Shares in Far Eastern Department Stores Co (遠東百貨) and other firms in the Far Eastern Group (遠東集團) extended declines yesterday after chairman Douglas Hsu (徐旭東) said the group would suspend all of its investments in Taiwan.
Hsu made the remark on Monday following a spat with the Ministry of Economic Affairs’ Department of Commerce over the group’s ownership of Pacific Sogo Department Stores Co (太平洋崇光百貨).
Aspects of Far Eastern Group's portfolio, especially Far Eastern Department Stores, may face near-term downside pressures if the uncertainty over ownership of the Sogo arm remains, analysts said.
Primasia Securities Co (犇亞證券) said yesterday that as the prolonged legal dispute intensifies, it expects Far Eastern Department Stores to see "short-term share price volatility" due to uncertainty over Sogo ownership.
However, given the company's strong core operations, the stock looks attractive after a recent sell-off, it said.
"Although Mr. Hsu announced he would halt all of the Far Eastern Group's ongoing investment projects in Taiwan, we think this move in itself will have little impact on Far Eastern Department Stores' sales and profitability outlook given the company's recent launch of three new stores," Primasia said in a note.
On Monday, the Far Eastern conglomerate — which has operations in department stores, textile manufacturing, cement supplies, shipping services and telecom services — announced it would cease all investments in Taiwan, adding that the group would take to the streets to protect its interests.
The firm’s stern remarks came after the commerce department on Friday last week approved a proposal by interim managers at Pacific Distribution Investment Co (太平洋流通), a holding company for Sogo, to hold a special shareholders’ meeting and reshuffle the board in the next three months — a move that Hsu said was beyond the ministry’s authority and would undermine his group’s ownership of the retail outlet.
Far Eastern Group secured control of Pacific Distribution in September 2002, which enabled it to run the Sogo chain of department stores in Taiwan and the Pacific Department Store group in China.
However, the long legal battle between Far Eastern Group and former Sogo owner Pacific Construction Co (太平洋建設) over Sogo’s ownership remains unresolved. In the intervening period, Pacific Distribution has also become involved in a dispute with Far Eastern Group over whether Hsu’s group has legal “management rights” to Sogo, or is merely “a shareholder” in the company.
Jih Sun Securities Investment Consulting Co (日盛投顧) yesterday said the impasse would likely impact Far Eastern Department Stores, Far Eastern New Century Corp (遠東新世紀)and Far EasTone Telecommunications (遠傳電信), but other arms of Far Eastern Group’s operations including Oriental Union Chemical Corp (東聯化學) and Asia Cement (亞洲水泥) would be less affected.
In Taipei trading, Far Eastern Department shares dropped 6.9 percent at NT$29.7 yesterday, while textile manufacturers Far Eastern New Century Corp (遠東新世紀) dropped 3.96 percent to NT$31.5 and Everest Textile Co (宏遠紡織) dipped 3.85 percent to NT$9.49.
Asia Cement Corp (亞洲水泥) edged down 0.43 percent to NT$35.05, U-Mine Marine Transport Corp (裕民航運) shares were down 1.53 percent to NT$48.25 and Far Eastern International Bank (遠東商銀) ended 1.28 percent lower at NT$11.6.