High-Flyer Cruises Low
asiawise.com
By Kareem Jalal, AsiaWise
8 Dec 2000 10:30 (GMT +08:00)
Techpacific was once one of Hong Kong's most aggressive Internet investment companies. A lack of hits means its shares - down more than 70% since April - aren't poised to turnaround soon.
Techpacific's flamboyant chairman Johnny Chan is proud of being in the black. Revenues for the third quarter stood at $1.7 million, with modest profits of $121,000. But almost half its revenues, or $800,000, were attributable to interest income from cash raised during the IPO. Without these, the company would have been in the red.
It's once-promising corporate finance business looks grim because the bear market for New-Economy stocks is leading to a decline in new offerings and their fat underwriting fees. Another source of income – fees from fund management - stands at around only $2 million this year. Fee income will never be stratospheric, so it all hinges on having big hits in the portfolio - they get a 20% interest carry on portfolio gains.
Techpacific's own direct investment portfolio also depends on hits that have proven to be few. The company's failing as an incubator is that its management has no proven track record building and exiting businesses, and relatively little operational experience in tech companies. This makes them less attractive as mentors for bright young start-ups.
What's more, even successful U.S. incubators such as CMGI and Internet Capital Group, despite their proven track records of incubating successful businesses, get no respect from the market. The value of the publicly traded companies in CMGI's portfolio is around $4 billion, and at its current share price of $11.6, the entire company is barely worth that. Investors give it no credit for its pre-IPO holdings. Why would techpacific get any more with no record? The only publicly traded holdings in techpacific's portfolio are a 0.68% stake in China portal Netease.com, Inc. and 0.03% in Korea's Daum Communications Corp.
How about e-services? So far, the business has been slow, too. On Nov. 30, techpacific tried to boost its e-services capacity by acquiring a controlling stake in Spike Cyberworks, taking over PCCW's 30% stake in the company, and buying further shares from Australian parent Spike Networks.
PCCW, which paid $23.3 million for the stake in June, exchanged it for a 4.5% share of Techpacific worth less than $7.5 million. With recent aggressive moves by both local (Chinadotcom's WebConnection,) and international (Icon Medialab, Modem Media, marchFIRST and Scient) players in the Asian e-services field, it's clear techpacific faces a hard slog for market share.
With no business breakthroughs in sight, the chance for one in techpacific's share price also looks slim.
Company Links:
TECHPACIFIC.COM
asiawise.com |
