Shares in Far Eastern Department Stores Co (FEDS, 遠東百貨) and other firms in the Far Eastern Group (遠東集團) rose yesterday after the Taipei High Administrative Court on Thursday ruled in favor of the retailer’s control of Pacific Sogo Department Stores Co (太平洋崇光百貨).
Aspects of Far Eastern Group’s stock portfolios, especially Far Eastern Department Stores, may see an upside push after the removal of uncertainty over ownership of the Sogo arm, analysts said.
However, the swing factors is whether the Ministry of Economic Affairs will appeal the case as well as the potential overhang on the group’s core and non-core business outlook next year, they added.
“The court’s decision effectively marks the beginning of the end of this decade-long Sogo ownership debacle,” Primasia Securities Co analyst Kai Chen said yesterday.
In Taipei trading yesterday, Far Eastern Department Stores closed up 5.04 percent at NT$30.20. The stock has declined 15.41 percent so far this year, compared with an increase of 7.18 percent on the benchmark TAIEX over the period, according to Taiwan Stock Exchange data.
Far Eastern Group secured control of Pacific Distribution Investment Co (太平洋流通) — a holding company for Sogo — 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, since then the Far Eastern Group has engaged a long legal battle with former Sogo owner Pacific Construction Co (太平洋建設) over Sogo’s ownership. In the intervening period, Pacific Distribution has also become involved in a dispute with the group over whether the group has legal “management rights” to Sogo, or is merely “a shareholder” in the company.
On Thursday, the Taipei High Administrative Court issued its ruling that the NT$4 billion capital injection undertaken by Far Eastern Department Stores and 14 other Far Eastern Group affiliates in 2002 to Pacific Distribution is legitimate.
The long-awaited court decision grants full legal authority to Far Eastern Department Stores as the largest shareholder of Sogo, overruling the Ministry of Economic Affairs’ previous injunction against the company after the ministry’s Department of Commerce revoked the capital injection in 2010.
Department of Commerce Director-General Reed Yu (游瑞德) said yesterday the agency would review the ruling after receiving the documents and determine if it would file another appeal.
While the verdict would favor Far Eastern Department Stores in the short term, JPMorgan Securities (Taiwan) Ltd analyst Caren Huang said in a report on Thursday that she remained cautious on the retailer’s fundamentals next year, because domestic consumption still shows no signs of recovery amid economic uncertainties.
Grand Cathay Investment Services Corp (大華投顧) analyst Horatio Lin (林修平) also expressed concerns about falling sales in Sogo’s three major branches in Taipei in recent anniversary promotional sales.
The same-store sales of Sogo branches in Zhongxiao, Fuxing and Dunnan in this year’s anniversary activities totaled NT$5.2 billion, lower than the company’s targeted sales of NT$5.4 billion and lower than last year’s NT$5.3 billion, Lin said in a note yesterday.
Meanwhile, shares in other Far Eastern Group subsidiaries also moved up yesterday in tandem with Far Eastern Department Stores, with Far EasTone Telecommunications (遠傳電信) moving up 1.11 percent to NT$72.8, Asia Cement Corp (亞洲水泥) rising 1.36 percent to NT$37.35, U-Mine Marine Transport Corp (裕民航運) gaining 1.53 percent to NT$46.35 and Far Eastern International Bank (遠東商銀) ending 2.27 percent higher at NT$11.25.
Textile manufacturer Far Eastern New Century Corp (遠東新世紀), which is a flagship company of the diversified business conglomerate, advanced 2.67 percent to NT$34.55 yesterday. Shares have fallen 1.71 percent so far this year.
Fubon Securities Investment Services Co (富邦投顧) analyst Kerry Wu (吳致勤) said the government’s tighter housing restrictions and a purified terephthalic acid (PTA) supply glut will continue to undermine Far Eastern New Century’s operations next year.
In addition, non-core gains from Sogo only make up a 2 percent of the textile firm’s net asset value, representing a meager contribution to consolidated sales, he added.
Additional reporting by Helen Ku