Description of Portfolio Company
S3 Investment Company holds a 51% equity interest in SINO UJE, a nonstocking distributor of western designed and manufactured high tech products to the China market. SINO UJE sells medical and industrial products in China through both direct selling activity and relationships with a nationwide network of local and regional agents. Direct offices in Shanghai and Guangzhou are operational for the direct sales coordination and the management of the distribution network.
SINO UJE utilizes a highly effective staff with years of experience selling in the China markets and its senior management has over 120 years of Chinese and international business expertise. This senior management group knows the product distribution business from both sides (supplier and distributor) and from both inside and outside of China.
Since S3 made its investment into SINO UJE, its financial performance has steadily improved. Revenues grew each month in the first quarter of 2005, almost immediately outpacing projections set forth by S3 management at the beginning of the year. Much of this success is attributable to increased capital resources, which allowed SINO additional purchasing power and resulted in the doubling of sales volume in a single month early in 2005. Building on that first quarter success, SINO experienced sustained growth throughout 2005. SINO has developed to the point that S3 is receiving repayment of its investment capital and expects regular repayments throughout 2006.
Summary of SINO UJE Investment
- Equity Position: 51%
- Expected Return to S3 Shareholders:
- Repayment of $750,000 line of credit provided by S3, plus interest
- Value of ongoing 51% equity position in revenue payments back to S3
- Potential for spin-off in to public markets with stock dividend to S3 shareholders
- Candidate for acquisition by large medical device company with cash or stock dividend to S3 shareholders, depending on whether the acquiring company is public or private
- Capital appreciation of S3 stock as portfolio value of SINO UJE increases