Ennoconn Corp (樺漢), an industrial computer manufacturing arm of Hon Hai Precision Industry Co (鴻海), on Tuesday last week said it plans to raise NT$1.32 billion (US$42.7 million) by issuing new shares.
The company made the announcement in a filing with the Taiwan Stock Exchange.
The Ennoconn board of directors set the issue price of 6 million new common shares at between NT$160 and NT$220 per share, compared with the stock’s closing price of NT$236 on Tuesday last week.
The company plans to reserve 10 percent of the new shares’ subscription rights for employees and make 80 percent of them available to existing shareholders, while selling the remaining 10 percent on the open market, it said.
The board also decided to issue as much as NT$6 billion in five-year unsecured convertible bonds at a zero coupon rate.
There is no timetable for the company’s fundraising plans, but Ennoconn said it would use the proceeds to meet funding needs when bondholders at home and abroad exercise the option to sell their holdings.
Ennoconn, which provides hardware systems to various applications, such as point-of-sales, banking automation, kiosks and industrial automation, has in the past few years been seeking merger and acquisition (M&A) opportunities to enter different application markets.
The acquisition of Germany’s S&T AG and Kontron AG allowed Ennoconn to expand into the Internet of Things and system integration businesses, while the purchase of a controlling stake in semiconductor equipment supplier Marketech International Corp (帆宣) helped it tap into the factory automation business.
With larger economies of scale, Ennoconn’s consolidated sales expanded to a record NT$19.98 billion in the July-to-September quarter, from NT$11.89 billion a year earlier.
While gross margin fell from 30.06 percent to 20.94 percent and operating margin dropped from 4.68 percent to 4.63 percent on a yearly basis, net profit in the third quarter increased 19.49 percent to NT$335 million, with earnings per share (EPS) of NT$4.32.
In the first three quarters, net profit totaled NT$796 million, up 2.1 percent annually, with EPS of NT$10.38, the financial statement showed.
Ennoconn said it expects sales to grow by 5 to 9 percent this quarter from last quarter and increase by 15 to 20 percent this year from last year.
However, Yuanta Securities Investment Consulting Co (元大投顧) said it is cautious about Ennoconn’s operating margin outlook and views the lingering US-China trade war as a risk.
“We are concerned that the company’s lack of experience in these new areas could lead to a longer-than-expected time for investors to see M&A synergies,” Yuanta analyst Steve Huang (黃柏璁) said in a client note.
“In addition, we are also worried that, amid the rising Sino-US trade war, not only will slowing end-demand negatively impact top-line growth, but Ennoconn will also find it difficult to leverage Hon Hai group’s most cost-efficient capacity in China, resulting in a slower-than-expected pace of operating margin improvement,” Huang said.
Yuanta forecast operating margin of 5.5 percent for this quarter and EPS of NT$5.3 for Ennoconn.
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