Advantech buys majority stake in LNC

DIVERSIFICATION::The company now has a 77 percent stake in the CNC controller maker and said it will buy the rest later. It still has plenty of assets to buy more firms

By Kevin Chen  /  Staff reporter

Sat, Aug 31, 2013 - Page 14

Industrial computer maker Advantech Co (研華) continued its shopping spree yesterday with the acquisition of a subsidiary of Pou Chen Group (寶成) that supplies controllers for computer numerical control (CNC) and injection molding machines.

The company said in a filing to the Taiwan Stock Exchange that it has bought 38.5 million shares of the 13-year-old LNC Technology Co (寶元數控) at NT$14.72 per share, for a total purchase price of NT$566.7 million (US$18.9 million).

The purchase will give Advantech a 77 percent stake in LNC Technology, the filing said, adding that the company aims to purchase the remaining shares eventually also.

Advantech — which mainly supplies embedded computing, industrial automation and applied computing products in the industrial PC field — said the investment would strengthen its presence in the intelligent control and robotics field, while helping make it a leading automation brand in the Greater China region in years ahead.

The latest deal came after Advantech said on Aug. 14 that it was buying a 70.2 percent stake in AdvanPOS Technology Co (鈞發) for NT$319.46 million to tap its point-of-sale (POS) device market.

The recent purchases are not expected to financially burden the Taipei-based company, which had NT$26.8 billion in total assets, including NT$2.67 billion in cash and cash equivalents, at the end of June, its balance sheet showed. Total liabilities were NT$9.81 billion as of June 30.

Advantech has extended its reach into smart-life and factory automation applications in recent years to diversify its business portfolio. It has also pinned hopes on mergers and acquisitions (M&A) to help accelerate its progress in the highly fragmented industrial PC market.

Analysts say M&A, in addition to corporate reorganization, is part of the company’s efforts to double its annual revenue in the next five years to US2 billion from the estimated US$1 billion for this year.

“We estimate acquisitions could add an additional 3-5 percent revenue per year in 2014-2018,” CLSA analyst Cheng Chao-kang (鄭兆剛) said in a note on Aug. 15.

Cheng said Advantech is aiming to penetrate into new sectors such as energy, transportation, logistics and healthcare in order to broaden its addressable market to US$25 billion from the current US$13 billion.

In the first seven months of this year, the company’s cumulative revenue totaled NT$17.04 billion, up 8.16 percent from the same period of last year, while net profit totaled NT$1.99 billion in the first half of this year, or earnings per share of NT$3.5, up 13 percent from the same period last year.

KGI Securities Co (凱基證券) analyst Lisa Chen (陳玫芬) forecast the company would report a net profit of NT$4.66 billion, or NT$7.55 per share, on revenue of NT$30.36 billion, up 10.2 percent from last year’s NT$27.55 billion.

Supported by solid demand from North America and China as well as a positive view about the company’s reorganization, KGI raised its target share price on Advantech to NT$156 from NT$117, Chen said in a note on Wednesday.

Shares in Advantech were unchanged at NT$152 yesterday. The stock has risen 24.08 percent so far this year, compared with the broader market’s 4.19 percent increase over the same period.