China internet firms eye up to US$1b in offerings

PUBLISHED : Thursday, 09 February, 2006, 12:00am
UPDATED : Thursday, 09 February, 2006, 12:00am

At least six China internet firms will tap overseas markets this year to raise between US$500 million and US$1 billion in initial public offerings, according to an industry research report.


Mainland internet players such as China's largest online marketplace Alibaba.com, mobile music service provider A8 Limited and online community service provider China Interactive Corp will seek listings this year.


'Those internet firms that aim to go public this year need to strengthen their financial positions to deal with market competition,' said Hu Yan-ping, director of communication and development centre at the Internet Society of China which released this year's internet industry survey report yesterday.


Mr Hu said he believed the internet companies could raise between US$100 million and US$200 million each on the US Nasdaq.


'Hong Kong investors seem to have no interest in China's internet stocks. It is much better to list on the Nasdaq where the market reflects the potential valuation of those firms,' Mr Hu said.


He said Hong Kong-listed mainland instant messenger service provider Tencent Holdings had not shared the success of its Nasdaq-listed counterparts.


'The listing of Tencent in Hong Kong seems meaningless.' he said.


Sources said Shenzhen-based mobile music service provider A8 expects its shares to be valued at 10 times to 20 times the company's historical profits.


A8 obtained US$20 million from venture capital firms TDF Capital, Jafco Asia, Intel Capital Corp, Mitsubishi UFJ Securities (HK) Capital and International Data Group in December last year.


Alibaba.com is also rumoured to be a potential listing candidate despite denials from its founder Ma Wan.


'Alibaba.com has a clear business model and scale after it acquired Yahoo China last year. It should be expected that the company will go public,' said Wang Chi-man, an analyst at Everbright Securities.


Another possible listing candidate is mainland online community service provider China Interactive Corp. Its main assets include portal Mop.com with more than 18 million registered users. The company aims to boost its revenue to US$50 million this year to meet Nasdaq listing requirements.


Meanwhile, the China internet market is expected to record strong growth this year.


The report estimated that total revenue from internet users in China would increase 52.5 per cent year on year to 286 billion yuan, up from 186 billion yuan last year. The average revenue per user each month was 157.80 yuan last year.


China had 110 million internet users at the end of last year, up from 103 million in 2004. Mr Hu expects the user base will continue to grow at 12 per cent this year.


The report also predicted that a new generation of internet applications, such as Web 2.0, would focus more on interactive functions and personalised content.


Blog and mobile internet service (WAP) should be the next industry growth engine, it said.