Hua Hong NEC revives listing plan
Wong Ka-chun and Lee Yuk-kei
Shanghai Hua Hong NEC Electronics, a chipmaker half-owned by Japan's NEC, is trying to revive its long-awaited plan to list in Hong Kong by raising up to US$300 million in the next quarter, according to a source yesterday.
The company had planned to raise as much as US$500 million by selling shares in Hong Kong in 2004 and again in 2005 but put the plan off on both occasions because of poor market sentiment and a tight operating environment.
BNP Paribas is sponsoring the share sale. The proceeds will be used for building a new plant.
'Generally, downside pressure on [chip] prices has ceased over the past quarter and the sector is seeing a more stable operating environment,' the source said.
Listed competitor Semiconductor Manufacturing International Corp, which makes dynamic random access memory chips in Shanghai, reported a first-quarter net profit of US$8.8 million compared with a restated loss of US$9.6 million a year earlier.
'Manufacturing semiconductors is not an attractive sector because it involves a very heavy investment outlay, high technology requirement and strong pricing power,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities. '[Even so], I now think Hua Hong's IPO is attractive to investors.'
BNP is also involved in an initial public offering by Sunny Optical, due to come to the market next month.
Sunny Optical, a leading mainland maker of optical components and optoelectronics, aimed to raise up to HK$1.17 billion to fund its business expansion, market sources said.
The company is expected to price its offered shares at 20.3 to 24.4 times its earnings last year, putting its market value in a range of HK$3.37 billion to HK$4.04 billion, according to a research report by one of its share sale arrangers, BOC International.
'In light of poor listing debut performances of recent industrial stocks, this IPO is a risky bet,' said one fund manager who was notified about the share sale.
'Furthermore, pricing the company at more than 20 times earnings sounds expensive.'
Sunny Optical earned 117 million yuan last year on revenue that rose 53 per cent to HK$901 million yuan from HK$588 million.
The company increased its return on equity to 33 per cent last year from 27 per cent in 2005.
At the same time, the company saw its operating margins on optical components shrink to 19 per cent from 29 per cent, according to the research report.