Combined entity to be listed on Nasdaq as firm seeks to lift DVD player output Starlight International Holdings, a Hong Kong-listed consumer electronic products maker, plans to merge its retail subsidiaries Cosmo Communications Corp and recently bought Singing Machine Co (SMC) and sell shares in the combined company on the Nasdaq Stock Market at the end of next year. Starlight shares dropped 13.9 per cent to HK$1.05 on July 25 when it postponed earlier plans to raise US$20 million from a Nasdaq listing for Cosmo. The company bought SMC in June. 'Canada-based Cosmo will take care of our six to seven large merchandise retailers such as Wal-Mart and Target Corp, and the United States-based SMC will mainly serve the small and medium-sized merchandisers like JC Penney and Costco Wholesale Corp,' said Philip Lau Sak-hong, Starlight's chairman and managing director. The restructuring comes as the company prepares to boost growth with the production of high-definition DVD machines next year. It plans to make players that will be compatible with one of either the Toshiba HD-DVD format or Sony Corp's Blu-ray format, both of which were launched in July. Starlight, which is targeting making 500,000 units of DVD players next year, will decide on which format to back after gauging consumer preferences. The proportion of DVD users using high-definition players will jump to between 30 per cent and 40 per cent within five years from the present 5 per cent, even though the machines will have an average retail price of US$129, compared with US$39 for a traditional DVD machine, Mr Lau said. Starlight will also be competing with mainland and other manufacturers that produce DVD machines without paying licence fees, accounting about 30 per cent to 40 per cent of all China-made DVD machines. Global consumption of DVD machines was about 100 million units last year, 70 per cent to 80 per cent of which came from the mainland. 'We need to pay 10 per cent to 15 per cent of the selling price of our DVD machines to licence holders such as Philips Electronics and Dolby Laboratories, and will need to pay one to two more percentage points of selling price to the HD-DVD licence holders,' said Mr Lau. High raw material costs are also driving up prices, with gold-plated cable costing up to 30 per cent of the selling price, he said. Panyu, Guangdong-based Starlight, which said it will help licence-holders to expose illegal DVD manufacturers, aims to spend HK$20 million to HK$30 million this year to increase overall capacity to 15 million units next year from 11 million units. The company is seeking to boost growth after net profit rose 56.6 per cent to HK$79 million in the year ended March on a 10.5 per cent increase in turnover. About 95 per cent of the company's sales come from original brand manufacturing and original design manufacturing business. Subsidiary Cosmo had turnover of about US$80 million last year with net profit of several hundred thousand US dollars, while SMC, which had total sales of US$40 million, had a loss of about US$1 million to US$2 million, mainly due to heavy financial expenses, Mr Lau said. Shares in Starlight rose 2.2 per cent to close at HK$1.39 on Friday.