E Ink Holdings Inc (元太科技) yesterday said it has increased its holding of SES-imagotag in a gesture of support as its major customer put forward persuasive arguments against allegations of inflating revenue.
The world’s sole e-paper display manufacturer said it has bought the shares after SES-imagotag’s stock price nosedived after being targeted by short-seller Gotham City Research LLC last week, E Ink chairman Johnson Lee (李政昊) told shareholders during its annual general meeting in Hsinchu yesterday.
“SES-imagotag is a well-managed company. It is one of very few companies in Europe that still enjoyed fast growth in recent years,” Lee said. “Because of our cooperations with the company, we can open up the electronic shelf label [ESL] market along with other partners from this ESL ecosystem.”
Photo: CNA
“We are confident that installing ESLs is a must for retailers in the future. The penetration rate of ESL is still low, less than 10 percent, indicating that there is a spacious room for growth,” he said.
E Ink originally owned a 5 percent stake in SES-imagotag, a leading supplier of ESLs and a customer of E Ink for 13 years, Lee said.
Lee is a board observer and attends board meetings of SES-imagotag regularly.
The SES-imagotag stock price plummeted 58.27 percent to 69 euros on Thursday last week after Gotham City Research released a report accusing SES-imagotag of overstating its revenue during 2020 and last year by at least 7 percent to 13 percent, and last year’s earnings before interest, taxes, depreciation and amortization by 106 percent.
Gotham City Research alleged that SES-imagotag has artificially overstated revenue through a “round-trip transaction” with BOE Technology Group Co (京東方), China’s biggest LCD panel manufacturer and a major shareholder of SES-imagotag.
E Ink did not expect the volatility of SES-imagotag’s share price to directly hurt the company’s bottom line based on its accounting rules, company chief financial officer Lloyd Chen (陳樂群) told reporters yesterday.
The company categorizes its SES-imagotag holdings as shareholder equity in comprehensive income, which is excluded from net income on a statement, Chen said.
Shares of SES-imagotag rallied more than 15 percent to more than 100 euros as of press time last night, after Deloitte and KPMG provided a certificate to the company indicating that the transactions with BOE for a total amount of 53.1 million euros (US$57.8 million) were neutralized and are therefore not included in SES-imagotag’s consolidated revenue, which totaled 620.9 million euros at Dec. 31 last year.
SES-imagotag said it would initiate all procedures necessary to defend its interests, including with the French Parquet National Financier for alledgedly disseminating false and misleading information.
E Ink yesterday kept its business outlook for the whole year unchanged. Revenue would grow at a single-digit percentage this year from last year, as the weakening world economy and soaring inflation curtailed demand for e-readers and e-Notes.
However, the weakness is to be offset by robust demand for e-paper displays used in ESLs, Lee said.
E Ink expected revenue to grow quarter by quarter in the second half of this year, Lee said.
It saw some positive signs as customers have placed rush orders for e-papers used in e-readers and e-Notes from the US, Europe and China, Lee said.
Besides, Walmart Inc is to start installing ESLs in the US from the fourth quarter of this year, he said.
The firm’s shareholders yesterday approved a cash dividend of NT$4.5 per common share, representing a payout ratio of 51.78 percent based on the company’s earnings of NT$8.69 per share last year.
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