Activating 20 Billion-Dollar Investment:
Expand Niche Products & Vietnam Investment Plans
Far Eastern New Century Corporation (Stock code: 1402) (hereinafter referred to as “FENC” or “the Company”) held its 2015 Annual General Shareholders’ Meeting at the Auditorium of Taipei Hero House at 9 o’clock this morning with Chairman Douglas Tong Hsu presiding. During the meeting, the management team reported on the 2014 financial results and the operating strategies of key businesses –production, investments, and property development.
Despite the volatility of the global economy and plummeting oil prices upending the selling prices of FENC’s petrochemical and polyester products, the Company still managed to deliver solid operating results in 2014. FENC’s consolidated revenues reached NT$ 235.5 billion (or US$7.8 billion), whilst net income attributable to shareholders of the Company was NT$ 11 billion (or US$363 million), or an EPS of NT$ 2.25 (or US￠7.43). Dividends of NT$ 1.4 (or US￠4.62) per share, comprising a stock dividend of NT$ 0.2 (or US￠0.66) per share from capital surplus and a cash dividend of NT$ 1.2 (or US￠3.96) per share from retained earnings, was accepted during the meeting and reflect the Company’s commitment to a stable dividend policy. The cash dividend yield is 3.7% based on the closing price of June 25, 2015.
FENC presented remarkable1Q2015 financials as well, with net income attributable to shareholders of the Company of NT$ 2.6 billion (or US$83 million), representing YoY growth of nearly 45%. Strategic summaries of the various business segments are outlined below:
Production Business: Strengthening Industry Leadership by Focusing On Three Major Strategies
FENC’s production businesses span across the petrochemical, polyester, and textile industries and its products are industry leading. To solidify the niche market (products such as recycled-PET, non-woven staple fibers, nylon 6,6, and PET resins), the Company has launched various ongoing expansion projects, estimated investment will reach NT$10 billion (or US$320 million) level. In addition, the production businesses are especially focused on the three following strategies
1. Building a green supply chain: Regarding recycled polyester(r-PET), the Company has achieved an annual capacity of 90,000 tons, while planning to expand its annual capacity to 140,000 tons over the next three years, maintaining its leading role in the industry. Furthermore, in order to reduce resource use, the Company has cooperated with Nike to develop a water free dyeing technology, using liquid carbon dioxide to drastically reduce energy and water consumption. Additionally, through the development of bio-based feedstock to replace petroleum-based feedstock, the Company together with its major brand client, Coca-Cola, has jointly developed the world’s first 100% bio-based PET bottle. The management team aims to promote the “Recycle, Reduce, and Replace” concept and lead the green trend in the industry.
2. Activating Vietnam investment plan:To exploit business opportunities presented by the Trans Pacific Partnership (TPP), the Company plans to increase its investments in Vietnam. In addition to its existing capacity, to meet the TPP’s yarn forward rule, FENC will build a vertically integrated production site for yarn, fabrics, dyeing and apparel in its phase one expansion and the investment amount will be expected to reach NT$10 billion (or US$320 million). After expansion, Vietnam will become the third world class vertically integrated production site of FENC following the current sites in China and Taiwan.
3. Strengthening R&D power: Far Eastern Group R&D Center (the Center) has become proactive in aligning with the Company’s growth plan. The Center has strategically allied with giant international brands such as Coca-Cola, Nike and Burberry to create new functional materials. Such material collaborations will develop new high value-added products to meet market demand and trends.
Property Development: Various Development Projects in Full Swing
FENC currently has total land holdings of 570,000 pings (or 1,886,700 square meters) throughout Taiwan, the majority of which are located in prime areas of northern Taiwan. Of these land holdings, 210,000 pings (or 695,100 square meters) are classified as investment properties, with estimated market value of approximately NT$ 150 billion (or US$4.8 billion). A nearly NT$ 30 billion (or US$959 million) gap in land values has not been reflected it its financial report.
The property development business has contributed profits of NT$ 984 million (or US$31 million) in 1Q15. Various property development projects are underway. Three commercial office buildings located in the Taipei Far Eastern Telecom Park (Tpark) in Banqiao will begin construction soon. Moreover, two high-rise residential projects are planned inside the Tpark and on the A-mart hypermarket BanXin store site, respectively. Banqiao Mega City phase II, a commercial office building, already officially commenced operations at the beginning of this year. As for Ilan, the Spa Resort project has already received its development permit and construction will begin shortly. These development plans are expected to further unlock FENC’s asset value, bring cash inflows via residential housing sales and provide constant rental incomes from commercial properties for the foreseeable future.
Investments: Create Stable Incomes through Investment Portfolio Diversification
FENC is the parent company of Far Eastern Group and encompasses a sizable and diversified quality investment portfolio that brings stable cash dividend inflows each year. Using the current market prices of its listed companies, the total portfolio market value is around NT$140 billion (or US$4.5 billion). In consideration of the carrying costs, the unrealized gains can achieve approximately NT$69 billion (or US$2.2 billion), or NT$ 13.2 (or US￠42.2) per share.
The book value per share of the Company on March 31, 2015 reached NT$ 38.7 (or US$1.24). However, coupled with the unrealized gains to reflect the current market value of FENC’s listed investments and land value, the book value of the Company should be above NT$ 57.1 (or US$1.83) per share, even without including future land development value, and the recovery of its production businesses.
“Inventing the New Century”: Exercise Social Responsibilities and Be a Role Model in Corporate Governance
FENC issued its second CSR report this year, “Inventing the New Century,” which demonstrates the Company’s founding spirit of “Innovation” as the foundation for sustainable development. The Company has exercised social responsibilities by providing green product solutions, in order to both foster the environment and enhance corporation sustainability.
“FENC will adapt to the changing environment with new thinking, strive for success with a new business paradigm, and will continue to maximize return for our shareholders,” said the management team.
