CyberWorks seen chasing capital injection
BEN KWOK
Analysts expect Pacific Century CyberWorks to raise fresh capital this year to meet more than US$1 billion in cash outlays.
They said the battered telecommunications and Internet firm, which last week reported a HK$6.9 billion loss and HK$14.1 billion negative equity for last year, might need the money after details were unveiled of its capital expenditure breakdown.
Deutsche Securities said CyberWorks' operating expenditure of between US$400 million and US$500 million, together with its annual interest payments of US$300 million to US$350 million, could account for much of the US$1 billion cash flow generated from its fixed-line telephones business.
"This means [CyberWorks], in our view, will need to either raise fresh debt, significantly curtail investment programme or dispose of non-core assets," wrote Deutsche analyst Nigel Coe.
Mr Coe said there was concern at the extent of the cash spent in areas of Cyberport and Network of the World (NOW). They have a combined budget of US$500 million in capital expenditure this year.
Last week, CyberWorks chairman Richard Li Tzar-kai told analysts that content provider NOW, which capped capital expenditure at US$200 million this year, would begin to charge subscription fees. This indicated it might be giving up its initial reliance on advertising and e-commerce income.
CyberWorks deputy chairman Francis Yuen Tin-fan also suggested the company would use internal resources, including project financing, to help service its US$300 million commitment to Cyberport.
While raising further capital is seen as difficult for the company in both debt and equity markets, analysts said the disposal of non-core property assets could generate additional cash flow for the company.
CyberWorks' adviser during its Cable & Wireless HKT takeover, UBS Warburg, now believes the stock is a "credit story".
"A fair question to ask is what the negative equity means for the company," UBS analyst Bethany Chan said.
"A rights issue is a hypothetical possibility."
Negative equity might prevent some investors holding the stock. A rights issue could address this.
Several analysts said the unpredictable element was NOW. CLSA analyst Edison Lee thought a tie-up with a media company was the right thing to do.
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