IPO Report: TCP International Holdings Ltd. (TCPI)

Francis Gaskins  |

TCP International Holdings Ltd. ($TCPI) believes that the market for LED lighting solutions is at an inflection point that will drive increased adoption. It is headquartered in Cham, Switzerland,

Fourteen other companies are scheduled for the week of June 23, 2014. The complete IPO calendar is available at IPOpremium.

The manager and co-managers are Deutsche Bank Securities and Piper Jaffray. The joint managers are Canaccord Genuity and Cowen and Company.

TCPI scheduled a $100 million IPO with a market capitalization of $440 million at a price range midpoint of $14 for Thursday, June 26, 2014 on the Nasdaq.  SEC filings

TCP International Holdings Ltd. IPO Report


TCPI believes that the market for LED lighting solutions is at an inflection point that will drive increased adoption.

However, it's not necessarily growing the market, it appears to be cannabilizing the compact fluorescent lamplighting (CFL) market from itself.

Top line revenue grew 19% for 2013 vs 2012. The rate of growth slowed to 12% for Q1 '14 vs Q1 '13.

There was a $4 million foreign exchange swing in TPCI's favor for Q1 '14 vs Q1 '13, resulting in a 3.9% Q1 '14 profit vs a 1% Q1 '13 profit.

It's difficult to feel comfortable with income projections when a company has major foreign exchange gains (losses) swings.

TCPI bills itself as a technology company but the gross margin is only 25%. True technology companies have higher gross margins.


Valuation Ratios

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annualizing Q1 '14


TCP International Holdings Ltd. (TCPI)*







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*Q1 '14 helped by a $3mm swing in foreign exchange (losses) gains



The rating on TCPI is neutral.


TCPI is a leading global provider of energy efficient LED and CFL technologies.

TCPI designs, develops, manufactures and delivers high quality energy efficient lamps, fixtures and internet-based lighting control solutions.

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TCPI has established the largest number of Energy Star® compliant lighting products for LEDs and CFLs combined.

Product mix

For the last several years CFL lamp sales have represented the majority of overall sales mix, comprising 81.7%, 72.6% and 67.5% of 2011, 2012 and 2013 net sales, respectively and 58.8% of net sales for the three months ended March 31, 2014.

The decline in CFL sales as a percentage of net sales principally is the result of the successful introduction and expansion of new LED products, which grew from 4.3% of net sales in 2011 to 15.7% of net sales in 2012, to 25% of net sales in 2013 and to 35.9% of net sales for the three months ended March 31, 2014.

Internally developed technology

TCPI’s internally developed driver, optical system, thermal management, and power management technologies deliver a high standard of efficiency and light quality.

TCPI’s broad portfolio of advanced LED and CFL lamps and fixtures enables it to address a wide range of applications required by its retail and commercial and industrial (C&I) customers.

The lighting market is characterized by rapid product innovation and, as a result, TCPI has maintained integrated product design and manufacturing capabilities to allow TCPI to quickly respond to the rapidly evolving demands of its customers.

TCPI’s products are currently offered through thousands of retail and C&I distributors.

Since its inception in 1993, TCPI has sold more than one billion energy efficient lighting products.

General lighting market

The general lighting market is in a state of transition from inefficient lighting technologies, primarily incandescent lamps, to efficient lighting technologies, primarily LEDs and CFLs.

This transition is driven by improving light quality, appealing economics, government regulations, public awareness, and emerging connectivity and control capabilities.

According to McKinsey, the global LED and CFL markets are expected to grow from $22.1 billion in 2011 to $87.4 billion in 2020 in aggregate, representing a CAGR of 16.5%.

LED lighting market

TCPI believes that the market for LED lighting solutions is at an inflection point that will drive increased adoption.

Distribution channels

Currently, TCPI sells the majority of its products in the United States and Canada, accounting for 82.4% of its net sales in 2013.

Key customers in the retail channel include The Home Depot, to which TCPI ise one of the largest energy efficient lamp suppliers in the United States; Walmart, from whom TCPI received a Supplier Award of Excellence in 2013, and Carrefour.

Key customers in the Commercial & Industrial (C&I) channel include HD Supply, Regency, Rexel, CED, and Grainger.

TCPI’s net sales in the United States and Canada are principally made through its retail channel, most notably through The Home Depot (HD) and Walmart (WMT) , as well as through various C&I distributors.


In addition, TCPI has significant sales, marketing and distribution infrastructure outside of the United States and Canada, especially in EMEA, Asia and Latin America, which represented 7.7%, 5.1% and 4.9%, respectively, of its net sales in 2013.

In the first half of 2014, TCPI opened its newest sales offices in Japan and Germany.

TCPI’s largest Asian customers include IRIS, a C&I distributor in Japan, and Emart, a retailer in South Korea.

In 2012, TCPI acquired its distributors in Europe and Latin America. TCPI believes that these acquisitions have provided us with the ability to expand in markets that are transitioning to energy efficient lighting.

Dividend Policy

No dividends are planned.

Intellectual Property

TCPI owns 21 issued U.S. patents and 19 pending U.S. patent applications.

TCPI’s U.S. patents are expected to expire between 2016 and 2032.


As a result of its broad product portfolio, TCPI faces global competition from a variety of well-established and emerging lighting companies.

TCPI believes that its competitors mainly operate under two distinct business models, with some manufacturing lamps in-house and others purchasing lamps through joint ventures or from original equipment manufacturers, or OEMs, for resale under their own brand.

5% stockholders

Lillian Yan Irrevocable Stock Trust1        10.9%                                                  

Ellis Yan2         56.1%

Solomon Yan3              33.0%

Use of proceeds

TCPI expects to net $90 million from its IPO. Proceeds are allocated as follows:

to acquire and develop advanced, automated manufacturing equipment to expand its LED manufacturing capacity, for the repayment of indebtedness outstanding and for general corporate purposes. The indebtedness to be repaid will be a portion of TCPI’s outstanding short-term bank loans and revolving line of credit. The short-term bank loans each have a maturity of less than one year. The weighted average interest rate on these loans as of March 31, 2014 was 4.21%.

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