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Eric Ng

Shares in Pearl Oriental Holdings surged 37 per cent yesterday following the announcement of an 8.48 per cent placement of stock in the company to China Strategic Holdings.

 Resuming trading after a day's suspension, Pearl's shares closed at 25 cents, against a closing level of 18.2 cents on Tuesday.

 Pearl's chairman, Wong Kwan, the controlling shareholder, has agreed to place one billion existing shares with a China Strategic subsidiary at 18.2 cents each, or $182 million in all.

 Mr Wong will immediately subscribe to the same number of new shares in Pearl Oriental at the same price.

 His holding will drop from 61.62 per cent to 56.40 per cent of the enlarged capital.

 The rebound came as Pearl unveiled details of an ambitious expansion in fixed-telecommunications network services (FTNS) in Hong Kong.

 Mr Wong said the company's fully owned subsidiary, Pearl Oriental Telecom and Technology, yesterday submitted its application for a wireless local FTNS licence.

 He expects to invest between $200 million and $300 million in this project if a licence is granted.

 The company will initially focus on a network in the New Territories because there is less competition in this area.

 However, it would not rule out attempts to enter more densely populated areas, Mr Wong said. He added the network would be the base for plans to develop similar businesses in the mainland.

 Mr Wong said the company had a long-term commitment to telecommunications technology and was confident of a licence being granted.

 He said Pearl Oriental might form a joint venture with China Strategic in high-technology projects, but at present, China Strategic was a strategic investor of the company.

 He said Pearl Oriental had various channels to raise money for its investment projects, including a plan to list Stockonline, in which Pearl Oriental holds 55 per cent, in Nadsaq within the next six months.

 He said a recent valuation revealed Stockonline was worth US$200 million.

 Mr Wong said the company had more than a year's experience in the telecoms business and had enough experts in this field.

 But analysts were sceptical of Pearl Oriental's move.

 They said Pearl Oriental only employed relevant experts recently and had no established brand name in the field.

 Stephen Leung, assistant research manager at Daiwa Institute of Research, said: 'Theoretically, every company can set up a fixed-line business by using outside expertise, but you still need the relevant management experience to run it in the long-run.'  An unnamed analyst said those with established brand names and larger operators would have a competitive edge on pricing and costs in the fixed-line business.



Pearl Oriental surges on share placement plan