Analysts expect Tricom to provide early rewards
ANALYSTS predict the stock market debut of telephone distributor Tricom Holdings could ring up some early profits for investors.
The past six months have proved costly for investors in new issues, but that may be changing.
Last week, Pacific Andes International Holdings listed and is trading above its issue price.
Of the three issues still to come this month, Tricom looks the most interesting.
The company is the largest independent dealer of mobile telephones in Hong Kong and also enjoys a healthy turnover installing PABX systems for offices.
Analysts like the stock because it is one of the few telecommunications plays available and because it is small, with plenty of room to grow.
Tricom was part of the First Pacific Group, but was sold to management when the conglomerate decided to focus on developing its Pacific Link cellular network.
The company has ridden the mobile telephone boom in Hong Kong and profits have risen steadily, but competition is heating up and the industry is showing signs of maturing.
Tricom's success so far has been in its dealership network, which represents most major brands including Nokia and Fujitsu, and in its own brand name.
There are few companies that are as well recognised in the telecommunications field as Tricom. But it faces some challenges.
Tricom has acquired the licences to represent most major telecommunications brands in Hong Kong and a few in China, but is facing increased competition from parallel imports.
Analysts do not expect earnings to come under pressure yet, but clearly the company wants to make the move into manufacturing before it is pushed.
It plans to use the funds raised from the issue to invest in two joint ventures in China, one which makes PABX systems and the other keyline telephone systems.
Tricom is still small and investors will be buying into a concept stock, but for those with a longer-term time-frame the stock could be well worth the money.
The issue should be well-subscribed, as some of Tricom's partners are expected to take a strategic stake in the company to firm their alliance. In an industry where the power of the brand is all-important, Tricom has a strong lead on its competitors.