Negative equity, huge losses and unpredictable future, all these are expected to Quam's intelligent viewers, but many local newspapers give us an impression that they are a Columbus who have just found a new continent in a New Found-land called PCCW (8).
Nine months ago, Tony Measor, our semi-retired Chief Editor and the original author of Daily Quommentary, in both Quamnet and his Next Magazine column warned that PCCW would become a negative asset after the acquisition of HKT. PCCW's annual results for the 12 months ended 31 December 2000 confirmed our view. The company wrote off $172 billion in goodwill arising from the acquisition of HKT, resulting in a net liability of $14.13 billion as at 31 December, 2000. Based on 21.88 billion shares in issue, the net liability was 64.57 cents per share. At yesterday closing price of $3.475, the company was still grossly overpriced at $76 billion. In other words, even at today's seemingly depressed prices, shareholders are still paying $90 billion in premium for the entrepreneurship of Richard Li, a local billionaire-child-and-college-dropout-turned Internet venture capitalist.
Including $4.89 billion losses on investments and provisions for impairment losses, net losses amounted to $6.91 billion (LPS: 47.54 cents). Excluding the exceptional item, net losses were $2 billion (13.76 cents per share). The company had promised its creditors that no dividend would be paid in at least the following five years. Considering the uncertainty in the telecommunications industry and the lack of disclosure in the company's results announcement, we are unable to project the company's future earnings (or losses) at the moment. Details of the company's financials will be discussed in a separate analyst report later today.
This is definitely not our cup of tea.
Overnight in the U.S. markets, all major indices were in the red after a number of leading tech firms had given profit warnings. The Dow lost 162 points to 9,785; the Nasdaq was down 118 points, or almost 6%, to 1,854; and the S&P 500 also lost 29 points, or 2.4%, to 1,153. The sell off was triggered by Nortel Networks, the world's number one telecommunications equipment supplier, and Palm, the inventor of Palm Pilot, both of which warned investors that their coming results will not be able to meet analyst forecasts. The layoffs of Walt Disney, and IT company DAC Telecommunications also added fire to the panicked investors.
HSBC's (5) ADRs declined 50 HK cents from HK close of $92 to US$58.67 (equivalent to HK$91.50, 1 ADR=5 HSBC shares). China Mobile's (941) ADRs lost 90 HK cents to US$21.92 (equivalent to HK$34.20, 1 ADR=5 Mobile shares) from HK close of $35.10. PCCW's ADRs was down 21.5 cents, or 6.2%, from HK close of HK$3.475 to US$4.18 (equivalent to HK$3.26, 1 ADR= 10 PCCW shares). Manulife Financial (945), which has been a safe haven in the past twelve months, in the U.S. gained HK$6 to US$25.30 (HK$197) from yesterday's closing price of HK$191.
KMB (62), another safe haven and the Large-cap Portfolio member, gained 35 cents to $21.55 on news that every 12 shares of KMB will be granted 1 preferential share of RoadShow, the advertising agent which is applying for a separate listing in the local main board. (to be continued...)
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Mar 29, 2001 - 10:00:42 HKT
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