Hollysys Automation (NASDAQ:HOLI)

Q3 Financial Highlights

• Quarterly revenues of $66.1 million, representing an increase of 18.6% compared to $55.8 million year-over-year.
• Gross margin at 39.3%, as compared to 40.3% year-over-year, and 38.5% quarter-over-quarter
• Non-GAAP net income attributable to Hollysys of $11.6 million, as compared to $9.6 million and a 20.8% increase year-over-year.
• Non-GAAP Diluted EPS at $0.21 reported for the quarter, as compared to $0.17 year-over-year
• Record-breaking backlog of $401.8 million as of March 31, 2012, a 43.1% increase compared to $280.9 million year-over-year, and 21.0% increase compared to $332.1 million quarter-over-quarter.
• Inventory turn-over days of 68 days for this quarter compared to 101 days year-over-year.
• Quarterly DSO of 160 days, as compared to 156 days year-over-year.
• Generate net cash provided by operating activities of $1.5 million for this quarter.

Dr. Changli Wang, Chairman and CEO of Hollysys, stated: "We are pleased to report another quarter with solid operating and financial results. Here I would like to take this opportunity to discuss some key events that took place in this quarter:

"Industrial automation is continuously growing towards the top position in domestic market and starting to build its brand power globally. We keep seeing strong business demand across all of our products and industry verticals. The significant growth we reported in the quarter clearly validates our dedicated industry expert total solution and sales network expansion strategies. Our established brand recognition, strong track record of customization, quality and service, efficient R&D and implementation together with customer-orientated flexibility give us a significant competitive advantage over domestic and international competitors. We believe Hollysys is in an excellent position as we pursue future growth in industrial automation market.

"In our high-speed rail segment, we successfully won the international bid and signed a contract of approximately US$63.15 million with MTR Corporation Ltd to provide the complete suite of high-speed rail signaling systems to Guangzhou-Shenzhen-Hong Kong Express Rail Hong Kong Section. As the first-ever international contract for our high-speed rail signaling system amid the stiff competition from other world class signaling system providers, this contract is of paramount importance and remarkable milestone in steering our business to the next level in the global arena. On the domestic side, we believe we will continue to benefit from the continuous construction of high-speed rail called by the huge demand for rail transportation across the country. With the successful Safety certification in accordance with International Standards for our Signaling products and system, we will continue to leverage on our strong commitment to Research & Development, quality and service to further explore business opportunities in bothChina and abroad.

"In subway business, in addition to the Hong Kong MTR contract and Beijing Subway Line 14 contract of supplying the integrated surveillance control and data acquisition system (SCADA) we signed last quarter, we are expecting our self-developed proprietary subway signaling system to obtain the European Safety Standard Certification Level 4 (SIL 4) by the end of 2012. We are excited about the subway signaling system because it clearly differentiates Hollysys and will bring us to a higher level in competing with other players to propel our subway business in both Chinese and international market.

"What's more, we made substantial progress in our strategy of international market expansion through our successfully acquired company - Concord. In this quarter Concord successfully signed a retrofit project of USD $14.02 million with Shaw Brothers Limited to supply and provide installation and electrification services for Shaw Centre in Singapore. We are seeing building automation is becoming a lucrative market given the increasing high-end commercial buildings and growing demand for retrofit projects of existing commercial buildings in many markets. Meanwhile, Concord has been actively working on a few international biddings and projects in rail and industrial automation sectors. The acquisition of Concord has been proved to be a good synergy and successful by combining our proprietary technology and Concord's international team, we will continue to leverage the core capabilities to further penetrate into the international arena and build Hollysys into a world leading automation and control technology and products provider."

Outlook for FY 2012

Dr. Wang concluded, "Due to severe slow down of China's high-speed development, as well as overseas projects delayed because of the mixed international environment. We are revising the previous announced FY2012 revenue guidance between $354 million and $356 million, down to between $310 million and $ 320 million; but we are confidently reiterating our FY 2012 net income guidance between $ 57 million and $ 58 million unchanged."

BEIJING, March 20, 2012 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI)("Hollysys" or the "Company"), a leading provider of automation, control technologies and applications in China, announced today that it has successfully won contracts to design, supply and implement the High-Speed Rail Signaling Systems for the MTR Corporation. These contracts are primarily to implement the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL). The contracts are valued at approximately HK $489.9 million, or US $63.15 million.

Pursuant to the terms of the contracts, Hollysys will design, supply and implement both the on-board signaling equipment Automatic Train Protection (ATP), and the ground-based high-speed rail signaling equipment and systems including the Train Control Center (TCC), Lineside Electronic Unit (LEU), Vital Data Network, Interlocking System, Centralized Traffic Control (CTC), track circuit and auxiliary products, and provide related services for the Hong Kong section of the XRL connecting the West Kowloon Terminus in Hong Kong and Huangguan in Shenzhen which is 26 km in length, with a design line speed of 200km/h. The project is scheduled to be completed in 2015.

Hollysys has a highly reliable, proven and mature High-Speed Rail Signaling Technology and a successful track record in delivery and implementation on a number of high-speed rail lines including the Zhengzhou-Xian Line, Guangzhou-Shenzhen Line, Beijing-Shijiazhuang-Wuhan Line and Qinhuangdao-Shenyang Line, etc.

Dr. Changli Wang, CEO and Chairman of Hollysys, commented: "We feel very humble, honored and excited to win these contracts especially from such a reputable client as MTR given the stiff competition from other world class signaling system providers. This is a strong validation of our proven world class technology and it's recognition by MTR. This contract is of paramount importance as it is our first-ever international contract for our high-speed rail signaling system and marks a significant breakthrough and remarkable milestone achievement in steering our business to the next level in the global arena. "

"With the successful Safety certification in accordance with International Standards for our Signaling products and system, we will continue to leverage on our strong commitment to Research & Development and our implementation capability to further grow and strengthen our company. We will continue to explore the opportunities in international high-speed rail, subway and industrial automation sectors to provide our propriety products and systems and build Hollysys into a leading world class automation technology company through stable and sustainable growth, and continue to create value for our shareholders."

BEIJING, March 7, 2012 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, announced today that its wholly owned subsidiary Concord Corporation Pte. Ltd. ("Concord") signed a retrofit contract with Shaw Brothers Limited to supply and provide installation of mechanical and electrical equipment, fire protection system, civil & structural works, relocation of the existing electrical equipment and replacement of cables and others for Shaw Centre in Singapore, valued at approximately USD $14.02 million. The project is expected to be completed by October of 2012.

Shaw Center is one of the oldest and most recognized buildings in Singapore and this project will embark the BCA Green Mark Incentive Scheme which was introduced by Building Construction Authority (Singapore) (BCA) in 2005, to provide a meaningful differentiation of buildings which incorporates internationally recognized best practices in environmental design and performance.

Dr. Changli Wang, CEO and Chairman of Hollysys, commented: "We are pleased to announce this sizable contract win by Concord and glad to see that Concord is continuously winning contracts despite the current global economy situation. This contract winning also demonstrates Concord's smooth and successful integration into Hollysys and its business development is well on track. Meanwhile, Concord is actively working on winning new international businesses in rail and industrial automation sectors in Southeast Asia and the Middle East. We are confident that it will continue to pave our way to a broader market space and to create value for our shareholders."

Second Quarter 2012 Results

• Quarterly revenues of $80.3 million, representing an increase of 8.0% compared to $74.4 million year-over-year.
• Gross margin at 38.5%, as compared to 36.0% year-over-year, and 37.8% quarter-over-quarter
• Non-GAAP net income attributable to Hollysys of $20.4 million, as compared to $15.0 million and a 36.4% increase year-over-year.
• Non-GAAP Diluted EPS at $0.37 reported for the quarter, as compared to $0.27 year-over-year
• Record-high backlog of $332.1 million as of December 31, 2011, a 15.1% increase compared to $288.5 million year-over-year, and 10.7% increase compared to $300.1 million quarter-over-quarter.
• Inventory turn-over days of 54 days for this quarter compared to 60 days year-over-year.
• Generate record-breaking net cash provided by operating activities of $57.8 million for this quarter.

Backlog Highlights

Hollysys' backlog as of December 31, 2011 was $332.1 million, compared to $300.1 million on September 30, 2011, and $288.5 million on December 31, 2010.

Outlook for FY 2012

Dr. Wang concluded, "Given our strong backlog currently on-hand and sales pipeline, we are reiterating our annual guideline of revenue in the range between $354 million and $356 million and non-GAAP net income in the range between $57 million and $58 million on consolidated basis."

BEIJING, Jan. 15, 2012 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced the departure of Peter Li, CFO, who is leaving the Company due to personal reasons at the expiration of his three-year contract, effective February 1, 2012, and appointment of corporate senior executives of CFO, COO, and Senior VP Business Development.

Ms. Herriet Qu, Financial Controller, is promoted to Chief Financial Officer of Hollysys overseeing the overall corporate financial management. Ms. Qu has been with Company for more than four years with MBA degree from Oklahoma City University. Mr. Jianfeng He, CEO of Beijing Hollysys Group Corporation, is promoted to Chief Operating Officer of Hollysys in charge of Company's daily operation and supply chain management. Mr. He has been with Company for more than 14 years, with PHD in Automation from South China University of Technology. Mr. Baiqing Shao, Vice President of Beijing Hollysys Group Corporation, is promoted to Senior Vice President Business Development of Hollysys in charge of merger and acquisition and new business exploration. Mr. Shao has been with Company for more than eighteen years as one of the founding group of engineers, with Master of Computer Science from the 6th Research Institute of China Electronics Corporation and MBA from Beijing University. Ms. Jennifer Zhang, IR Manager, is promoted to IR Director of Hollysys in charge of investor relations management and corporate communications. Ms. Zhang has been with Company for more than three years, with B.A. in English Literature from Nanjing Agricultural University.

Mr. Peter Li, the departing CFO, commented, "I was blessed to be part of Hollysys' team in its journey of significant growth realization and capital market recognition over the past three years. Hollysys is well-set for the next phase of growth on much improved infrastructure of operational and financial management under the leadership of this team, thanks to the visionary strategy adopted, tough decisions made, and short-term sacrifices endured. I am confident that the team of internally promoted CFO and IR Director will come together to fill in my shoes with the team's support, to enable the Company's growth to the next higher level. I will continuously cheer for every success achieved by Hollysys on the side-line. From bottom of my heart, I will always be part of Hollysys team."

Dr. Changli Wang, Chairman and CEO of Hollysys, commented, "Peter has been a great addition to Hollysys team. Under his leadership, we see Hollysys market capitalization growing by multiple times, sell-side analyst coverage expanded dramatically including bulge-bracket banks, and our investor base diversified and improved by leaps and bounds. He is truly a Hollysys story evangelist in the capital market for us. We are grateful to his contributions as Hollysys CFO and extend our best wishes to his new endeavors! Going forward, I will allocate more of my time in communicating with investors and analysts, together with Jennifer and her team. With Herriet, Jianfeng, and Baiqing readily stepping up to their roles, I believe this new team will be capable to grow the Company to the next level of development. "

BEIJING, December 27, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd.(NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, announced today that it has been awarded three separate contracts by different power corporations in the country, to supply its proprietary industrial Distributed Control Systems (DCS) to 6X660MW ultra-supercritical thermal power generating units in aggregate, with all of the delivery expected to be completed by the end of 2012.

The three DCS contract wins include 2X660MW ultra-supercritical thermal power generating units of Yuejiang Thermal Power Plant constructed by Guangdong Yudean Group Co., Ltd. In Guangdong Province, 2X660MW units of Dianta Thermal Power Plant by Shenhua Shendong Power Company Ltd. in Shaanxi Province, and 2X660MW units of Guizhou Panxian Thermal Power Plant by Guangxi Investment Group in Guizhou Province.

The automation and control system for large-scale thermal power plants is consisted of various ancillary sub-systems besides the core DCS system, such as optimization, desulfurization, Digital Electric Hydraulic Control and etc. It is a common practice for DCS supplier to commission the ancillary sub-systems in automation and control of large-scale thermal power plants due to the nature of DCS system. The company expects to generate a series of follow-on contracts on the three DCS contract wins.

Dr. Changli Wang, Chairman and CEO of Hollysys, commented, "We are pleased to have established a strong foothold in high-end thermal power automation and control market in China evidenced by a string of DCS contract wins of 660MW power generating units, which have been pretty much dominated by multi-national corporations. We will continue to leverage on our proprietary technology and total solution approach to further penetrate into high-end segments of industrial automation and consolidate low-end to mid-end market through expanded sales and service network in the country, to create value for our shareholders.

BEIJING, Dec. 22, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced that it received a purchase order from China Techenery Co., Ltd. (CTEC), to supply its proprietary non-safety automation and control products to #3 reactor of Yangjiang Nuclear Power Station, valued at approximately USD $1.8 million, or RMB 11.5 million. This is the first batch of a series of purchase orders to be granted to Hollysys for #3 reactor project of Yangjiang Nuclear Power Station.

The Yangjiang nuclear power station in Guangdong province is funded and constructed by a consortium of power corporations led by China Guangdong Nuclear Power Holding Co. (CGNPC), and designed to have six one-gig watt (GW) pressurized water reactors using CGNPC's proprietary CPR-1000 technology.

Dr. Changli Wang, Chairman and CEO of Hollysys, commented, "We are pleased to see the continuous order flow from our nuclear JV for our proprietary nuclear non-safety automation and control products. As the only qualified local automation and control technology provider to nuclear industry in China, Hollysys will leverage the strategic alliance with the largest nuclear builder and operator in China to further penetrate the nuclear automation and control market both in China and internationally, to create value for our shareholders."

BEIJING, Dec. 16, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, announced today that it signed a contract of approximately US$ 4.2 million or RMB 26.60 million to supply its 200-250km/h high-speed rail ATP equipment to Ministry of Railways of China ("MOR"), which will be finished delivering by December 31, 2011.

The on-board signaling equipment ATP (Automatic Train Protection) works together with the ground-based signaling equipment TCC (Train Control Center), as the crucial control elements in the high-speed railway signaling systems to ensure the safety and reliability of the high-speed railway operation.

Dr. Changli Wang, CEO and Chairman of Hollysys, commented: "We are pleased of signing this 200-250km/h high-speed rail ATP contract for the works we've already completed largely. With approximately 17,000 km of high-speed rail tracks currently in construction in China, we are still seeing a huge market potential in high-speed rail signaling market for leading players like Hollysys to realize and capture. Given the whole product suite of our proprietary high-speed rail signaling systems completed and received European Safety Standard certification, Hollysys is poised to explore the vast international railway market to further create value for our shareholders."

First Quarter 2012 Results

BEIJING, Sept. 12, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"),a leading provider of automation and control technologies and applications in China, today provided a further update of purchases under the management stock purchase plans established by several members of the company management, led by the Chairman and CEO.  As of September 12, there have been purchased an aggregate of 1,169,357 shares of Hollysys.

The Company announced on August 15, 2011, that the management persons led by Dr. Changli Wang, Chairman and CEO, had committed an aggregate of $7.5 million for purchases under the management stock purchase plans. The Company subsequently announced that as of September 6, 2011, an aggregate of 725,467 shares had been purchased under the management stock purchase plans.

Dr. Changli Wang, Chairman and CEO of Hollysys, commented: "We are pleased to announce the purchase of another 443,890 shares under the management stock purchase plans since last week's update. The continuous purchase by management members is a strong indication of our collective confidence in Hollysys' business fundamentals and growth prospects. During difficult times, we would do anything within our power to support and protect our shareholders' value. We will provide further updates on purchases made under our stock purchase plan."

BEIJING, September 7, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, announced today that it won a contract to supply its proprietary ground-based high-speed rail signaling system to Wuhan-Xianning high-speed rail line with a designed traveling speed of 200-250 km/h, valued at approximately US$ 3.3 million or RMB 20.9 million. More details. 

BEIJING, Sept. 6, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI ("Hollysys" or the "Company"),a leading provider of automation and control technologies and applications in China, today announced that several members of the company management, lead by the Chairman and CEO, have purchased approximately 725,467 shares of Hollysys as of today.

The Company announced the management stock purchase plan on August 15, 2011, in which the management persons lead by Dr. Changli Wang, the Chairman and CEO, would commit up 5 mto $7.illion US dollars for their purchase.

Dr. Changli Wang, Chairman and CEO of Hollysys, commented: "We are pleased to provide an update on the significant progress of our management stock purchase plan, which demonstrates our confidence in Hollysys' strong business fundamentals and prospects, and our unshakeable commitment to supporting and protecting our shareholders' value during difficult times. We will provide further updates on our stock purchase plan status in the next week or two. As the Chairman and CEO, I am putting more of my efforts in communicating with our investors at this difficult time. I am attending J.P. Morgan's Greater China Factory Automation Corporate Access Days in Hong Kong and Singapore this week, and I am also scheduled to attend Daiwa Green Day 2011 in Singapore on September 30. We are trying our best to create shareholders' value from both business fundamental and investor communication perspectives."

Mr. Peter Li, CFO of Hollysys, stated: "We are scheduled to hold this year's Annual Investor Day on October 20 at our Beijing premises, a 6-hour fully packed event with key management presentation and facility tour, through which we hope to enhance investors' understanding of our team and business. Investors who would like to participate in this event shall contact their respective broker to make a reservation, which is on limited availability basis. We look forward to hosting our investors at our Annual Investor Day!"

A Letter to the Investors

Dear investors,

2011 was a tough year for us, economic recovery in the world has been slower than many people expected, and the Chinese economic growth has been subdued due to a series of tight fiscal and monetary policies to rein in the nonstop inflation, which render the much needed capital a scarce resource for small and medium non state owned enterprises. In spite of all of the difficulties, we are still pleased to report a strong set of results for the financial year 2011. Our revenue grew 51% to $262.8 million; net income increased by 60.2% to $42 million, earnings per share was reported at $0.76 compared with $0.51 EPS for last year. We closed our year with a healthy backlog of $296.4 million, which will help us to deliver a promising result for the year 2012.

Tough time never last, but tough people do.

Hollysys survived a string of unprecedented strikes and passed the severe test with an outstanding score amidst the negative market conditions and external disastrous events during our fiscal year 2011. The first came in to nearly halt the high-speed rail business since February, when the minister of the Ministry of China Rail, Liu Zhijun, who didn't support Hollysys during his tenure, was removed because of criminal activities. Then the new nuclear power plant projects got suspended from March, a rippling effect of the Japanese nuclear power plant radiation leakage accident caused by the earthquake and tsunami. In addition to the two cold waves fallen upon us, Hollysys experienced the most catastrophic plague, which was the short selling pressure and the distrust of the China based companies, because some of them, especially those went public through back door listing, were found lacking of adequate corporate governance and internal controls and discovered or exposed to commit serious frauds in their proclaimed business data such as contracts, revenues, profits even bank account balances. With extraordinary courage and efforts called upon to have overcome the previous pummels, we had to confront another disastrous impact, the Wenzhou high speed rail collision accident, which killed 39 passengers and injured 191 passengers. Even though we concluded that our ATP system worked fine and normally during the accident based on data analysis from various sources not long after the accident, and we announced our conclusion on a timely basis, the tragic event still led to severe panic among our shareholders, and drove our prices to the 52 weeks low.

During these hard times, our colleagues and I did not complain or grumble about these unfair treatment, because we strongly believe that tough time never last but tough people do! There are no great long-lasting companies in the world without experiencing various hardships and perils. Compared with our multinational competitors, most of which have lasted more than a century, the tremendous hardship forced upon us now will stifle our potential vanity, complacency and impetuosity, solidify our business and strengthen our tenacity to strive for our great objective to build an everlasting, healthy and sustainable growing automation company in the world. Facing the uncontrollable difficulties, we calmly analyzed each of them and formulated clear strategies for every business sector.

For our nuclear power plant control business, which has improved our company image and raised our core competence dramatically by achieving the highest technical requirements and paramount quality specifications, and greatly inflated our shareholders expectations, we realized that the business has much more an emblematic meaning than an economical one to us and we have remained sober from the early stage. We calculated clearly, instead of speculating boldly, that our subsidiary joint venture company will get 4 to 6 projects each year at most for the next 10 to 15 years, under the current China's ambitious nuclear power development and construction plan. Although the nuclear power control business looks quite lucrative on project basis, it is very hard to become a powerful engine to drive Hollysys' perpetual growth at a desired pace due to its limited financial impact and earning capability. Understanding the scenario, Hollysys made the strategic decision on nuclear power control business sector, that we will deploy only adequate resources after our system platform is complete to guarantee the required system high quality and supply our JV to generate decent profit, and ensure our JV to continuously enjoy a leading position in this field in China.

Notwithstanding the ups and downs of our rail way automation business, including signaling system and SCADA system for the high-speed rail and subway segments, our judgment is that this will be a profitable and sustainable business with high entry barrier requiring critical safety concerns, and the market is quite lumpy and not huge enough to attract too many competitors. We understand this business very clearly that it is very difficult for us to forecast its financial figure on quarterly even annual bases. Considering the mass transportation requirement in China and the world, especially under the increasing pressure for environmental protection and energy conservation, we believe that railway transportation will grow for a very long time. Thanks to the Ministry of Rail, who awarded us this golden opportunity to design and supply the 250 km/h and 350km/h high-speed rail signaling system, and assisted us in setting up the collaborative relationship with Hitachi for the 250km/h on-board ATP system and with Ansaldo for the 350 km/h telecommunication based train control systems, we have grown from a new entrant to a very competitive signaling system provider within a short time span of 5 years, which would have taken the multinational competitors at least 10 years . Being able to participate in drawing the CTCS standard and having delivered successfully quite amount of signaling systems, which have experienced various severe application environments with solid quality and great functionalities, is an invaluable experience to understand the genuine requirement and specifications of high- speed rail signaling system, which would be impossible to grasp without hands-on practices. Through working and providing CTCS standard compliant signaling systems to MOR, we obtained a rare opportunity to learn high-speed rail signaling technologies and mature experiences and accumulate strong track records through which we successfully cultivated and developed our own proprietary capability from both technology and implementation perspective to support our strategic goal for this business going forward.

With our clear understanding of the CTCS, China Transportation Control System standards, and invaluable experiences accumulated from this round of China's high-speed rail build-out, we have finished all of the R&D investment and are qualified to fulfill all of the projects for the Ministry of China Rail, and could have temporarily boosted our earnings by diminished R&D spending. However, Hollysys has always been watching the big picture of this business. In order to establish long term distinguished competitive advantages, to be able to explore the rail market outside of China, and to exploit the full potential of our signaling platforms in metro systems, we have to redesign the whole set of signal systems totally on our own proprietary technologies and get fully certified by the prestigious European Organizations for the SIL 4 certification (Safety Level IV). It is a paramount of investment in capital and human resources for a fledgling business in Hollysys. Through fastidious analysis of all safety requirements and comparison of the technical advantages of the mature systems, and leveraging on our core technologies gained from our industrial control system design and development, our engineers worked around the clock for the past one and half years, and finished most of the prototypes of most of the platforms, and near the finish line to get all certified by the most prestigious TUV. The signaling system set includes the onboard ATP system with SIL 4 for high-speed rail and subway used to protect the train from over speed and accidents, the ground based TCC train control system with SIL 4 for ground safety control of trains, CBI computer based interlocking system with SIL 4 for both high speed rail and subway, ATS automatic train supervision system with SIL 2 for metro ATC systems, and some other auxiliary interfacing products. Based on our own technologies, we can customize our system platforms to meet every level of requirements from conventional rail signaling systems to the most state-of-the-art high-speed rail applications, not only for Chinese market but also for international market. Our current schedule is that most of the platform will be certified by the calendar 2011 year-end, and ATP for metro systems with ATO (automatic Train Operation) will be certified by the end of calendar 2012. Given the series negative events surrounding China's high-speed rail build-out, it is hard for us to make any prognosis on how quickly the China rail construction will recover, and all we can do is to make ourselves ready in all aspects in order to capture the opportunity when it does arise. Being armed with the full signaling product offerings, we are more confident and excited than ever to aggressively compete in the global arena of rail signaling market.

In subway SCADA business, we made a conscientious decision of concentrating on the quality customers and higher margin projects prior to our proprietary subway signaling system coming out to the market. The application of SCADA for subway operation is not safety and operation critical and there is a trend that price-cutting is the only competitive weapon wielded by our competitors. With our full suite of subway signaling products certified by European safety standard, our SCADA competitive advantages will be greatly enhanced by bundling it together with our signaling system, not only for the market in China, but the international market at large.

Innovation to Drive Long Term Sustainable Growth for the Industrial Automation Business

Since its inception, Hollysys has been very lucky, but we never depend on good luck. Every few months or on some special situations, my colleagues and I sit down calmly to evaluate our business environments and opportunities through comprehensive SWOT analysis, so as to make judicious decisions.

At the time when our high-speed rail business was showing and regarded as the most promising prospect, and our capabilities are ready for full fledged fly, we made the very tranquil judgment that this business would be a good long term business, but with certain level of uncertainties and lumpiness in nature due to customer concentration, Hollysys cannot afford soly depending on such a uncontrollable business to maintain a sustainable and steady growth over the longer term. Through a circumventing examination, we realized that our incumbent industrial automation business had much greater growth potential which we were far from fully exploiting it.

First of all, our mindset needs to be changed in order to perceive the new scenario of this traditional business, which means to re-define Hollysys industrial control business from a DCS system provider to a total system solution provider.

The demographic structure change and aging process acceleration will transform every aspect of our life in China. The shortage of labor force and the fast increasing labor cost will force most of the manufacturing factories to utilize automation products and systems to replace manual workers, which will create unfathomable additional growing opportunities for the automation companies and we will strive to gain a substantial part of it.

The second driving force derived from the fundamental transformation of business environment predicted by C. K. Prahalad and M.S. Krishnan in their book "the New Age of Innovation". According to Prahalad and Krishnan, the transformation is built on two basic pillars: namely N=1 and R=G BY N=1, it means that value is based on unique personalized experiences of consumers and firms have to learn to focus on one consumer and his/her experience at a time even if they serve 100 million consumers. R=G defines that no firm is big enough in scope and size to satisfy the experiences of one consumer at a time, and that all firms will access resources from a wide variety of other big and small firms, focusing on access of global resources instead of owning them. This mega trend is fully reflected in our industrial automation market. Firstly, the technological progress in all the measurement instrumentations and equipments, which become intelligent with sophisticated communication protocols rather than the 4-20mA physical signals, makes most of the field maintenance oriented engineers unable to handle, and it is far from economical for the factories to maintain these engineering staffs due to the dramatic increase in salaries and other labor costs. Therefore, more and more of our customers incline to let the system providers to become the MAV main automation vendor. We refer to this integrated solution as one-stop shop. Secondly, fierce competition between the manufacturing enterprises forces them to enhance their productivity and product quality constantly, and this can be easily realized through advanced automation recipes and algorithms. To obtain these objectives needs the systems provider to fully understand the manufacturing process, which requires the closer collaboration between the customer and the vendor. This trend will transform the conventional purchasing mode, where all systems and equipments are separately purchased through individual bidding processes, to a steady and long term collaboration between customers and qualified system vendors. This new relationship between customer and automation system provider based on long term collaboration is referred to as back room service provider.

Based on this point of view, Hollysys began to execute a new growth strategy from July of 2010. The new strategy comprises mainly three categories of actions: firstly, we enlarge the sales network all over China in three years so as to cover most the industrial areas to guarantee full access to every incumbent and potential customer. We refer to this strategy as farming the customer field, where you can expect your yield depending on your investment and labor, instead of sporadic hunting for projects, where you may succeed to get the prey only if you are very skillful and having some good luck. Secondly, we spend significant investments to enhance our system functions both vertically and horizontally. Vertical integration means that we will supply each customer with full spectrum of products from the DCS control to process management software packages such as AMS asset management system, MES manufacturing execution systems, APC advanced process control systems, OTS simulation and on job training system, and dedicated solutions for power, chemical, cement, iron and steel, pulp and paper process with expertise. Horizontal extension is to expand our products to include DCS, PLC, and proprietary safety protection systems and various instrumentation equipments integrated from our OEM resources or some third party vendors. Thirdly, we have been inviting prestigious experts in every application field to join Hollysys so as to help our customers improve their manufacturing process.

The new growth strategy for industrial automation has delivered astonishing results of more than 35% revenue growth year-over-year, which is much more than we expected, considering the DCS markets growth rate has been no higher than 12% in the past few years. More importantly, this stellar performance provides our colleagues with great confidence in our new set strategy, through which they see a high annual growth rate of 25% to 30% possible and plausible for industrial automation for the foreseeable future. Through our new growth strategy and strong execution, our goal is to enable a traditional low-growth business line rejuvenated to become a fully charged engine to drive our business growth forward.

M&A to Accelerate International Development

There has been a continuous pressure from our investors that Hollysys was too meticulous in M&A activities to utilize the capital to grow the business faster. Having seen too many M&A cases ended up with sad and vacant results instead of promising and promised growth, therefore we have been controlling the impetus to rush into any M&A just for the ego and vanity of the management team. Nevertheless, with perfect synergy in business operation and congruent match in cultures, we see the Concord acquisition will tremendously accelerate Hollysys' international business expansion and development.

Having a strong belief that the emerging markets will constitute a significant part of our business where potential customers are exuberant without local competitors, Hollysys has been trying to exploring the South and East Asian automation market for the past three years. It was quite disappointing to have realized that we didn't achieve our desired goal at a satisfactory pace, due to lacking an effective team capable addressing vastly different markets with cultural and linguistic differences and inability to establish a trustworthy brand in a short time. As we were groping around in the darkness and anxiety, Concord came to our eyesight. Established in 1983, Concord is an engineering company carrying out electrical systems and instrumentation installation and testing work in industrial sectors such as power plant, chemical process, water processing and semiconductor manufacturing. In the past five years, Concord has successfully entered a promising business segment, to install and test electric power and signal systems in metro transportation and high-speed rail industries. Being a grass-root enterprise without any prominent background, very much like Hollysys in this aspect, the founders of Concord, the Chim brothers, have known it well that they have no privileges and no one to rely on to win business opportunities except delivering outstanding engineering result with the lowest cost on consistent basis. Dreaming to build a long-term sustainable enterprise, they have been persistently improving the project management efficiency, the quality of service, and dedicating to a harmonious and mutual beneficial relationship between colleagues and customers with integrity and value-adding. Leveraging on its strong track record and reputation, Concord has become one of the most competitive engineering companies in ASEAN countries and Middle East, working as a sub-contractor with the most established EPCs in the region. Concord management was well aware that lacking of proprietary technology and products in its addressable market verticals prevents it from elevating its business to the next higher level. Both Concord and Hollysys see the perfect match of Hollysys' full product offerings in industrial automation and rail signaling markets combined with Concord's long-time established team and customer base and are highly confident in achieving the desired synergetic advantages and establishing Hollysys' foothold in international market, which in turn will create sustainable value for our customers and shareholders.

Better Value for Money Is Always Part of Our Competitive Edge

According to the classical competitive advantage theory, differentiation and low cost are two effective weapons to maintain competitive edge over competitors. Although Hollysys has been consistently enhancing our differentiation level by constantly improving our product performances and fostering customer affinities by our tailored solutions and satisfactory services, we have never stopped the endeavor to streamline our R&D, manufacturing, procurement, project execution processes, to sift out unnecessary applications and redundant procedures so as to drive the overall cost 6% to 8% down every year, even though remuneration and other costs have been increasing consecutively every year. Dr. He Jianfeng, the China's business group president known as the Czar in Hollysys for his tough execution, has been taking charge of this responsibility since the beginning of our fiscal 2011. With our competitive engineer labor cost at 70% lower than our multinational competitors, our persistently improved operation, and our reliable and mature system platforms proven in tens of thousands projects in various harsh applications in China, we have no doubt in our sustainable and profitable growth not only in Chinese market but also in the world.

Our Distinguished Team Ensures Solid Execution of Our Growth Strategies

It is my great pleasure to share with you that what I have enjoyed most during all these 18 years of growing our innovative enterprise is being able to work with my team, who shares the same dream with me and relieves me from all of the distress and operational managerial chores in different business operations so that I can have the time and mental tranquility to keep watching the mega trends pertinent to our business environment, and technology development in our field to prevent any big mistaken decisions made at strategic level. In 2010, we reorganized our business and constituted Hollysys Group in China (HGC), managing all our business activities in China. The group is mainly consisted of strategic executive committee (SEC), R&D center, manufacturing plant, Beijing Hollysys Co. Ltd (BHC) engaging in high-speed rail and subway businesses, Hangzhou Hollysys Co. Ltd (HHC) engaging in process control (DCS) and developing our sales network in China, Beijing Hollysys Automation and Driver Co. Ltd (BHAD) dedicated to factory automation (PLC) business, and Xian Hollysys Co Ltd (XHC) for R&D and exploring new automation opportunities. Our SEC is consisted of the following members of our key business executives.

Wang Changli, 48, PhD in Automation, 18 years with Hollysys, Chairman of HGC, Chairman and CEO of Hollysys Automation Technologies Ltd.;

He Jianfeng, 49, PhD in Automation, CEO of HGC, 14 years with Hollysys, previously CEO of HHC and BHC in change of business execution and overhauling corporate internal functions and processes;

Peter Li, 47, Master in Educational Administration with C.G.A. professional accounting designation, 3 years with Hollysys, CFO of Hollysys Automation Technologies Co. Ltd.;

Xu Yue, 50, Master in Computer Science, CEO of BHC, 11 years with Hollysys, in charge of high-speed rail and subway businesses, instrumental in building a top-notch team for high-speed rail business from 30 to 300 people in 6 years, leading Hollysys in the process to have emerged as one of the leading players in signaling business in China;

Shi Hongyuan, 42, Master in Precision Instrumentation, 14 years with Hollysys, CEO of HHC from 2010, previously in charge of R&D;

Shao Baiqing, 43, Master in Computing and Automation, 18 years with Hollysys, Vice President of HGB and CEO of XHC, in charge of corporate branding, business development and Administration of XHC, previously in charge of R&D, production, power plant automation, Information systems, and HR;

Shi Bo, 41, B.Sc. in Computer Science, 18 years with Hollysys, in charge of R&D;

Zhou Yuanna, 48, MBA, B.Sc. in Automation and Control, 13 years with Hollysys, COO of HHC, in charge of DCS sales and network building, being instrumental in driving Hollysys Industrial automation business growth;

Xu Changrong, 41, PhD in Thermal power and Instrumentation, 14 years with Hollysys, CEO of BHAD, in charge of growing Hollysys' PLC business to one of its growth engines;

Qu Xiaorong, 41, Master in Finance and Accounting, 5 years with Hollysys, Chief Finance Controller of HGB, in charge of corporate finance and accounting.

Most of our executives have shared happiness and hardships with me for more than 10 years and they earned their position by merits and capabilities. It is our shared ambition to develop a sustainably growing automation company in the world, to create genuine value for our customers, shareholders and colleagues, and to compete with the century old multinationals. Although we have successfully accomplished many outstanding projects such as 1000 MW nuclear power control systems, high-speed rail signal systems and sophisticated control systems in various industries through our consistent innovative work, we have never shown complacency, because we are well aware that we are still very immature compared with our competitors. I am grateful and deeply indebted to their integrity and loyalty to our great mission, and they sacrificed their leisure time because of the tremendous work load, not to mention that they could have earned much more money if they had worked for the multinational companies.

It is out of our capability to predict the economical conditions and stock market fluctuations in the future, however, based on the tenacious determination of our people to consistently improve our competitive edges through effective innovation and efficient operations, to prepare to fight any unexpected difficulties and to win big in favorable environment, we are confident that our investors are going to be greatly rewarded for their sagacious choice and their faith in Hollysys. I am writing this letter with my heart, trying to clarify some of your concerns and to share my considerations and my feelings with you, wishing to improve the mutual understanding and to enhance transparency of our decision making process.

I would like to end this letter with an old saying that if winter comes, can Spring be far behind?

With Best Wishes,

Wang Changli

Chairman and CEO

Hollysys Automation Technologies co. Ltd

Q4 Financial Highlights

• Quarterly revenues of $71.9 million, representing an increase of 27.5% compared to $56.4 million year-over-year
• Gross margin at 28.8%, as compared to 33.9% year-over-year, and 40.3% quarter-over-quarter
• Non-GAAP net income attributable to Hollysys of $7.0 million, as compared to $6.3 million and a 11.9% increase year-over-year
• $7.4 million cash generated from operations for the quarter, as compared to $3.9 million used quarter-over-quarter and $1.8 million provided year-over-year
• Non-GAAP Diluted EPS at $0.13 reported for the quarter, as compared to $0.11 year-over-year
• Record-high backlog of $296.4 million as of June 30, 2011, a 17.2% increase compared to $252.9 million year-over-year
• Quarterly DSO of 129 days, as compared to 116 days year-over-year

Fiscal Year Financial Highlights

• Revenues of $262.8 million, representing an increase of 51.0% compared to $174.1 million year-over-year
• Gross margin at 34.7%, as compared to 34.6% year-over-year.
• Non-GAAP net income attributable to Hollysys of $42.0 million, as compared to $26.2 million and a 60.2% increase year-over-year
• $1.8 million cash used in operations for the fiscal year 2011; cash and cash equivalents of $90.7 million as of the year end.
• Non-GAAP Diluted EPS at $0.76 reported for the fiscal year, as compared to $0.51 year-over-year
• DSO of 124 days, as compared to 140 days year-over-year.
• Inventory turnover of 58 days, versus 73 days year-over-year.

Dr. Wang continued: "We've noticed the short interest on HOLI has reached historical high in the past few months. In this context, the Company believes that an important way to protect shareholder value is to limit short sellers' ability to borrow stocks and shareholders can contribute by reviewing whether their custodians or brokers are lending their shares to third parties. It's a common practice for brokers or custodians to lend out stocks to third parties for a fee, since investors may have approved this in a blanket agreement they signed when opening their accounts. This activity can be extremely profitable for brokers or custodians, not to mention short-sellers, but may go against the interest of the holders of our shares. We call on our shareholders who have been supportive to the Company, and have unfairly suffered, to be vigilant and make sure that they are in full control of the economic benefits of their ownership in our Company. It is prudent for our shareholders to issue an instruction to their respective brokers or custodians not to lend out their shares to third party, or alternatively, request a stock certificate be issued and be delivered to them so that shareholders are in complete control of shares of stock held."

Outlook for FY 2012

Dr. Wang concluded, "Given our strong backlog currently on-hand and sales pipeline envisioned so far, we project our revenue in the range between US $354 million and US $356 million and non-GAAP net income in the range between $57 million and $58 million on consolidated basis including newly closed acquisition, which is based on management best estimate of our current market and business conditions at this point in time, with certain level of conservatism in mind. The management would also like to maintain our earnings per share at or above one US dollar when it comes to any potential dilution effects caused by financing, incentive share scheme, or acquisition during the year."

BEIJING, July 25, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (Nasdaq:HOLI - News) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, confirmed today that its high-speed rail (HSR) signaling ATPs functioned normally during last weekend's fatal accident. On the evening of July 23rd, a severe fatal accident occurred on Wen-Yong Dedicated Passenger Line (DPL) at Wenzhou area, involving D301 and D3115 trains, both with Hollysys HSR signaling ATPs installed. According to the analysis of data from multiple sources, the ATPs on the two trains provided by Hollysys functioned normally and well, and free of any malfunctions prior to the crash. MOR will announce its findings of investigation on the cause of the accident upon completion of the investigation.

Rodman and Renshaw on HOLI         7/13/2011

Hollysys Closes Concord Acquisition; Raising PT to $14.

Hollysys Automation Technologies, Ltd (HOLI) announced the closing of the previously disclosed acquisition of Concord Corporation Pte Ltd, a Singapore-headquartered provider of electrification related services, for a total consideration of $43.2 million consisting of $33.5 million in cash and $9.7 million in stock (equivalent to approximately 1 million shares of HOLI stock). We consider this to be a tuck-in acquisition that should yield significant product and geographical cross selling opportunities for both companies. The acquisition is immediately accretive to earnings and is expected to contribute approximately $10.0 million and $11.5 million to FY12 and FY13 earnings, equivalent to, respectively, $0.18 and $0.20 per fully diluted share based on 56.1 million and 56.8 million shares outstanding. Including the impact from the Concord acquisition, we now expect FY12 non-GAAP net income to come in at $60.1 million or $1.07 per fully diluted share. We reiterate our Market Outperform rating, raising our price target from $12 to $14, based on the shares attaining a P/E multiple of 13x our new FD EPS estimate of $1.07.

Discussion

• Concord Corporation Overview: Founded in 1983, Concord is a group of four companies located in Singapore, Malaysia and Dubai. Working with multinational corporations such as Mitsubishi (8058, Not Rated), Alstrom (ALO, Not Rated), Bombardier (BBD/A, Not Rated), Siemens (SI, Not Rated), Areva (AREVA, Not Rated), and ABB (ABB, Not Rated), Concord provides design engineering, procurement, project management, installation, test and commissioning, and maintenance services for electrical and instrumentation projects in power generation and distribution, railway transportation, pharmaceuticals, petrochemicals, and other industries to clients located in South East Asia (Singapore, Malaysia, Vietnam) and the Middle East (Dubai and Saudi Arabia). Notable Concord projects include: Red and Green lines of Dubai Metro LRT in United Arab Emirates, Makkah-Holy Sites Rail Line in Kingdom of Saudi Arabia, and Circle Line Stage I, II, IV, V & Kim Chuan Depot and North East Line of MRT System in Singapore.
• Deal Valuation Hollysys management expects the acquisition to add approximately $10.0 million to FY12 earnings and $11.5 million to FY13 earnings, implying a forward P/E multiple of 4.3x and 3.8x projected earnings. Although we would like to see additional disclosure on Concord’s historical financial performance and existing assets and liabilities, we believe Hollysys has paid a reasonable acquisition multiple for Concord Corporation.
  
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BEIJING, July 12, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (Nasdaq: HOLI)("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced that it has closed on its previously announced acquisition of Concord Corporation Pte Ltd., and its group of companies (CCPL), a Singapore headquartered electrification related service provider to rail and industrial industrials in South-East Asia and the Middle East.

The total payment for the acquisition is in combination of approximately US$ 33.5 million cash and approximately 1 million shares of Hollysys common stock, equivalent to approximately US$43.2 million. The newly issued shares to CCPL shareholders will have a three-year lock-up period. The CCPL management is also entitled to approximately 0.75 million shares of Hollysys common stock in each of the next two years, if Concord's US-GAAP audited net income equals or exceeds US $ 10 million and US$ 11.5 million for Hollysys' fiscal year of 2012 and 2013 respectively.

The agreement is expected to yield significant cross selling/cross of our existing product lines in rail and industrial segments to fast growing South-East Asia and the Middle East market.

Dr. Changli Wang, CEO and Chairman of Hollysys, commented: "We are very pleased to have closed the acquisition of CCPL. The seasoned and high-caliber management team will remain intact, and the daily operation of CCPL will not be impacted by the acquisition transaction. CCPL has demonstrated its penetration and execution capability in its years of strong track record and will continue to expand its footprints inSoutheast Asia and Middle East with Hollysys as its backbone supporter."

Mr. Chim Swee Yong, Group Executive Chairman of CCPL, said: "The response from our clients and employees is overwhelmingly positive, we are very happy and proud to be part of Hollysys, the leading provider of automation and control technologies and application in China. With Hollysys' brand name and R&D, customization and production capability, we are well set to grow our business to the next higher level."

Rodman and Renshaw on HOLI                              6/9/2011

HOLI: Upgrading to Market Outperform Based on Valuation

We are upgrading our rating on the shares of Hollysys Automation Technologies Ltd. (HOLI) from Market Perform to Market Outperform based on valuation. We believe the recent market-related weakness in the shares presents an excellent entry point for investors to begin building positions in the stock. Trading at 10x and 9x our FY11 and FY12 EPS forecasts, we believe HOLI is now undervalued. As a leading provider of integrated automation and controls solutions for industrial clients, high speed railways, urban transit networks and nuclear power plants with a rich portfolio of product offerings, a well-known brand and a significant share of China’s industrial automation, rail signaling and nuclear power automation and controls market and one of only two qualified suppliers in China of high speed rail signaling systems for 300-350 km/hr high speed rail segments and one of the five approved providers for the 200-250 km/hr segment, Hollysys should continue to benefit from the ongoing high-speed railway and nuclear power build-out in China and industrial production and process automation. We also believe Hollysys strong commitment to R&D and new product development as evidenced by 214 patents and computer software copyrights held by the company as of the end of FY10 will help the company to maintain competitiveness in a rapidly evolving market ensuring sustainable growth and profitability. We are, consequently, upgrading our rating to Market Outperform and are establishing a price target of $12, based on the shares attaining a conservative multiple of 13x our fully diluted FY12 EPS estimate of $0.90 excluding the impact of pending Concord Corporation acquisition.

Investment Thesis Highlights We believe Hollysys is one of the most attractive investment opportunities in the U.S.-listed Chinese universe. Our bullish stand on the stock is supported by the company’s notable achievements in industrial, subway/high speed railway and nuclear automation and controls markets. These include: (1) 10.6% market share in China’s industrial automation market based on the historical installed base (2) 70% market share of China’s 200-250 km/hr Automatic Train Protection (ATP) market (3) the largest SCADA subway automation systems supplier in China (4) 214 patents and computer software copyrights as of the end of FY10 (5) joint venture with China Guangdong Nuclear Power Company (CGNPC), one of the three government approved nuclear operators in China, to supply nuclear automation control systems to CGNPC built reactors - equivalent to approximately 50% of all currently planned reactors in China (6) $280.9 million order backlog as of the end of 3Q11.

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2009 20F

We believe our working capital is sufficient to meet our present requirements. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. In the long-term, we intend to rely primarily on cash flow from operations and additional borrowings from banks to meet our anticipated cash needs.

Our long-term liquidity needs will relate primarily to working capital to pay our suppliers, and third-party manufacturers, as well as any increases in manufacturing capacity or acquisitions of third party businesses that we may seek in the future. We expect to meet these requirements primarily through our current cash holdings, revolving short-term bank borrowings, as well as our cash flow from operations. We currently do not have any plan to incur significant capital expenditures in 2011 and for the foreseeable future beyond 2011.

BEIJING, May 20, 2011 /PRNewswire-Asia/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, announced today that it signed a stock purchase agreement (SPA) to acquire 100% ownership of Concord Corporation Pte Ltd. and its group of companies (CCPL), a Singapore headquartered electrification related service provider to rail and industrial industrials in South-East Asia and the Middle East. The total consideration for the acquisition was a combination of cash and stock, equivalent to US$43.2 million approximately, with a two-year incentive share program for CCPL management team if CCPL meets certain performance targets.

Pursuant to the stock purchase agreement, Hollysys shall pay/issue a fully refundable deposit of 20.75 million Singaporean dollars at SPA signing, and 20.75 million Singaporean dollars and approximately 1 million shares of Hollysys common stock at the closing. The CCPL management is entitled to approximately 0.75 million shares of Hollysys common stock in each of the next two years, if Concord's US-GAAP audited net income equals or exceeds US $ 10 million and US$ 11.5 million for Hollysys' fiscal year of 2012 and 2013 respectively.

CCPL provides complete electrical solution with end to end capabilities in design, engineering, procurement, project management, construction & commissioning, and maintenance to a wide array of industries, including rail, power plants, semiconductors, pharmaceuticals, petrochemicals, etc. As an established regional electrification service provider in the rail industry, CCPL has successfully commissioned signaling, power distribution, automatic train control, communication, power rail, and other related electrical engineering and installation works for Red and Green lines of Dubai Metro LRT in United Arab Emirates, Makkah-Holy Sites Rail Line in Kingdom of Saudi Arabia, and Circle Line Stage I, II, IV, V & Kim Chuan Depot and North East Line of MRT System in Singapore.

Dr. Changli Wang, CEO and Chairman of Hollysys, commented: "We are very pleased with this highly accretive and complementary acquisition of CCPL group of companies, which provides Hollysys with a readily available channel to cross sell our existing product lines in rail and industrial segments to fast growing South-East Asia and the Middle East market. We are also excited to be able to retain a team of seasoned and high-caliber professionals through this acquisition, who will form the foundation of our international team to greatly enhance Hollysys capability to tackle the international market. Hollysys will leverage its strong proprietary technology and its capabilities accumulated from its leading positions in China's rail and industrial segments to enter and penetrate into the international market, through both organic growth and accretive acquisitions to maximize our shareholder value."

Mr. Chim Swee Yong, Group Executive Chairman of CCPL, commented: "We are honored to be able to join and team up with Hollysys, a well-established proprietary technology and product provider in rail and industrial industries in China. We are seeing great opportunities lying ahead of us, given the fast growth in rail, oil and gas, and power industries in our addressable market in South-East Asia and the Middle East. With more than 20 years strong track record, we believe the combination of our existing customer base and complete electrification solution capabilities and Hollysys' proprietary technology and products would be of great benefit to capturing the growth opportunities, both in the current addressable geographical regions and other international markets at large."

Mr. Peter Li, CFO of Hollysys, commented: "This acquisition is our first meaningful M&A since we were listed on NASDAQ. We are very pleased to have entered SPA to acquire such a successful platform together with a team of professionals with backgrounds from GE Industrial, Thales Transportation and Bombardier Transportation, at a highly accretive valuation to its forward earnings. CCPL meets all of our acquisition criteria, which we laid out as our corporate acquisition strategy, of accretion, complement, and ease of integration. We expect this acquisition will be closed around July 1, 2011, from when CCPL revenue and income would be fully consolidated and reported under Hollysys. With the capital needs for more potential acquisitions, Hollysys will seek to dual list itself on the Hong Kong Stock Exchange while maintaining NASDAQ listing as its primary listing board, because we believe that Hong Kong dual listing will provide us with a valuable diversified investor base, comparable peers, and stronger analyst coverage interests, to unlock our intrinsic value currently ignored or undiscovered, for maximizing our shareholder value."

Rodman and Renshaw on HOLI                         5/11/2011

HOLI 3Q11 Update

Hollysys Automation Technologies, Inc. (HOLI) posted 3Q11 results that were above the Street and our expectations. Revenues came in at $55.8 million, above the consensus of $48.6 million and our estimate of $46.5 million. Fully diluted EPS of $0.17 exceeded both the consensus of $0.12 and our 3Q11 forecast of $0.11. Management revised up the previously provided FY11 revenue and net income guidance from $243-$247 million and $39-$41 million or $0.71-$0.75 per fully diluted share to $255-$259 million and $41-$42 million equivalent to $0.75 - $0.77 per fully diluted share, respectively. The company reported strong year over year growth in all segments but, sequentially, this was a weaker quarter due to the timing of Chinese New Year. Backlog declined QoQ for the first time since 1Q10 from $288.5 million at the end of 2Q11 to $280.9 million at the end of 3Q11 on faster delivery on backlog and absence of sizable new orders in the subway segment. Trading at 14x and 12x times our FY11 and FY12 fully diluted EPS estimates of $0.78 and $0.90 compared to 19x and 15x multiples for automation equipment peer group and 16x and 13x multiples for railway equipment peer group, we believe HOLI remains a touch expensive. We are maintaining our valuation-driven Market Perform rating.

Segment Analysis: Industrial Automation and Controls sales increased 51.8% YoY to $24.9 million representing 44.7% of the total revenues in 3Q11. Rail Signaling and Controls segment contributed 26.0% of revenues for the quarter, growing 141.7% YoY to $14.5 million. Subway System Integration and Nuclear Plant Controls revenues were up 47.5% YoY and 33.3% YoY, respectively (Exhibit 1: Quarterly Revenues by Segment).

As of the end of 3Q11, the company had a total of $280.9 million in backlog orders consisting of $91.5 million in Industrial Automation orders, $102.9 million in Rail Signaling and Controls orders (excluding the recently announced $24.3 million contract announced in April 2011), $71.7 million in Subway Systems orders and $14.8 million in Nuclear Plant Controls orders (Exhibit 2: Quarterly Backlog by Segment). Subway segment backlog continued to decline sequentially on weak order flow and regression towards more normalized backlog levels.

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Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

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First Quarter Results:

• Quarterly revenues of $55.8 million, representing an increase of 67.2% compared to $33.4 million year-over-year
• Gross margin at 40.3%, as compared to 37.2% year-over-year, and 36.0% quarter-over-quarter
• Non-GAAP net income attributable to Hollysys of $9.6 million, as compared to $5.2 million and a 83.6% increase year-over-year
• Diluted EPS at $0.17 reported for the quarter, as compared to $0.10 year-over-year
• Backlog of $280.9 million as of March 31, 2011, a 15.9% increase compared to $242.3 million year-over-year
• Quarterly DSO of 156 days, as compared to 192 days year-over-year

Dr. Changli Wang, Chairman and CEO of Hollysys, stated: "We are pleased to report another stellar quarter with solid financial and operational performance. I would like to take this opportunity to discuss some of the key events that took place during this quarter."

Dr. Wang concluded, "Given our strong financial performance to date and backlog currently on-hand, we are again revising up our fiscal 2011 revenues and net income guidance from $243M to $247M and $39 million to $41 million to $255 million to $259 million and $41 million to 42 million respectively. It is worth noting that this is the second time in a row that management has to revise up the previously provided fiscal year guidance. The management has taken note of recent pressure on Company's stock price due to market conditions caused by misperception and firmly believes that our stock price will eventually reflect our intrinsic value over the longer term. Hollysys will continue to leverage on its core growth pillar foundations of its proprietary technology and strategic alliance with leading organization to penetrate and increase its market share in respective high-growth end markets. At the right conditions, Hollysys will also rely on M&A to accelerate its growth pace and penetrate into the new market, to create long-term value for our shareholders."

New High Speed Railway Contract to Lift FY11 Earnings.

Hollysys Automation Technologies, Ltd. (HOLI) announced signing of a new $24.3 million or RMB 159.1 million contract with various local bureaus of PRC Ministry of Railways to supply Automatic Train Protection (ATP) systems for 200-250 km/hr. high speed rail lines. The company expects to complete delivery on the contract by the end of May 2011 or during 4Q11. Consequently, we are increasing our 4Q11 revenue, adjusted net income and EPS projections for the 4Q11 from $65.1 million and $9.2 million or $0.17 per fully diluted share to $83.4 million and $12.1 million or $0.22 per fully diluted share, respectively. We now expect full FY11 revenues and adjusted net income to come in at $265.1 million and $43.3 million or $0.79 per fully diluted share. Our current estimates exceed the company’s previously issued revenue and net income guidance of $243-$247 million and $39-$41 million. We do not except the new contract to have a significant impact on the backlog (at $288.5 million at the end of 2Q11) due to the imminent delivery.

The new contract comes on the heels of the recently announced Ministry of Railway budget for the 2011-2015 period (12^th Five Year Plan). China plans to spend RMB 2.8 trillion (approximately $ 431 billion) in the next five years on railway construction including high-speed rail. While substantial, the amount is significantly below the previously floated government estimate of RMB 3.5 trillion (approximately $538 billion). Considering the announced railway budget and the company’s railway signaling and controls segment order backlog of $112.3 million at the end of 2Q11,we expect strong near-term growth in high speed railway signaling and controls systems to flatten out in the 2nd half of the 12th Five Year Plan.

We maintain our valuation-driven Market Perform rating. HOLI is currently trading at 15x and 14x our FY11 and FY12 fully diluted EPS estimates of $0.79 and $0.84. We believe HOLI shares to be fully valued at this level and recommend investors await a better entrance point or new catalysts before adding shares or taking a new position.

Risks

(1) Scale-back in government infrastructure spending (2) Delay in the development of proprietary subway signaling and nuclear island automation products (3) Project delays (4) Slowdown in new orders in the subway segment (5) Competition (6) Slow accounts receivable turnover (7) Backlog risk (8) Customer retention (9) End of government R&D subsidies.

Notice Regarding Privacy and Confidentiality:.

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman and Renshaw on HOLI     4/19/2011

New High Speed Railway Contract to Lift FY11 Earnings.

Hollysys Automation Technologies, Ltd. (HOLI) announced signing of a new $24.3 million or RMB 159.1 million contract with various local bureaus of PRC Ministry of Railways to supply Automatic Train Protection (ATP) systems for 200-250 km/hr. high speed rail lines. The company expects to complete delivery on the contract by the end of May 2011 or during 4Q11. Consequently, we are increasing our 4Q11 revenue, adjusted net income and EPS projections for the 4Q11 from $65.1 million and $9.2 million or $0.17 per fully diluted share to $83.4 million and $12.1 million or $0.22 per fully diluted share, respectively. We now expect full FY11 revenues and adjusted net income to come in at $265.1 million and $43.3 million or $0.79 per fully diluted share. Our current estimates exceed the company’s previously issued revenue and net income guidance of $243-$247 million and $39-$41 million. We do not except the new contract to have a significant impact on the backlog (at $288.5 million at the end of 2Q11) due to the imminent delivery.

The new contract comes on the heels of the recently announced Ministry of Railway budget for the 2011-2015 period (12^th Five Year Plan). China plans to spend RMB 2.8 trillion (approximately $ 431 billion) in the next five years on railway construction including high-speed rail. While substantial, the amount is significantly below the previously floated government estimate of RMB 3.5 trillion (approximately $538 billion). Considering the announced railway budget and the company’s railway signaling and controls segment order backlog of $112.3 million at the end of 2Q11,we expect strong near-term growth in high speed railway signaling and controls systems to flatten out in the 2nd half of the 12th Five Year Plan.

We maintain our valuation-driven Market Perform rating. HOLI is currently trading at 15x and 14x our FY11 and FY12 fully diluted EPS estimates of $0.79 and $0.84. We believe HOLI shares to be fully valued at this level and recommend investors await a better entrance point or new catalysts before adding shares or taking a new position.

Risks

(1) Scale-back in government infrastructure spending (2) Delay in the development of proprietary subway signaling and nuclear island automation products (3) Project delays (4) Slowdown in new orders in the subway segment (5) Competition (6) Slow accounts receivable turnover (7) Backlog risk (8) Customer retention (9) End of government R&D subsidies.

Notice Regarding Privacy and Confidentiality:.

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

BEIJING, April 18, 2011 /PRNewswire-Asia/ -- Hollysys Automation Technologies, Ltd. announced today signing a contract of approximately US$ 24.30 million or RMB 159.02 million to supply its 200-250km/h high-speed rail ATPs to various local bureaus of Ministry of Railways of China. The delivery is expected to be completed by the end of May 2011.

The on-board signaling equipment ATP (Automatic Train Protection) works together with the ground-based signaling equipment TCC (Train Control Center), as the crucial control elements in the high-speed railway signaling systems to ensure the safety and reliability of the high-speed railway traffic and operation.

Dr. Changli Wang, CEO and Chairman of Hollysys, commented: "We are very pleased of winning the 200-250km/h high-speed rail ATPs contract under the current market situation. With approximately 17,000 km of high-speed rail tracks currently in construction and newly announced budget of RMB 2.8 trillion for the next five years, we are still seeing a huge market potential in high-speed rail signaling market for leading players like Hollysys to realize and capture going forward. Hollysys will continue to leverage on its core growth pillar foundations of strong R&D capability and strategic alliance to increase its market share in this unprecedented high-speed rail build-out."

Rodman and Renshaw on HOLI                                                    2/18/2011

HOLI Reports 2Q11 Results: Maintain Market Perform Rating Based on Valuation.

Hollysys Automation Technologies, Inc.(HOLI) posted 2Q11 results that were above the Street and our expectations. Revenues came in at $74.4 million, substantially above the consensus of $63.3 million and our estimate of $58.0 million. Fully diluted EPS of $0.27 exceeded both the consensus of $0.18 and our 2Q11 forecast of $0.16. Management increased FY11 revenue and net income guidance from $233-$237 million and $38-$39 million to $243-$247 million and $39-$41 million or $0.71-$0.75 per fully diluted share, respectively. The company experienced strong year over year and sequential revenue growth in industrial automation and rail signaling and controls segments and reported another record backlog of $288.5 million. That said, given the recent run up in share price, we continue to view HOLI shares as fairly valued at current levels, even after an upward adjustment in the FY11 guidance. We maintain our Market Perform rating based on valuation. 

Valuation 

While we are pleased with HOLI 2Q11 performance, with the shares trading at 21x and 19x our FY11 and FY12 fully diluted EPS estimates of $0.74 and $0.84 compared to 24x and 18x multiples for automation equipment peer group and 25x and 17x multiples for railway equipment peer group, we consider HOLI shares to be fully valued, and recommend investors await a better entrance point or new catalysts before adding shares or taking a new position. 

Risks 

(1) Scale-back in government infrastructure spending (2) Delay in the development of proprietary subway signaling and nuclear island automation products (3) Project delays (4) Slowdown in new orders in the subway segment (5) Competition (6) Slow accounts receivable turnover (7) Backlog risk (8) Customer retention (9) End of government R&D subsidies.


Notice Regarding Privacy and Confidentiality:
This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Results for Second Quarter

• For the three months ended December 31, 2010, total revenues increased by 61.1% to $74.4 million, from $46.2 million in the comparable prior fiscal year period.
• For the three months ended December 31, 2010, the non-GAAP net income excluding non-cash stock compensation cost was $15.0 million or $0.27 per diluted share based on 55 million shares outstanding. This represents an increase of $6.9 million, or 85.4%, over the $8.1 million, or $0.16 per share based on 51 million shares outstanding, reported in the prior year period.

Dr. Changli Wang, Chairman and CEO of Hollysys, stated: "We are very pleased to report another stellar quarter with solid financial and operational performance. Our financials were significantly improved on a year-on-year basis, and our operational status and backlog continued its upward trend. I would like to discuss some of the key events that took place during this quarter."

"In this quarter, amid robust growth from all business lines, our high-speed rail business set another quarterly high from not only revenue but also backlog perspective."

Dr. Wang concluded, "Given our strong financial performance to date and historical record-high backlog balance, we are revising our fiscal 2011 revenues and net income guidance from $233M to $237M and $38 million to $39 million to $243 million to $247 million and $39 million to $41 million respectively."

Rodman & Renshaw on HOLI                       1/10/2011

Initiating Coverage with a Market Perform Rating 

Investment Thesis 

We are initiating coverage on Hollysys Automation Technologies Limited (Hollysys) with a Market Perform/Speculative Risk rating. Hollysys is a leading provider of integrated automation and controls solutions for industrial clients, high speed railways, urban transit networks and nuclear power plants. The company has a rich portfolio of product offerings, well-known and trusted brand and a significant share of China’s industrial automation, rail signaling and nuclear power automation and controls market. As one of only two qualified suppliers in China of high speed rail signaling systems for 300-350 km/hr. high speed rail segments and one of the five approved providers for the 200-250 km/hr. segment and the only certified domestic automation control systems provider to the nuclear industry in China, Hollysys stands to benefit from massive high-speed railway and nuclear power build-out in China. The company also represents an attractive play on the urbanization and rising labor costs trends in China that will drive the investment into urban transit infrastructure and factory automation. We forecast revenues and fully diluted EPS of $235.6 million and $0.69 for FY11 and $285.1 million and $0.82 for and FY12, respectively. Although we are confident in the company’s long-term growth potential, the recent share appreciation, in our opinion, fully reflects our current earnings estimates. We await a pullback or new catalysts before reviewing our rating.

Valuation 

Although we are optimistic about Hollysys future prospects, with the valuation scraping the upper range of historical P/E multiple, we now consider the shares fairly valued. Hollysys shares are currently trading at 23x and 19x our FY11 and FY12 fully diluted EPS estimates of $0.69 and $0.82 compared to 25x and 19x multiples for automation equipment peer group and 22x and 17x multiples for railway equipment peer group. Trading at 17x and 14x FY11 EV/EBITDA and FY12 EV/EBITDA multiple, the stock appears to be fully valued on an EV/EBITDA basis as well. We recommend investors await a better entrance point or new catalysts before adding shares or taking a new position.

Risks 

(1) Scale-back in government infrastructure spending (2) Delay in the development of proprietary subway signaling and nuclear island automation products (3) Project delays (4) Competition (5) Slow accounts receivable turnover (6) Backlog risk (7) Customer retention (8) End of government R&D subsidies.

Notice Regarding Privacy and Confidentiality: 

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

 Q4 Financial Highlights:

    -- Revenues of $56.4 million, representing an increase of 25.9% compared
       to $44.8 million year-over-year
    -- Gross margin at 33.9%, as compared to 33.5% year-over-year
    -- Non-GAAP net income of $10.7 million, as compared to $6.3 million and a
       69.2% increase year-over-year
    -- Record-breaking backlog balance at $252.9 million as of June 30, 2010,
       a 33.8% increase compared to $188.9 million year-over-year
    -- Operating cash inflow of $1.8 million
    -- Non-GAAP EPS of $0.20 vs. $0.14

Dr. Changli Wang, Hollysys' Chairman of the Board and CEO, stated, "We are very pleased to report a solid fiscal 2010 annual result, culminated by the fourth quarter of strong financial and operational results, amid some of the difficulties we overcame during the year. Our financials demonstrated the continuous trend of revenues and earnings growth on a year-over-year basis, and our record-breaking backlog balance and strong sales pipeline indicated our strong operational status going into the new fiscal year. Most important of all, Hollysys is becoming a stronger and better company, not only from the market competitiveness perspective, but also from the corporate management perspective.

Dr. Wang concluded, "Given the backlog balance and strong pipeline across all of our business segments, we believe our revenue and net income growth will accelerate to approximate 35% and 25% respectively in our fiscal 2011. At the same time, the company has decided to grow our industrial automation sales team by an exponential rate and increase the investment in corporate research and development initiatives to further establish Hollysys as a dominant leader in automation and control field, across industrial, rail, and subway industries in China. "

Based on our operating results for fiscal 2010, we project our fiscal 2011:

• Revenues to be in the range of USD 233M to USD 237M.
• Non-GAAP net income to be in the range of USD 38M to USD 39M.
• Net income per share of USD 0.69 to USD 0.71, based on expected 55 million shares outstanding vs. $0.58 for fiscal 2010.