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China IPO Alert: AsiaInfo Holdings Inc.
By Lester J. Gesteland
ChinaOnline News
(3/1/2000) U.S. investors clamoring to get in on the high tech boom in China will soon have another stock to buy, AsiaInfo Holdings Inc., an Internet infrastructure firm that is planning to list on the Nasdaq within a week (ticker: ASIA). The company intends to issue five million shares at US$18-20 each through the underwriter Morgan Stanley Dean Witter.
AsiaInfo is neither an Internet service provider nor an Internet content provider. It is a network solutions provider that integrates the servers and routers that make up China?s Internet. It also supplies software that allows these systems to operate smoothly.
Because the number of Web surfers in China is growing rapidly ? more than doubling every six months ? there is "huge demand" for AsiaInfo?s network services, according to Hong Kong-based Benjamin Lo of Credit Lyonnais Securities Asia (CLSA).
Agatha Poon of the Yankee Group agrees. "Out of [China?s] 8.9 million Internet users, 1.1 million access the Internet via a dedicated line, 6.66 million used a dial-up modem and 1.15 million used both types," she said. "These two areas are expected to propel the growth of networking services and related businesses in China."
AsiaInfo?s network solutions software sales should also do well, as there are not that many competitors in China. "There is huge potential in this area," CLSA?s Lo said.
Another factor working in AsiaInfo?s favor is its cozy relationship with the Chinese government. While the company?s online content brethren ? namely Sina.com and Sohu.com ? have failed to get official approval to list abroad, China?s Securities Regulatory Commission (CSRC) gave AsiaInfo the green light early on. (See Gary Chen?s article on Chinese Internet IPOs.)
The company has an especially good rapport with China Telecom, the country?s defacto monopoly (which enjoys backing from the Ministry of Information Industry), and garners most of its income from that major client.
"A constructive and cooperative relationship is good for doing business anywhere," Poon said, "undoubtedly, it works very well in the Chinese business community."
A bit of background
AsiaInfo was founded in Texas in 1993 by James Ding and Edward Tian. Although incorporated in Delaware, the firm relocated to Beijing in 1995 and is considered a Chinese company by local authorities.
Edward Tian left the company in May 1999 to head up China Netcom, the country?s third largest telecom, but he is still on AsiaInfo?s board. The company is currently run by Ding, who is chief executive officer.
According to the company?s prospectus filed with the U.S. Securities and Exchange Commission, AsiaInfo designed and built ChinaNET, the nation?s largest Internet backbone, and numerous provincial backbones, including GuangdongNET. The firm is designing and building UniNET for China?s second-largest telecom, China Unicom.
AsiaInfo sells customer management and billing software and carrier-scale messaging software for ICPs, ISPs and wireless telephony providers. These software products were historically sold alongside network solutions services, but the company is planning to sell these on a stand-alone basis.
For the year ended Dec. 31, 1999, the company reported a net loss of US$4.9 mln on revenues of US$60.3 mln. Revenues increased by 19% in 1998 and 36% in 1999.
A Caveat
There is always a certain amount of risk when investing in any company. In AsiaInfo?s case, CLSA?s recent China Internet Sector report states it best:
"The nature of AsiaInfo?s business shields it to some extent from the political and regulatory risk surrounding both the provision of online content and operation of services. Nevertheless, nearly all of its business still depends on the good graces of one customer: China Telecom." |
