3/19/00 9:18:00 PM
Source: Bloomberg News
Hong Kong, March 20 (Bloomberg) -- Pacific Century CyberWorks Ltd., Asia's third-largest Internet investment company by market value, said it will book a $73.8 million gain from its Internet- related investments for 1999, lifting analysts' estimates on its full-year results due to be released later today.
CyberWorks posted a net loss of HK$40.7 million ($5.2 million) in the six months through June, reflecting mainly the businesses it inherited from unprofitable mobile handset distributor Tricom Holdings Ltd., which it took over last May. The full-year results aren't expected to be released until about midnight local time.
CyberWorks was originally expected to post a net profit of HK$24.2 million ($3.1 million) for 1999, according to the online edition of the Estimate Directory, which polled four analysts before the company released the statement on its one-time gain today. Now, with the one-time gain, CyberWorks could report a net income of $60 million, analysts said.
''It's the biggest Internet startup I have ever seen,'' said Gregory Feldberg, an analyst with Indosuez W.I. Carr Securities in Hong Kong, who has a ''buy'' recommendation on the stock. ''What we are interested in is how the company is going to roll out its network over the next 12 months. Its share price hasn't been moving with historical earnings.''
Though CyberWorks has yet to start its first Internet service, its market value of $26 billion is already more than that of Amazon.com Inc., which began business five years ago and now runs the largest store on the Internet.
The profit CyberWorks is likely to post for 1999 will also include interest earned on its cash hoard. The company sold shares four times to institutional investors last year, raising gross proceeds of about HK$7 billion.
Still, analysts expect CyberWorks to report more losses over the next few years as it invests heavily to build what it intends to be the world's biggest broadband Internet business.
While the company's shares lost 10 percent last week in a global sell-off in technology shares, the stock is still up about 30-fold since Richard Li, the younger of the two sons of Hong Kong tycoon Li Ka-shing, agreed to take the company over last year. Today, CyberWorks shares gained 0.25 percent to HK$20 during the morning session.
Unlike many U.S. Internet companies, which attract investors with their revenue and customer bases, CyberWorks has been attracting a lot of interest partly because it's one of the few Asian Internet companies with a market value big enough to draw attention, and partly because it's embarked on a wave of asset purchases.
To date, the company has spent $535 million in cash and shares to buy stakes in more than 40 Internet companies, about a quarter of which are now publicly traded. While technology stocks globally have pared some of their gains recently, CyberWorks said it still has a paper profit of $1 billion from those listed investments.
Still, that won't be enough to keep investor interest.
''This year will be a year of execution,'' said Juliette Chow, an analyst with Lehman Brothers in Hong Kong. CyberWorks, as well as other Internet start-ups, must prove to investors the concepts they formulated in the past year will materialize, she said.
CyberWorks seems prepared.
The company said it will start in the next three months an Internet portal and a satellite broadcast television service, upgrading both next year to enable two-way interactive activities.
The company, having spent most of its energy so far on developing content, has also moved to strengthen its distribution channels.
In Hong Kong, CyberWorks offered to buy control of Cable & Wireless HKT Ltd., the city's dominant telephone company, to ensure its planned online products and services will have a way to be distributed. HKT owns a broadband fixed-line network that covers 80 percent of Hong Kong households.
In China, whose Internet user numbers are expected to exceed that of the U.S. by 2005, CyberWorks has teamed with Legend Holdings Ltd., the nation's No. 1 computer maker, to develop computers that give users instant access to the CyberWorks service.
In India, which is expected to become the second-biggest Internet market in Asia after China, the company recently agreed to buy 49 percent of Data Access India Pvt. Ltd., which owns a license for a nationwide Internet service.
''The focus (on Internet companies) has changed,'' said Matei Mihalca, an analyst with Merrill Lynch Asia. ''People don't want to take big bets. They want something that is more solid.''