Strong response may lift SIM offer
Investor response to the initial public offering of SIM Technology has been surprisingly strong, which could allow the company to raise more than originally expected, sources said yesterday.
The company, which had hoped to raise up to US$100 million, can now expect to raise a further US$10 million, either through higher pricing or the issue of additional new shares, even though poor market sentiment has forced lower prices and net proceed targets onto multibillion-dollar offerings from China Shenhua Energy and the Bank of Communications.
'The response for SIM Technology has been very positive, as it is the only technology stock available among the pool of new share offerings in the market now,' said a banking source.
The company has begun floating an indicative price range of 10 to 13 times this year's projected earnings, up from the nine to 12 times earnings introduced during pre-marketing earlier this week.
'There are a few funds in the market that are looking at fast-growing companies. By comparison, the Chinese banks that are also tapping the market for capital now did not show as fast growth rates [as SIM],' the source said.
The Hong Kong-based independent design house for mobile handsets wants to sell 25 per cent of its expanded share capital.
The post-offer trading performance of similar firms boded well for the issue, the source said, because it had stimulated investors' appetite for technology stocks.
Foxconn International, the mobile handset unit of Taiwan-listed Hon Hai Precision Industry, has been trading above its issue price of $3.88 since its debut in February, after selling shares to investors at 19 times last year's earnings.
SIM, which earns most of its income from royalties, has not provided investors with projected earnings for next year.
The company recorded net profits last year of US$25.5 million on sales of US$200 million. Its net profit margin reached 10 per cent last year, up from 6 per cent in 2003 and 3.4 per cent in 2002.
The company will use the proceeds of the issue for research and development of third-generation handset technology and second-generation GSM chipsets.
Book-building will start next week and the public offering will start on June 21, before the listing on June 30.
