Investors' Uncertainty Takes Toll on CyberWorks Stock
January 18, 2001
Tech Center
Investors' Uncertainty Takes Toll on CyberWorks Stock
By GREN MANUEL and H. ASHER BOLANDE
Staff Reporters of THE WALL STREET JOURNAL
Shares of Pacific Century CyberWorks Ltd. extended their slide to 21% over the past six trading days as investors continued to ignore the company's strengths.
"I can't find any logic behind it ... Their fundamentals are still strong," says Chris Cheung, an analyst at WorldSec International Ltd.
Analysts say good news, such as falling interest rates, bounces off the company, which is a merger of Richard Li's upstart Internet venture and Hong Kong's fixed-line telecommunications monopoly.
Bad news, meanwhile, the company can't shake. Even negatives the market has had months to digest, such as the approach of Cable & Wireless PLC's option as of Feb. 17 to sell a 7.4% block of CyberWorks shares, can haul down the stock. CyberWorks shares dropped 5.5% Wednesday to 3.875 Hong Kong dollars (50 U.S. cents), on a day the overall Hong Kong market fell just 0.8%.
CyberWorks' share price has fallen 75% since the Aug. 17 acquisition of Cable & Wireless HKT, Hong Kong's former telecom monopoly, against a 13% fall in the Hang Seng Index and a 35% fall in the Nasdaq Telecommunications Index. CyberWorks is now at 14% of its February peak of HK$28.50.
'Not a Dot-Com'
When Mr. Li told anxious shareholders earlier this week that the situation was better than at many Internet companies, he echoed the view of many analysts who say the market has lost sight of the fact that CyberWorks is Hong Kong's dominant telecom firm, sending out millions of bills a month and getting paid, in hard cash.
"The fact is that this is not a dot-com company with no cash flow behind it," says Michael Leary, an analyst at Lehman Brothers Asia, one of many who believe the company has been heavily oversold.
But many believed CyberWorks was oversold at HK$10 in September, and even more thought so when it slipped below HK$5 last month. Most analysts believe HK$7 or HK$8 is a fair value for the stock.
Hanging over the company is the Cable & Wireless option to sell CyberWorks' shares. The British telecom concern got the shares when it sold Cable & Wireless HKT to CyberWorks. When an earlier lockup on a bloc of CyberWorks shares expired, Cable & Wireless dumped a hefty amount of stock on the market, pulling the price from around HK$13 to nearer HK$11. The risk that it may do the same thing in February is a major factor in the stock's downward spiral, says Mr. Leary. Cable & Wireless spokesman Peter Eustace said the company hasn't decided what to do when the current lockup ends.
Looking Ahead
The lockup issue is just one of the hurdles that keep appearing in the path of recovery for CyberWorks' share price. A few months ago the shares were sinking due to fears that a series of joint ventures with Telstra Corp. of Australia would unravel, and concerns over the cost of building Network of the World -- a cross between a Web site and a global TV station. Now that the Telstra deal is signed and the Network of the World investment has been trimmed back, some analysts fret over bank financing costs, about other shareholders needing to sell large blocs, and technical factors on the company's charts.
Alan Hutcheson, head of research at Pacific Challenge Securities, says one problem is that the merged company has yet to present a balance sheet or other documents that would help analysts clarify its financial status.
"People don't know the real state of affairs, and the company is not doing enough to help," he says.
Other analysts dispute this, saying the basic telecom business that has emerged as CyberWorks' core is well understood.
Citing growth in the fixed-line business the company controls, as well as in residential broadband Internet services, Mr. Cheung of WorldSec says: "They are going to be in a very dominant position in the next 12 to 36 months."
Write to Gren Manuel at gren.manuel@awsj.com3 and H. Asher Bolande at hyam.bolande@awsj.com4
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