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Technology Stocks : PCW - Pacific Century CyberWorks Limited -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (1082)	4/17/2001 1:36:15 AM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

Cacophony of opinions surrounds CyberWorks Roger Evers, Hong Kong iMail The larger-than-life profile and image of PCCW, led by Richard Li Tzar-kai still casts a huge shadow over its perceived worth. Picture: AFP WHEN it comes to Pacific Century CyberWorks (0008), rational valuations seem to fly out of the window. What figure can you put on Internet assets such as PCCW's ambitious interactive TV venture Network of the World (NOW)? Do you put a premium on the connections and charisma of PCCW's chairman, Richard Li Tzar-kai? How do you factor a level of debt so huge the company is in negative shareholder equity of $14 billion? If you're a banker or an investor, the chance is that for this company more than any other, the gut and the heart still rule over the paper and ink of the balance sheet. After last month's gargantuan $6.9 billion net loss, Hong Kong's number-crunchers did the math and came up with the wildly diverging numbers and calls that PCCW regularly attracts. The reason for the variation - bankers, it appears, are only human - they have long memories, pet dislikes and, in many cases, with PCCW - business to win. ``The management is so disappointing, I will never, ever recommend this company,'' said one analyst with a ``sell'' call despite a sum-of-parts valuation of nearly $3.70. ``Even if its stock goes down to $1 or 50 cents I won't change my recommendation,'' he added, the memory of the dotcom blow-out clearly still echoing in his ears. ``We're trying very hard to win business with the company,'' said another analyst, who said he couldn't speak to the press. He denied business-winning considerations affected his call on the company. The cynicism pervading technology and telecoms analysis following the dotcom boom-to-bust now means that any marginally positive call is treated with suspicion. Witness the praise for PCCW from Bank of East Asia (0023) CEO David Li Kwok-po, whose ``100 per cent confidence'' raised eyebrows. That doesn't stop CyberWorks cheerleaders. Banks such as UBS Warburg still recommend PCCW as a ``buy''. SG Securities calls a ``strong buy''. They point to strong cashflow from Hong Kong Telecom's old assets - churning profits of $1.2 billion last year. They like the Cyberport, a government property project granted without tender to Richard Li's fledgling company and likely to be a licence to print money in a few years. They look at PCCW's Internet ventures such as its data centres, its consumer Internet products and its TV venture NOW - and they value them according to their potential future cashflow. ING, for instance, which has a ``hold'' recommendation on PCCW, still totes up the value of NOW as $13.8 billion, contrasting with other banks which value it at $0 and less. The bank rates HKT's old assets less net debt at $67.9 billion, or $2.52 per diluted share, puts the Cyberport at $10 billion (37 cents per share) and PCCW's ``concept values'' - its less tangible Internet plays including NOW - at $42.3 billion ($1.57 per share). Put together, PCCW is worth $120.2 billion - or $4.46 per diluted share (prior to the convertible bond deal), according to ING. But that assumes PCCW's ``concept values'' are worth something. Give five bankers the balance sheet, profit and loss, turnover and fixed assets for a stable cashcow such as HKT and they will dutifully do their sums and produce pretty similar valuations based on future cash flow. ING's $2.52 per diluted share valuation of HKT's assets matches closely with other analysts' targets. But when it comes to PCCW's Internet and technology ventures, valuation becomes more of an art than a science and the numbers start jumping all over the shop. Some bankers are keeping their counsel. ING, which predicted a net profit of $85 million for PCCW last year, keeps its $42.3 billion valuation for the firm's Internet ventures, but discounts them from its $2.89 target price - which is its HKT valuation. Others are harsher. One analyst, who asked not to be named, put the value of NOW at $0 and the data centres at 3 cents per share - that's despite a report, valuing PCCW's miscellaneous satellite, technology and property investments at 51 cents per share and the company overall at $3.63. But the underlying picture is that PCCW's larger-than-life profile and image still casts a huge shadow over its perceived worth. Perhaps that's natural. So much of the company's ambitious planning can't be reduced to valuations and numbers without reference to the management of the company - which is inextricably linked with its profile and image. If the company can't handle simple questions about the CEO's education, can it turn around a debt-laden utility weighed down by a slew of dotcoms, critics ask. The questions all come back to the Internet ventures - and what management can do with them. It was these businesses that lifted PCCW's share price to near the $30 mark during the height of the dotcom boom early last year. While PCCW's share price stalled at over $27 last February, most banks still recommended it as a ``buy''. With the benefit of hindsight it is obvious the forecasts were based on so much hot air. It looks ridiculous now that investors believed that millions of viewers all over the world would be gripped by NOW's broadband Internet TV programmes - and that advertising, syndication and e-commerce revenue would follow. It was clearly foolish for HKT's board and shareholders to pump for a merger with untested start-up PCCW above seasoned regional rival SingTel. But rational analysis was hard to come by then - and PCCW's brash techie image caught the dotcom zeitgeist. Now that the tide has turned, some say investors (and the media) are being hyper-critical - and as irrational in the company's adversity as during last year's euphoria. Critics won't be put off. The banker who says his ``sell'' call is permanent concedes one thing would change it - but it has nothing to do with better figures or growth forecasts. ``If some key management left the company, then I might rethink,'' he says. Who does he mean? Chairman and CEO Richard Li? He laughs. ``No comment,'' he says. Roger Evers 17 April 2001 / 12:21 AM Copyright(c) 2000 Hong Kong iMail Newspapers Ltd. All rights reserved. hk-imail.singtao.com