úber Horizon: 2000-01-14
PCC is to buy 2.8 million shares, a 5% stake, in Singapore-based Horizon.com for HK$24 million or $8.77 per share (S$5.2 million at S$1.88 per share). PCC has an option to pick up another 10%.
Horizon is due to start trading in Singapore on January 26 with 56 million shares. The company develops "enabling technology" which PCC may use whenever it launches its online services.
Horizon is a new kind of internet company -- one that actually makes money. The company earned S$2.2 million (HK$10 million) in 1999. The IPO price, however, seems pricey. Assuming the 56 million shares outstanding following the IPO were in existence last year, the price represents a P/E of 47.9 times. Higher P/Es are quite acceptable for high growth companies though in the past "high growth" was anything above fifteen or twenty percent.
Horizon Profits at Various Annual Growth Rates:
HK$ 2000 2006 2007 2008 2009 2011 SUM
20% 12.00 35.83 43.00 51.60 61.92 89.16 474.97
35% 13.50 81.72 110.32 148.94 - - 535.90
50% 15.00 170.86 - - - - 482.58
PCC's Cut with 5% Ownership:
HK$ 2000 2006 2007 2008 2009 2011 SUM
20% 0.60 1.79 2.15 2.58 3.10 4.46 23.75
35% 0.68 4.09 5.52 7.45 - - 26.80
50% 0.75 8.54 - - - - 24.13
*SUM = years to PCC breakeven.
Even at a constant 50% annual clip, it will be 2006 before PCC gets its investment back. At an annual 35% growth it will take 8 years and more than 11 years at 20%. The investment, however, presumably has synergies that will enhance other components of the PCC asset portfolio.
The investment may be a good one, but it appears a little expensive, and we just hope that those currently undefined synergies may provide a return far greater than the visible sum of its parts.