Compal Electronics Inc (仁寶) yesterday shed 1.23 percent to close at NT$20.15 in Taipei trading, after an executive hinted that the firm would suspend investment in Leshi Internet Information and Technology (LeEco, 樂視) due to the Chinese firm’s delayed debt repayments.
“If LeEco delays its payment this month, we will stop the investment to protect the interests of Compal’s shareholders,” Compal president Ray Chen (陳瑞聰) told reporters on Thursday on the sidelines of the company’s annual general meeting at its headquarters in Taipei.
Compal, LeEco’s largest smartphone assembler, on March 28 announced that it would spend NT$3.09 billion (US$101.6 million) to subscribe to 2.15 percent of new shares in a LeEco subsidiary in a bid to form a strategic partnership, despite the Chinese firm’s financial troubles.
Chen had on several occasions publicly voiced support for LeEco, saying that as it is difficult to find a smartphone client with strong global shipment momentum, Compal would help LeEco overcome its financial crisis.
However, Chen’s attitude toward LeEco has changed, saying that Compal has not ruled out legal action against the Chinese firm.
Compal has booked a total of NT$1.74 billion in bad debt over the past three quarters: NT$360 million in the third quarter of last year, NT$695 million in the fourth quarter and NT$688 million in the first quarter of this year, company data showed.
While accounts receivable from LeEco have fallen from NT$8.2 billion in the third quarter last year to nearly NT$4 billion last quarter, Compal will likely have to book bad debt this quarter due to the Chinese company’s poor payment progress over the past two months, Chen said.
Compal is evaluating the feasibility of writing off the remaining debt at once, he said.
“LeEco’s funding situation is certainly getting tighter,” he added.
Smartphone orders from LeEco in April and last month were softer than Compal’s estimates, Chen said, adding that Compal would be affected if LeEco exits the smartphone industry.
Compal is to make a decision regarding LeEco’s situation by the end of this month, he said.
Compal’s net income plunged 33.12 percent annually to NT$1.07 billion in the January-to-March quarter, compared with NT$1.6 billion in the same period last year, company data showed.
Revenue in the first five months of the year totaled NT$318.58 billion, a 13.92 percent increase from NT$279.65 billion in the same period last year, the data showed.
Compal’s shares have risen 9.21 percent this year, compared with the broader market’s 12.15 percent increase.
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