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Denise Tsang

Television-manufacturer Yugang International intends to exercise an option to buy a stake in a Nasdaq-listed educational-software company.

 Yugang secured the option in the form of convertible debentures and warrants a fortnight ago after lending US$1.5 million to Tengtu International.

 Yugang has until 2003 to convert the loan, debentures and warrants into a maximum 30 per cent interest in Tengtu at a cost of $25 million.

 Yugang chairman Cheung Chung-kiu yesterday said Yugang was likely to exercise the option 'in the near future' to take advantages of recent sharp rises in Tengtu's share price.

 'The stock has shot up dramatically since we were negotiating the transaction last month,' Mr Cheung said.

 Tengtu shares closed on Wednesday at $2.68 up from a mere 37.5 cents just a month ago.

 Yugang stands to make gains as the conversion price of the loan into new Tengtu shares is 50 cents.

 The debentures and warrants carry an exercise price of $1.

 In a vertically integrated operation, Tengtu develops, produces and markets educational software platforms and systems mainly in North America, the mainland, Hong Kong and South Africa.

 The company has estimated that sales will reach $89 million this year and $162 million next year based on the value of existing contracts.

 Tengtu chairman Pak Cheung said the company's net profit margin stood at 25 per cent.

 Mr Pak Cheung said a significant portion of the company's income was contributed by a 57 per cent-owned joint venture which held an exclusive licence to publish electronic educational materials in the mainland.

 This venture is also overseeing the building of an Internet network for remote learning.

 'Currently, we've got 15,000 schools internationally as our users, equivalent to 20 million people,' Mr Pak Cheung said.

 The joint venture was backed by mainland ministries such as of Ministries of Education and Information Technology as well as computer and software firms such as Legend Computer and Great Wall Computer, Mr Pak Cheung said.

 In Canada Tengtu's educational network system Usernet had been operated for more than 10 years by all the schools in Brunswick and Prince Edward Island, he said.

 In Ontario, at least 30 per cent of schools were using it, he said.

INVESTMENT 



Yugang poised to use stake option to get aboard Nasdaq software firm