
General Manager: Echo Wan
Accounting Management: Allen Hou