Listing Candidate HK iLink Warns More Losses To Come
Updated: Wednesday, February 28, 2001 01:33 AM ET
HONG KONG (Dow Jones)--Data center operator iLink.net, which is controlled by Pacific Century CyberWorks Ltd. (PCW, news, msgs), warned that it will likely continue to make losses in the near future as its expansion plans demand significant capital expenditure, according to its newly issued prospectus obtained Wednesday.
iLink.net is in the midst of a fund-raising exercise aimed at raising about HK$140.8 million to build data centers in China and other parts of Asia.
It will issue 110 million shares at HK$1.28 a share to institutional investors. The shares will begin trading on Hong Kong's Growth Enterprise Market March 9.
iLink reported a HK$28.6 million net loss for the 10 months to Oct. 31.
In its prospectus, iLink.net warned that its history of losses will likely continue "due to the high level of planned operating and capital expenditure, increased sales and marketing costs, hiring of additional personnel and a greater level of product development."
The company also said its "expansion plans in other cities in Asia will require significant initial capital investment."
iLink plans to invest about HK$59 million from the share offer's proceeds to expand its data center business in Asia this year, including about HK$25 million to establish a center in Taiwan and about HK$34 million to build one in Shenzhen.
The company will use HK$43 million to fund its operations this year and about HK$12 million to fund marketing and promotional activities this year. The balance will be used for working capital.
The company said funds raised from the share offer as well as its cash on hand will keep it operational until the end of the year, while projected cash flow from operations will provide it with adequate capital until the end of 2003.
The company warned that if it can't meet its cash-flow targets, it may be forced to raise more funds. If it fails to obtain such funding it would "have a material adverse effect on iLink.net," it added.
The company also warned that it faces a very competitive market, including potential direct competition from businesses operated by Pacific Century Cyberworks and its partners, including Telstra Corp. (A.TLS, news, msgs).
It also said that the company is banking on the growth and widespread use of the Internet. If its fails to become widely used, "iLink.net's business and future growth would be materially and adversely affected."
Despite the company's warnings, it already has strong business partners.
Dell Ventures, the venture capital arm of U.S. Dell Computer Corp. (DELL, news, msgs), owns 6%, though its stake will be diluted to 4.5% following the share offer.
PCCW owns 40.8%, though its stake will increase to nearly 48% because it owns a convertible note in the company.
iLink provides server hosting, facilities management, Internet connectivity and network management services.
-By Kirsti Hastings, Dow Jones Newswires; (852) 2832 2337; kirsti.hastings@dowjones.com
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