APRIL 27, 2010 -- Chinese optical technology supplier O-Net Communications (Group) Ltd. expects to announce tomorrow, April 28, the final offer price for the majority of shares it plans to make available as part of its initial public offering on the Main Board of The Stock Exchange of Hong Kong Ltd. (SEHK).
O-Net Communications supplies passive optical networking subcomponents, components, modules, and subsystems to an international customer base that includes Alcatel-Lucent and Huawei as well as the contract manufacturers for Ciena and Infinera, it says.
The company announced April 18 its plans for its proposed listing on SEHK, which will include 193,280,000 shares (subject to adjustment, an over-allotment option, and reallocation), of which 90% will be placed internationally. The remaining 10% was offered to the public in Hong Kong between April 19 and 22.
O-Net Communications plans to unveil both the final price and allocation results tomorrow. It targeted an indicative offer price range between HK$2.17 and HK$2.90 per share on April 18. Trading in company shares is scheduled to begin April 29 under stock code 877. Shares will be traded in board lots of 1,000.
Assuming an offer price of HK$2.535 per share and that the over-allotment option is not exercised, net proceeds from the global offering would be approximately HK$446 million after deducting underwriting commissions and other estimated offering expenses, the company estimated.
The company plans to use the money for a variety of internal requirements as well as for potential acquisitions. Again assuming a net return of HK$446 million, O-Net Communications says it plans to allocate the funds as follows:
- Finance the construction and build-out of new facilities on land owned by O-Net Communications of approximately 38,000 sq. m. located in Pingshan New District, Shenzhen City, China -- 44.8%
- Production line expansion and research and development -- 9.0%
- Payment to Shenzhen Kaifa for rent and other operating expenses borne by Shenzhen Kaifa on behalf of O-Net Communications for the formation of a joint venture company -- 7.6%
- Potential acquisitions of companies, businesses, assets or teams for the purpose of enhancing O-Net Communications’ position in China and overseas markets -- 31.0%
- General working capital -- 7.5%
For the three years ended December 31, 2009, O-Net Communications says its revenues achieved a CAGR of 21.4% to HK$338.4 million in 2009, mainly attributable to the new product launches and the increasing number of new customers. Gross profit margins improved from 38% in 2008 to 45.3% in 2009, and its net profit recorded a CAGR (between 2007 and 2009) of 97% to HK$79.2 million in 2009 with net profit margin at 23.4%. The company forecasts that profits for the six months ending 30 June 30, 2010 will be not less than HK$65.9 million.
CLSA Equity Capital Markets is the sole sponsor of the new listing, with CLSA Ltd. the sole global coordinator and CLSA and Piper Jaffray Asia Securities Ltd. as the joint bookrunners and joint lead managers. Sun Hung Kai Securities Ltd. is the co-lead manager and TaiFook Securities Co. Ltd. is the co-manager.
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