Col hält (siehe unten) 190 mn Stück.
24.01.00 DAO HENG SECURITIES
China Online (383) SPEC BUY
We believe the takeover of China Online (COL) by China Sci Tech, a company controlled by Stanley Ho, is likely to lead to a series of major corporate restructuring exercises which will refocus the group towards new PRC Internet and telecoms investments. The sale of a 32.8% stake to China Sci Tech becomes effective from 28 January. We expect COL's new management team might take the opportunity to spell out expansion plans then.
China Online (previously Star Telecom) had its origins as a handset distributor and was an early ISP player. However, the group soon acquired a series of assets, the most important being a stake in Pacific Century Cyberworks last year. The 200mn PCCW shares were reportedly acquired at below $8.00 a share. With PCCW's closing share price at $16.55 last Friday, the 200mn shares are currently worth $3.3bn.
In addition, the group has built up a cash pile of $700mn. Debt levels are believed to be negligible. Management said COL is a net lender to the interbank market. The large cash pile certainly suggests COL is well positioned to go on an acquisition spree for new telecoms and Internet investments in China and Hong Kong.
Other PRC projects that have been carried over from the previous management include an option to acquire a 35% interest in a CDMA network in Beijing and Shanghai and a 55:45 interest in a mobile handset distribution business in North and Northeastern China with Hikari Tsushin. The latter JV has 180 sales points and is said to be profitable. Preliminary discussions have begun regarding the potential expansion of the distribution network to 1,000 outlets.
Finally, COL is one of the two largest distributors of Nokia handsets in Hong Kong. COL represents the whole range of models. Management is talking with Nokia about setting up a separate service centre for its customers.
China Online (0383) BUY
In contrast to PCCW's (+6.15%) recent outperformance, China Online's (COL) shares closed unchanged yesterday. Despite the recent disposal of 9.7mn PCCW shares, COL still has 190mn shares outstanding. Based on PCCW's closing price yesterday, we estimate the stake is worth $4.45bn or $0.48 per share. We reckon COL's stake in PCCW is therefore worth 50% more than its closing share price of $0.32.
If COL's other assets comprising an estimated $680mn in cash, a 10.5% stake in listed SHK&CO, the PRC handset distribution JV in China and the Nokia handset agency in Hong Kong are taken into account, COL appears to be hugely undervalued by the market.