FOUR months after listing, Vanda Systems & Communications Holdings says it is ready to start planning its expansion in Hong Kong as its China operations look set to boom on the back of banking reform. Chairman Lam Hon-nam said the company was still considering different proposals of how to position itself in Hong Kong. But it will probably focus on providing integrated systems - because of their higher profit margins - than selling personal computers. A systems integrator co-ordinates the design, installation and implementation of the system, including the supply of hardware. While the company is still unsure about how to gain a slice of the competitive Hong Kong market, Mr Lam said it would not give up Hong Kong despite the bulk of its income being generated on the mainland. 'Hong Kong is our base and we will definitely expand our operation here.' China would nevertheless remain the focus of the company's operations, with most of its effort going into integrated systems for the banking sector. Mr Lam said it was difficult to say whether income from integrated systems, which accounted for 26.5 per cent of the $316.6 million turnover in the year ended March 31, 1994, would surpass that from personal computer sales in the last financial year. 'The income from personal computers is growing too despite [the fact] we are now focusing on integrated systems.' Income from personal computer sales accounted for 71 per cent of the turnover last year. Mr Lam said the company would have no difficulty in meeting the $36 million profit forecast in the prospectus for the last financial year. 'We listed in April this year and we knew the figure already when we prepared the prospectus.' Mr Lam said he believed the income of integrated systems would grow substantially on the back of robust growth in the mainland banking sector following the introduction of the new commercial banking law. He said his company had been trying to win contracts from new private banks in China over the past two months. As Vanda, which entered the China market in 1984, had already established good relationships with banks such as the Bank of China, the People's Construction Bank of China and Guangdong Development Bank, it would be easier for the company to secure new contracts, Mr Lam said. He said demand for integrated systems was high as more new bank branches were being set up. 'The first phase of computerisation is usually carried out on a smaller scale while banks usually invest more in the second phase.' He said the company would step up negotiations with mainland banks in the next two months as most contracts were signed in the second half of the year. 'Government departments usually set out plans and secure capital in the first half of the year, and they start negotiating with suppliers in the latter half of the year.' Mr Lam said the competition in China was fierce despite the huge demand for computers. 'Everybody knows the computer market in the banking sector is huge and they all want to enter the market.' Mr Lam said the company would focus on supplying mid-range integrated systems to avoid direct competition with giant multinationals such as IBM and AST - which mainly provided larger computer systems for banks. He said the demand for mid-range integrated systems was high with banks scrambling to install automated teller machines and to link different branches. An analyst with Dharmala Securities, Ann Ling, said it was difficult to secure a substantial share of the integrated systems market in the China banking sector as a project was usually divided into a number of separate contracts open for bids. As Vanda developed its software in its two subsidiaries in China, it would have some advantages over its foreign competitors, Ms Ling said. The company would be unable to avoid clashing with multinational competitors, which were also eyeing the booming market for mid-range integrated systems. 'The company's competitors are actually its suppliers such as IBM and AST,' Ms Ling said. Because the income generated from integrated systems was only $83.9 million in the previous year ended March, it would be relatively easy for the company to achieve high growth this year, she said. Mr Lam said personal computer sales were also expected to grow with the expansion of the company's sales network in China. Most of the $32.8 million raised from the flotation in April remained untouched because locations for offices in China had not been identified. The company intends to open representative offices in Fuzhou, Dalian, Kunming, Nanning and Chongqing within one year from the date of listing, according to the prospectus. It has acquired the warehouse in Hong Kong as stated in the prospectus. Besides turning an eye to the Hong Kong market, Mr Lam said the company aimed to expand in Singapore. The Singapore subsidiary had been profitable since it started operation in March. Mr Lam said the subsidiary had secured a bid to provide computer systems for the Singapore branch of the Agricultural Bank of China. But the operation in Singapore would remain relatively small, he said. The average price of the company's stock in the four months following its listing on April 18 was $1.383, compared with the issue price of $1.12. The stock peaked at $1.81 and traded as low as $1.14. It closed at $1.72 on Friday.