Electronics component maker Lite-On Technology Corp’s (LOT, 光寶科技) acquisition of a local DVD player maker is expected to increase its business growth and profitability for this year and next year, analysts said.
“The deal is consistent with LOT’s business strategy — diversification into new growth opportunities along with the continued dominance in its power supply business,” Credit Suisse analysts Josette Chang and Pauline Chen (陳柏齡) said in a report on Friday.
On Wednesday, Lite-On Technology announced it would merge with Lite-On IT Corp (建興電子), which is one of the world’s leading optical disc drive suppliers with a global market share of up to 30 percent, through a cash tender offer between Thursday and March 15.
Lite-On Technology, which holds a 42 percent stake in Lite-On IT, said in a statement that it planned to acquire the remaining outstanding shares of its subsidiary at NT$32.75 per share, and expected the deal would be worth up to NT$17.45 billion (US$588.2 million) if it purchases up to 532,886,485 of the Lite-On IT shares on the open market during the period.
Chang and Chen said in the report that the acquisition would help the company improve its product mix by moving into higher-margin businesses such as handset camera modules and server power supply.
As Lite-On IT will become a fully owned subsidiary of Lite-On Technology following the completion of the deal, Credit Suisse said it also meant a stable revenue source and better earnings outlook.
Based on Chang and Chen’s analysis, the acquisition would bring in an immediate earnings increase to Lite-On Technology, about a 20 percent upside to its net income, pushing the parent company’s earnings per share (EPS) to NT$3.79 this year from an estimated NT$3.15 last year.
In the first three quarters of last year, Lite-On Technology posted a net income of NT$5.23 billion, or NT$2.31 in EPS. Revenue rose 2 percent to NT$121.45 billion for the whole of last year from NT$102.29 billion in 2011, the company’s data showed.
The deal would also generate synergies from a wider product portfolio, and increasing economies of scale and cross selling, as well as joint development and resource sharing, Chang and Chen said.
In addition, it would enable Lite-On Technology to embrace “more diversification opportunities” by entering into new areas such as solid state drive (SSD) storage, wireless chargers in cars, and medical testing equipment in biomechanics, they added.
Fubon Securities Investment Services Co (富邦投顧) analysts Kevin Chang (張宜立) and Lynn Luo (羅伊琳) forecast the acquisition would boost Lite-On Technology’s earnings per share by 8 percent this year and 14 percent next year.
In a report issued on Friday, the Fubon analysts predicted Lite-On Technology would see net profit further expand in these two years, thanks to its market share gains in higher-margin power supply for cloud and networking devices, camera modules for smartphones and tablets, as well as its promising LED lighting business.
Shares of Lite-On Technology closed 0.59 percent higher at NT$42.75 on Friday in Taipei trading. The stock has risen 14 percent over the past 12 months, outperforming the TAIEX, which has increased 2.36 percent over the same period.