Sorry I cant find the original.
Here is the post from rb pcclf.
I am long and heavy PCCLF
Asia Stk Focus: CyberWorks Rated Buy; Risks Shrugged Off
HONG KONG (Dow Jones)--Despite soaring more than 140% this month most investors can't seem to get enough of Pacific Century CyberWorks Ltd. (H.PCW). And most analysts see them chasing the stock for some time to come yet.
Formed earlier this year, the Richard Li creation has quickly become the preferred buy among high-technology and Internet-related plays in Hong Kong, never mind that the company's broadband project is barely off the drawing board.
With the aim of becoming a leading Internet service, content and e-commerce provider in the Asian region, Pacific Century CyberWorks is teaming up with local cable operators and global content providers to set up a broadband Internet distribution system that will reach some 110 million households across Asia via satellite and cable. Its key focus will be China and India.
To be sure, there are those who are skeptical about the viability of the plan but most analysts retain a buy recommendation on the stock, noting that traditional valuations aren't meaningful for Internet-related companies, which lack revenue and are focused on building up market share.
"People are buying it because of the concept," said Mark Go, analyst with Jardine Fleming Securities Ltd., who ranks the stock "definitely a buy at these levels."
"Whatever value you put on it depends on the value of the benchmark stocks on Nasdaq," he added.
"The current share price is definitely discounting future hopes," said Bethany Chan, a technology analyst with Warburg Dillon Read (HK) Ltd. "But I still see upside, primarily from the momentum of the news flow," she added, referring to the company's investments in Internet content providers as well as its high-profile partnerships.
So far Pacific Century CyberWorks has tied up with big-name companies such as CMGI Inc. (CMGI) (3.4% stake), a U.S. Internet holding company that includes Altavista and Adsmart among its assets, SoftNet Systems Inc. (SOFN), a U.S. provider of broadband Internet access via cable and satellite (23%) and content providers such as iLink.net, SINA.com and StarEast Information Technology.
U.S. microprocessor maker Intel Corp. (INTC) owns 8.4% in Pacifc Century CyberWorks and will provide the set-top boxes that allow subscribers to access Internet services via a television set.
Alongside its investments and the broadband Internet project, which the company will begin to roll out towards the middle of next year, it is also building its so-called Cyberport - a property development dedicated to high technology companies - in a HK$13 billion partnership with the Hong Kong government. The first phase of the project will be ready in March 2002.
Investment Expectations Drive Stk Price
"Rightly or wrongly, the broadband project is now in the background and in the near term the stock price will be driven by these (partnership) deals," said Matei Mihalca, an Asia Pacific Internet analyst with Merrill Lynch (Asia Pacific) Ltd., who has a buy recommendation on the stock both in the short term and in the longer-than-12-month term.
Last Thursday, the stock soared 65% to a high of HK$18.20 within minutes of the opening bell on a local media report that the company was in talks with Microsoft Corp. (MSFT) regarding a share swap. Pacific Century CyberWorks publicly denied the report, but market participants weren't entirely convinced and the share closed the session 41% higher.
Friday, the share added 35 HK cents to close at HK$15.95, up HK$10.50, or 192%, from May 6 just after it was formed. In the same period the benchmark Hang Seng Index has risen 24%. Hong Kong's stock market was closed Monday.
"Pacific Century CyberWorks looks like Asia's first Internet gorilla," said one analyst who declined to be named. He cited the company's broad geographic reach, the spread of its revenue base, its ability to attract top talent and partners, as well as its good connections in China as reasons for why the current valuation isn't just built on air.
Hang Seng Index Inclusion Seen Drawing Nearer
Pacific Century CyberWorks is among the few Internet plays in Hong Kong that are liquid enough for fund managers and institutions with an appetite for hi-tech plays. And while not yet a constituent of the Hang Seng Index, analysts say they expect it to be soon included in the blue-chip barometer. In terms of size the company is already well qualified to be a blue chip. With a market capitalization of HK$132.88 billion only seven of the 33 Hang Seng stocks are bigger than the fast growing high-technology company.
Speculation about a Nasdaq listing is also supporting the price even though the company itself said Friday it has "no current plan" to list on the U.S. bourse.
Still, there are analysts who question the arithmetic, arguing that the company will be hard-pressed to line up the number of Internet subscribers it is targeting. Regulatory hurdles in China may slow its progress, and the willingness of cable operators to invest the significant sums it will take to upgrade their existing cable networks may also be tested.
"The plan isn't bad, but the market valuation is ridiculous," said one analyst who insisted on anonymity. "A valuation of HK$4.50 per share would be more appropriate," he said. The fact that Pacific Century CyberWorks will be buying all the Internet content for its broadband portal, is only one factor that makes it vulnerable, he said.
But although analysts recognize that delivery of the promised services is crucial and acknowledge that the whole project hinges on the cooperation of cable operators as well as subscriber acceptance, it is difficult to find anybody who will openly question its future success.
Off the record, one analyst implied that nobody is willing to see through the net of a company run by the second son of highly regarded Hong Kong business tycoon Li Ka-shing.
Such doubters though are easily outnumbered by supporters of the stock.
Rajeev Gupta, a technology analyst with Goldman Sachs, sees huge potential for the Hong Kong company, predicting that revenue will soar to more than US$3 billion by 2004 from zero this year. With 90 million cable TV subscribers in China and India and a low density of personal computers, cable-based broadband Internet access via the television set will become an attractive alternative, Gupta believes. Especially since it will be cheaper than the current narrowband dial-up PC connections.
Pacific Century CyberWorks has already signed up cable operators in China and India with access to more than 10 million homes, and Gupta forecasts that it should capture around 10% of the cable subscribers in China and India by 2004.
But the numerous Internet-related initial public offerings expected in 2000 could weaken investor appetite, analysts say.
"Investors will have more choice and may take their funds elsewhere," said Mihalca at Merrill Lynch. However, CyberWorks will remain attractive since it "offers a broad bouquet of investments," he said.
Another risk could be that "reality will be slower than the vision" which the company is working towards. Potential subscribers may not be susceptible to the new services, Mihalca added.
And of course, Pacific Century CyberWorks won't be immune to a sharp correction on Nasdaq, even though Goldman's Gupta believes the company will survive such an ordeal reasonably intact as it is among the 20% of Internet companies which he says aren't just hype and speculation. |
