Overview

Scud Group Limited (1399.HK) is engaged in the sales and marketing ofself-manufactured rechargeable battery packs for mobile phones in China under its own SCUD brand. All of the Company's principal products are manufactured in-house in Fuzhou, China. It is also an original equipment manufacturer (OEM) of rechargeable battery packs for mobile phones, notebook computers and chargers. As of June 30, 2006, with respect to its own brand business, the Company had over 1,600 models of mobile phone rechargeable battery packs, which are compatible with over 2,200 mobile phone models. During the year ended December 31, 2005, Scud Group Limited's own brand business accounted for approximately 66.4% of its total turnover.

Financials (In thousands of RMB)

Key Elements

• Further brand building by way of upgrading the distribution network

The Group intends to use a portion of the proceeds from the International Offering to further enhance its brand equity through providing financial sponsorship for the upgrade and revamp of specialized display counters of approximately 6,000 key sales points within its existing distribution network in the PRC. Such counters will bear the logo of the Group and will adopt the standard colour and design scheme of the Group. The Directors believe that a focused branding strategy will enable the Group's products to be readily distinguishable and help set the foundation for the future development of the Group.

In addition, the Group intends to enhance the reach of its existing distribution network by increasing market coverage and attracting and retaining quality distributors. The Group hopes to further raise the profile of the "SCUD " brand by devoting more resources to its advertising and promotion campaigns. Additionally, in order to further promote battery packs for digital consumer electronics products, including rechargeable battery packs for digital cameras and camcorders, the Group plans to develop a separate distribution network for such products. To this end, the Group will concentrate on developing alliances with quality distributors.

• Diversify product portfolio while maintaining a focus on mobile phone rechargeable battery packs

The Group will continue to focus on maintaining its market leadership in its own brand mobile phone rechargeable battery packs and at the same time, the Group will dedicate more resources to capture the growth in demand for rechargeable battery packs for other portable electronic devices in the PRC. The Group's key product, the mobile phone rechargeable battery pack, caters to the 3C market. The Directors believe that in line with the PRC's growing domestic economy, growth in demand for 3C products will increase which will also lead to growth in related requirements for battery packs needed to power such devices. Accordingly, the Group intends to further broaden its product range and develop compatible rechargeable battery packs for other 3C products, including notebook computers, digital cameras and other personal electronics, in order to enlarge the Group's revenue base and enhance its market competitiveness. The Group will also closely monitor the changing preferences of the end customers and the market trend and will provide more product choices for its end customers to cater for their different needs through the timely launches of new series of rechargeable battery packs for various portable electronic devices.

The Group will also continue to focus on consolidating its market leading position in mobile phone rechargeable battery packs. In the first half of 2006, the Group launched the "Gold" series targeting at customers who prefer to strike a balance between the cost and the long-lasting power of the rechargeable battery pack. The Group will use a combination of product differentiation and pricing strategies to broaden its customer base.

• Explore new sales platforms to participate in retail business

The Group intends to leverage on its brand and reputation and explore opportunities for the Group to participate in the retail portion of the supply chain of rechargeable battery packs. The Group has recently entered into a co-operation agreement with a nationwide electronics retail chain in the PRC. Pursuant to such arrangement, the Group will at its own cost set up sales counters within the retail chain stores and share with the retail chain operator an agreed percentage of the revenue generated from the sales of the Group's products at these sales counters. The Group will continue to explore new sales platforms and opportunities to further participate in such retail supply business to expand the distribution of its own brand products.

• Continue to adopt market-oriented approach for research and development

The Group will focus on developing new products with market potential by adopting a market-oriented approach for its research and development policies. The Group will continue to carry out market analyses before developing and launching new products. In addition, the Group will further improve its research and development capability through the acquisition of additional quality control and testing equipment as well as the employment of additional staff for the research and development department, so that it is able to develop new high quality rechargeable battery packs more quickly and shorten its product roll-out period as well as to ensure the quality consistency of its products.

• Expand capacity while continuing to improve product quality

In order to operate production base independently from its Controlling Shareholders and to meet the growing demand for products, the Directors intend to replace its current leased production facilities (which is being leased from Scud Stock, an associate of the Controlling Shareholders) with new, expanded and self-owned production facilities to be constructed on a new land site acquired by the Group in Fuzhou, PRC. Upon completion of the construction of the new production base, the Group will move all its production facilities to the new site. The construction of the production facilities will be conducted in three phases. The Directors expect construction to start in the first quarter of 2007, and to be completed in the second half of 2008, with production at the new facilities commencing by the end of 2008.

The Group's reputation is built on the quality of its products. The Directors believe that maintaining and enhancing the quality of its products is critical to attracting and retaining its customers. The Group will continue to focus on improving on its quality inspection systems and adhering to strict quality standards for its products to help strengthen its market reputation.

                                                                   Source:  e-finet.com

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News

Scud Shares Oversubscribed