Acer Sertek Inc's share price rose 1.83 percent yesterday to NT$139, following a 6.27 percent rise the previous day, after the company announced Thursday its pre-tax profits for the first half of the year showed an 83 percent increase over the same period last year.
The company also said it would set up a branch office in Tainan and invest a further US$10.8 million in Hitrust, a software company selling certificate authority software and with an exclusive distribution agreement from Verisign Inc.
Acer Sertek is the marketing arm for Acer Group (宏電), the world's third largest PC manufacturer and a leading Internet enabler. Acer Sertek is also increasingly turning itself into a holding house through its investments in a number of internet-related companies. With its growing portfolio of investments, 37 percent of its revenue will come from its non-operating business this year, said Kevin Hsiao, assistant research manager at China Securities.
"It's not just a PC-related distributor anymore," he said.
Acer Sertek reported a pre-tax profit of NT$621 million for the first six months of the year, or 46.5 percent of its year 2000 forecast. It reported a net income of NT$499 million, or NT$2.42 per share. Part of the profit came from its sale of about 3 million out a total of more than 9 million shares in TSMC (
The figures are considered strong, and with demand for desktop and notebook PCs expected to rise substantially in the traditionally busy third and fourth quarters of the year, analysts say Acer Sertek should meet its net profit forecast, even without selling any more of its investments.
On Thursday, the Market Intelligence Center of the Institute for Information Industry, said Taiwan should deliver over 14 million notebooks in 2000, up 51 percent year on year. In the first half, Taiwan sold 6.3 million units. As well as TSMC, Acer Sertek also has stakes in Taiwan Cellular Corp
The investment in Hitrust in particular is a wise move and should be very lucrative, said China Securities' Hsiao. "They have eight years' exclusive distribution rights from Verisign in Hong Kong, Taiwan, and six cities and provinces in China, including Shanghai," said Hsiao.
Verisign Inc is listed on Nasdaq and makes certificate authority software. George Godfrey, director and senior equity research analyst at ING Barings, described the company recently as having a spectacular business model.
"They have 100 percent recurring revenue, 100 percent revenue growth, virtually 100 percent customer renewal rate. Plus they provide an absolutely crucial element to e-commerce and that's security, which is generally the number one concern for people doing business on the Internet," he said. Verisign was down 2.23 percent at US$142.5 at the end of trading on Thursday.
As the distributor of Verisign's software in Taiwan, "all on-line companies will purchase software from Hitrust. It will be one of the few profitable Internet companies in Taiwan," said Hsiao. As an investor with a substantial stake in the company, such a scenario bodes well for Acer Sertek.
The strategy of investing in Internet-related companies is a good one, said Hsiao, and many of Acer Sertek's investments look promising. Hsiao has a long-term forecast price of NT$180 per share for the company.
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