Wonder Auto Technology, Inc1.
Investor Presentation
Roth Capital Partners, New York, September 7, 2006
1: Formerly MGCC Investment Strategies Inc.
1
Safe Harbor Statement
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This presentation includes or incorporates by reference statements that constitute forward-
looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements relate to future events or to our future financial performance, and involve known
and unknown risks, uncertainties and other factors that may cause our actual results, levels
of activity, performance, or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these forward-looking
statements. These statements include, but are not limited to, information or assumptions
about revenues, gross profit, expenses, income, capital and other expenditures, financing
plans, capital structure, cash flow, liquidity, management’s plans, goals and objectives for
future operations and growth. In some cases, you can identify forward-looking statements by
the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other
comparable terminology. You should not place undue reliance on forward-looking statements
since they involve known and unknown risks, uncertainties and other factors which are, in
some cases, beyond our control and which could materially affect actual results, levels of
activity, performance or
achievements.
We do not intend or assume any obligation to update any of these forward-looking statements
2
Investment Considerations
China’s #2 manufacturer of automotive alternators and starters1
China has become the world’s second largest auto market2 and is
amongst the fastest growing in the world
Additional growth drivers are causing China’s auto parts market to
grow even faster
Diversified, and expanding base of OEM customers
Multiple growth opportunities, both short and long term
The company’s competitive advantage accruing from exceptional
technology, a low cost manufacturing structure and superior quality
Strong financial condition
1: 2005 Economic Analysis of the Automotive Electrical Component Commission, China Automotive
Society
2: China Association of Auto Manufacturers
3
Equity Snapshot
Listed on the OTC Bulletin Board, Ticker: WATG.OB
Price (8/24/2006): $3.00
Market Cap (on 23.96M shares): $71.9 M
Revenues (ttm 6/30/06): $56.1 M
Net Income (ttm 6/30/06): $6.3 M
Shares Outstanding: 23.96 M
Earnings Per Share (ttm 6/30/06): $0.261
1: based on 23.96 million shares
4
PRODUCTS
Alternator
Critical part of a car
engine’s electrical
system
Starter and engine
solenoid comprise
engine’s starter
system
Alternators
Front Fan
Rotor
Rear Fan
Regulator
Rectifier
Stator
Pinion Gear
Planetary Gear
Armature
Magnetic Switch
China’s #2 Manufacturer of Automotive
Alternators and Starters
5
Facilities
42,196 sq. m manufacturing
facility, Jinzhou City, Northeast
China
2 R&D facilities: Jinzhou and
Beijing
Total employment ~300 people;
including 32 R&D; 30 QC; 158
workers
China’s #2 Manufacturer of Automotive
Alternators and Starters
Highly automated; rapid product
changeover!
ISO9002, QS9000 Qualified
13 Customer Awards for
Excellence Since 1998
6
China’s #2 Manufacturer of Automotive
Alternators and Starters
Founded in 1996, as a joint venture with Korean auto parts
manufacturer, rapid growth to #2 position:
Source: Automotive Electrical Component Commission of the China Auto Society, FSSL
Output
(10k)
Starter
manufacturers
20.5
45.0
64.5
71.2
81.5
ZhongQi ChangDian
(3
Xiangfan Dongfeng
(4)
Wonder —JZ Halla
(5)
Shanghai Valeo (2
Hubei Shendian (1
36.5
Huzhou Dehong(5
5
37.9
Chengdu Huachuan
(6
4
52.8
Hubei Shendian(3
3
81.8
Wonder —JZ Halla
(2)
2
111.0
Shanghai Valeo (1
1
Output
(10k)
Alternator
manufacturers
Rank in
1st half
2005
The (* behind names is its rank in 2004; products for agri-vehicles are not included.
7
China is the World’s Second Largest
Auto Market, Fast Growing
Chinese auto market has grown on average 10 to 15% a year since 1990
and the rate is expected to continue1
Growth Drivers:
GDP per capita at the critical point for auto ownership
Low auto ownership per capita compared to ROW
China 19 per 1000; Russia 198 per 1000; South Korea 313 per 1000China is the
World’s Second Largest Auto Market 2, Fast Growing
Increase in urbanization: 43% in 2003 vs. 26% in 19902
78% increase in Class I-IV highways since 19983
Favorable government policies
Small engine segment is the fastest growing. This is an area where
Wonder excels:
Economy in fuel costs and low emissions
Tax Policies: Small engine vehicles 3%; Larger engine vehicles up to
20%
1: Deutsche bank research study, January 6, 2006
2: National Bureau of Statistics, China
3: PRC Ministry of Communication
8
Additional Growth Drivers
Propelling Parts Market
Government imposes up to 25% manufacturer tariff on completed
vehicles with less than 60% local content
Downward pressure on PRC auto prices prompts automobile
manufacturers to adopt cost-saving measures
Growing vehicle population creates aftermarket sales opportunity
US/Japanese/Korean manufacturers have begun parts sourcing
initiatives in China. China is now the 4 th largest exporter of auto arts1
1: Source: CCID Consulting
9
Additional Growth Drivers
Propelling Parts Market
RMB Million
4,362
7,014
8,297
11,593
14,445
15,017
16,878
18,740
20,601
22,463
21,455
31,267
36,819
45,098
52,893
55,423
61,235
67,048
72,860
78,672
Maintenance Products & Services
Electrical Parts
Source: Access Asia Limited
15.53%
98-07
CAGR
19.97%
10
Exceptional Technology Offers
Competitive Advantage
“Co-development” programs with new and existing OEM customers .
R&D Centers in Jinzhou and Beijing
Licensing Agreement with Japanese manufacturer for patented
technology
Co-operation Agreement with Hivron (Korea) for Microchip Research
& Development
11
Exceptional Technology Offers
Competitive Advantage
f70
12V 1.4KW
50
2004
f70
f70
Size
12V 1.5KW
12V 1.2KW
Output Rate
60
33
Number of Models
2005
2003
Starter
f118
14V 120KW
110
2004
f118
f128
Size
14V 135KW
14V 100KW
Output Rate
120
90
Number of Models
2005
2003
Alternator
“Local” R&D drives competitive advantage:
Improved product quality
Lower development cycle times
Broader product range
Design/Function for manufacture at lower cost
12
Diversified Customer Base
77%
$37.2
Total
2.9%
Vehicle Manufacturer
$1.4
Beijing Foton
2.9%
Engine Manufacturer
$1.4
Harbin Dong’an Mitsubishi
4.8%
Engine Manufacturer
$2.3
Shenyang Xinguang
6.0%
Engine Manufacturer
$2.9
Greatwall Baoding
7.0%
Engine Manufacturer
$3.4
Mianyang Xinchen
7.4%
Vehicle Manufacturer
$3.6
Tianjin Automotive Xia Li
9.4%
Vehicle Manufacturer
$4.5
Harbin Dong’an
11.1%
Vehicle Manufacturer
$5.3
Dongfeng Yueda Kia Motor
Co., Ltd
11.3%
Engine Manufacturer
$5.5
Shenyang Aerospace
Mitsubishi
14.4%
Vehicle Manufacturer
$6.9
Beijing Hyundai
% Total Sales
Customer Type
2005 Sales ($M)
Customer
No Customer Accounted for More Than 15% of sales in 2005
13
Multiple Growth Opportunities
Expansion of markets
Create New Products for
Existing Customers
New and Existing Products to
New Customers
Penetrate the Aftermarket
18 New joint development
programs
32 million vehicles in use
Strong business and product
development activity with multiple
OEMs and other manufacturers
Beijing Benz Daimler Chrysler
Shanghai VW
Shanghai GM
South Korea Hyundai
Increase Exports
International sale agreements in
South Korea, USA and Turkey
Detroit sales office planned end ’06
14
Multiple Growth Opportunities
Expansion of capabilities
Enhance R&D capabilities by
employing foreign experts and
purchasing advanced equipment
Build production lines dedicated
to the production of alternators
and/or starters for sedans
Make strategic investments
by way of vertical or
horizontal integration
Strengthen
overall competitiveness
Further expansion improve
quality and cost control
Further increase productivity
and production efficiency
15
Strong Financial Condition
Revenues ($ Millions)
Robust Revenue Growth
*
* Guidance
65.9
48.1
42.3
39.8
22.8
14.7
33.6
25.6
16
Strong Financial Condition
Net Income
Rising Full Year Net Income
*
* Guidance
17
Income Statement
8,231,000
28.6%
3,489,306
6,400,926
14.6%
5,587,455
Net Income
% Growth
778,149
1,570,960
1,199,829
Taxes and
Int/Other Exp
4,267,455
12.7%
7,971,886
16.6%
6,787,284
16.1%
Operating Inc.
% of Revenue
1,844,855
3,303,804
2,404,824
Operating
Expenses
6,112,310
18.2%
11,275,690
23.5%
9,192,108
21.7%
Gross Profit
% of Revenue
65,937,640
37.2%
33,606,328
48,062,805
13.7%
42,265,874
Revenues
% Increase
2006
projected
1st half 2006
2005
2004
USD$
18
Strong Financial Condition
Balance Sheet $ millions
5.00
4.95
Secured Long-term Debt
7.49
7.43
Secured Short-Term Debt
15.53
7.97
Cash and Restricted Cash
69.03
52.09
Total Liabilities and Equity
32.66
18.85
Shareholders’ Equity
5.00
4.95
Non-Current Liabilities
31.38
28.28
Current Liabilities
69.03
52.09
Total Assets
13.88
13.62
Non-Current Assets
55.15
38.47
Current Assets
June 30,
2006
Unaudited
December 31,
2005
Audited
19
Experienced Management Team
Mr. Qingjie Zhao, Chairman and CEO
Chairman of Chinese operating subsidiary since 1997.
Strategic planning, business development, policy development
Previous to private industry, professor and lecturer in advanced automotive
engineering with Liaoning University
Mr. Yuncong Ma, COO
General Manger responsible for all operations
30 years production management experience; 16 in automotive
Mr. Meirong “Ryan” Yuan, CFO
Previously VP Finance for Shenzhen Asphalt Advanced Technology, Ltd.
PhD study at the University of Southern California program in China
Mr. Yuguo Zhao, VP Sales
Jim Groh and Gerry Pascale, US executives
20
Valuation
3.8
2.1
10.6
2.3
4.8%
42.6
164.6
7.07
CAAS
China
Automotive
Systems
1.4
1.3
N/A
1.6
14%
9.7
42.2
0.11
08293.HK
Jinheng
Automotive
1.9
0.9
7.6
1.0
5%
16.7
99.9
12.00
MPAA.PK
Motorcar
Parts of
America
4.3
1.2
10.0
1.3
8%
14.8
89.2
6.68
SORL
SORL Auto
Parts Inc.
2.2
1.3
7.8
1.2
11%
11.3
71.9
3.00
WATG.OB
Wonder
Auto
Company
Price/
Book
(ttm)
Price/
Sales
(ttm)
EV/
EBITDA
(ttm)
EV/
Rev
(ttm)
Profit
Margin
(ttm)
P/E
ttm
Market
Cap ($)
Stock
Price
($)
Ticker
Symbol
Source: Yahoo Finance and Company Reports
21
Investment Considerations
China’s #2 manufacturer of automotive alternators and starters1
China has become the world’s second largest auto market2 and is
amongst the fastest growing in the world
Additional growth drivers are causing China’s auto parts market to
grow even faster
Diversified, and expanding base of OEM customers
Multiple growth opportunities, both short and long term
The company’s crafts competitive advantage accruing from
exceptional technology, a low cost manufacturing structure and
superior quality
Strong financial condition
1: 2005 Economic Analysis of the Automotive Electrical Component Commission, China Automotive
Society
2: China Association of Auto Manufacturers
22