Backdoor issues may lose their glitter easily: analysts
By Dennis Ng
STORY: THE share prices of Guoco Land and Fung Cheung Kee - both new members of the high-tech stocks club - jumped sharply yesterday on news that they were backdoor listing vehicles for investors with deep-pockets.
The pair joined an elite group, whose recent entrants include Cheung Wah Development and Golden Power, but analysts and traders warned that the current upturn in their share price could easily change course.
``The share price increase is maintainable for a short time, but for the medium and longer term, the share price should hinge on the support given to the companies by their new investors,' said William Li, an analyst at Celestial Asia Securities.
Shares of listed contracting business Fung Cheung Kee Holdings yesterday closed up 69.4 per cent at $2.1, with 48.7 million shares changing hands, after news of a share subscription by KG NextVision Corp which belongs to the Koo family of Taiwan.
It had a rollercoaster ride, opening up 37.1 per cent at $1.70, peaking at $3.5, before retreating to $2.80 later in the morning. It continued to drop in the afternoon session.
Under the subscription agreement, KG NextVision will subscribe for 1.8 billion new shares of Fung Cheung Kee at 12 cents per share, or $216 million in total.
It will become Koo Group's listed flagship in Hong Kong to develop Internet business in Asia. It will also change its name to KG NextVision to reflect its future diversification.
Capital Securities assistant sales director Peggy Ho said she believes the share price hikes of backdoor listing vehicles are likely to be a flash in the pan only, because such deals are becoming more and more common.
``The status of the new investors are very important to the share price performance,' she said.
Guoco Land also saw its share price jump yesterday after news of a subscription agreement. It rose by 38.8 per cent and closed at $9.3, after hitting an intraday high of $13, up 94 per cent, before edging back by the close.
``Many investors hope to see asset injections (into the backdoor listing companies),' Mr Li said.
A group of new investors, including Hutchison Whampoa, Ericsson and Swedish's largest investment holding company, Investor, agreed to pay $177 million for control of Guoco Land. Guoco Land will expand its business to focus on the mobile Internet industry in Asia and it will also change its name.
On the other hand, share prices of some other high-tech club members suffered yesterday with some losing almost 20 per cent in a market in which investors favoured ``old economy' stocks.
Golden Power International Holdings, which announced investments by Hikari Tsushin and Pacific Century CyberWorks in December, fell 19.53 per cent to close at $8.70.
The sharp decline cut an estimated $607.22 million from its market value.
Like Guoco Land and Fung Cheung Kee, Golden Power's shares also spiked after news it was linking up with Hikari Tsushin and Pacific Century CyberWorks.
Cheung Wah Development also fell yesterday, losing nine per cent to end at $6.65, with its market value falling by an estimated $1.23 billion.
That was a far cry from Cheung Wah's share performance just after news that Softbank was buying into it. The Softbank news sent Cheung Wah's shares up 637 per cent to $9.80 on 20 January.
online.hkstandard.com
P.S. With they would change the name!!! |
