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Commenting on its relationship with China-based LeEco, Compal Electronics president Ray Chen has said the company will complete an evaluation of LeEco at the end of June and will compose a new strategy to handle its uncollected debts, including a possibility of suing the China-based player.
Compal’s plan of investing in LeEco’s subsidiary has also been temporarily halted and Chen noted that whether the plan will continue will depend on LeEco paying back debts.
LeEco had some financial issues in 2016 and was unable to make payments to its major upstream partner Compal. Compal has been declaring accounts receivable losses each quarter because of the debt. In the first quarter, Compal declared losses of NT$680 million (US$22.71 million), causing its EPS to drop to NT$0.15.
Compal’s decision on March 28 to invest CNY700 million (US$104.51 million) in LeEco’s subsidiary to acquire a 2.15% stake in the company also seriously concerned Compal’s investors.
To soothe its investors, Compal has conducted an evaluation and will make a move at the end of June, after the results come out. Chen noted that LeEco continues to payback its debts and Compal is still shipping products to LeEco, but the volume has dropped dramatically.
At Compal’s investors conference for the first quarter, the company originally said that LeEco has been paying its debts steadily and should be clear by the end of the second quarter, but Compal has turned conservative about LeEco’s payment plan recently, indicating that there might be some issues. In the first quarter, LeEco already paid back 50% of its debts.
As for question on whether Compal may sell its stake in its notebook manufacturing joint venture with Lenovo in 2017, Chen said that the decision has not yet been finalized and still need evaluation.
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