Compal to invest in LeEco subsidiary

DEBT DRIVER::LeEco’s largest smartphone assembler last year booked a total of NT$1.055 billion in bad debt over two straight quarters because of the Chinese firm

By Lauly Li  /  Staff reporter

Wed, Mar 29, 2017 - Page 12

Laptop computer maker Compal Electronics Inc (仁寶) yesterday said it plans to spend NT$3.09 billion (US$102.4 million) to subscribe to 2.15 percent of new shares of a subsidiary of Leshi Internet Information and Technology (LeEco, 樂視), to enhance its strategic partnership with the Chinese firm.

“We believe the strategic investment will benefit both Compal and LeEco in the long term,” Compal president Ray Chen (陳瑞聰) told an investors’ conference at the company’s headquarters in Taipei.

The investment is to expand the two firms’ collaboration from the smartphone business to the Internet of Things and virtual-reality sectors in the long term, Chen said, adding that it would be conducted through a Compal subsidiary in Kunshan, China.

The transaction is expected to be completed before June 21, Compal said.

Chen’s remarks came as Compal reported net income for last year of NT$8.13 billion, or earnings per share of NT$1.88, a drop of 6 percent from NT$8.68 billion, or earnings per share of NT$2.01, in 2015.

Compal, which is LeEco’s largest smartphone assembler, last quarter booked NT$695 million in bad debt, compared with NT$360 million in bad debt in the prior quarter — because of LeEco.

As of Sept. 30 last year, the Chinese company owed Compal NT$8.29 billion in account receivables, a filing with the Taiwan Stock Exchange on Nov. 23 last year showed.

LeEco has been paying its debts regularly since November and has returned nearly 50 percent of the total to Compal, Chen said, without disclosing updated figures.

Compal does not expect to book any more bad debt from LeEco this quarter, due to the Chinese firm’s regular repayments, Chen said.

“LeEco is an important smartphone client for Compal. We believe it will overcome its financial troubles,” he added.

However, as LeEco is expected to turn conservative on its smartphone business this year amid its financial issues, Chen said he expects Compal’s smartphone shipments this year to be flattish or slightly decline from last year.

Compal’s total device shipments this year are expected to grow by 10 percent annually to 87 million units, driven by shipments of notebook computers, tablets and smartwatches, he said.

Shipments of notebooks and tablets are this year forecast to grow by 10 percent and 20 percent respectively, supported by increasing order allocations from existing clients, he added.

Compal is assessing the feasibility of selling its stake in Lienpal Ltd (聯寶) — a contract notebook joint venture with China’s Lenovo Group Ltd (聯想) — to Lenovo after the contract expires in October, Chen said.

“We are still evaluating the pros and cons of selling Lienpal. A decision will be made when the contract ends later this year,” Chen said.