CyberWorks still teetering on edge
JON OGDEN
Pacific Century CyberWorks might be down 90.66 per cent from its peak, but shares in the heavily indebted Internet and telecommunications company might still be staring over the precipice, according to some commentators.
"It could have another 80 per cent to go. The trouble is nobody can figure out what its value should be," said an analyst who declined to be named.
CyberWorks closed at a 23-month low of HK$2.60 on Wednesday. A further 80 per cent fall would leave it at just 52 cents.
The key concern was that CyberWorks' management had still not been able to turn a hodgepodge of new-economy businesses into a coherent whole which could generate revenue growth rather than destroying capital, the analyst said.
While announcing a staggering $6.9 billion loss on March 28, CyberWorks said investors would have to wait 90 more days before it unveiled its new strategy for the Internet.
The company had hoped that spending millions of dollars creating original content to beam out on its Network of the World Web site would help it become a must-have broadband intermediary between the Internet and hundreds of cable-television companies around the world.
The company had "gone back to the drawing board" on the Internet, executive vice-president Jeffrey Bowden said. It was now looking at adapting leading Internet access provider AOL's business model. Subscribers might be asked to pay for a premium service in which Web pages could be accessed in 0.7 second rather than four seconds, a plan which is hardly likely to set the market on fire.
There is likely to be more immediate pain for CyberWorks shares, with the company saying on Wednesday it was selling its 14.7 per cent stake in Singapore operator Mobile One Asia to cut its US$5.1 billion debt burden.
The move illustrates how CyberWorks is having to sell its established businesses to finance its leveraged buyout of incumbent telephone company Cable & Wireless HKT last year.
In writing down HK$170 billion in goodwill for HKT, CyberWorks' balance sheet was left with $14 billion in net liabilities. Ascribing a value of $30 billion for the "deteriorating" asset of HKT and its clientele, which included a management premium, shares in CyberWorks were only worth 73 cents, according to financial Web site Quamnet.
"Some might even argue if we should grant a premium to the management of [CyberWorks], and if not, then the goodwill of HKT alone might not be able to compensate for the $14 billion negative asset value," Quamnet said. "In other words, one may [speculate] if the fair price is, or close to, zero."
There are other ways to value CyberWorks which make more positive reading.
Goldman Sachs used a discounted cash-flow method and came up with a $5.75 valuation per share.
On the other hand, it said, CyberWorks was trading at a 66 per cent premium to fixed-line peer companies in terms of its valuation against forecast earnings before interest, tax, depreciation and amortisation.
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