Friday, June 23, 2006

More people come in to the PCCW deal

Among the buyers of PCCW's assets, it became more crowded with three funds coming in, Ashmore Investment Management, Spinnaker Capital and Clearwater Capital Partners.

This is the most interesting deal process I have seen: more and more bidders(both small and big) , and higher and higher willing-to-be-exposed price. Are the assets too good to be omitted? Or people are just too optimistics? Or Richard Li is so friendly with everyone that his asset are a must-see?

The three funds, according to their websites, are expertised in investing in debt, especially in distressed debt(one of Amy's expertised area, too). Coincidently, the three are jointly bidding for undersea cable carrier Asia Netcom, which is exactly belonged to the category "distressed debt", from China Netcom and its Beijing parent. It is said that the three will give Asia Netcom three years before a final solution. If the three also bought PCCW's alive assets, would three years too long?

Among PCCW's assets, the fastest growth comes from Now Broadband TV. It certainly beated other cable operators in terms of user number, and reported a good result in the PCCW's annual report 2005. I would call the service "alive asset", which will not be the right investment category for the three funds.(So why are they here?)

So now three groups, Macquarie, Newbridge and the three-fund consortium, are in the queue. Any further one coming into this fake game?

Big bet today(just for my readers):

If I were the banker, I will approach Mr. Rupert Murdoch, who just sold 20 percent stake of Hong Kong-based Pheniox TV to China Mobile, suggesting him to buy the Now broadband TV. It will be a good choice for the Australian tycoon to buy the opportunity in the growing cable TV market in Hong Kong, and thus opening the market in China as a result. Plus, he has the cash now from China Mobile.

Big belief today:
China Netcom will never allow any foreign companies buying the whole PCCW telecom network. In the political thinking, it must be in this way. So the choices remain with China Netcom: one is to buy PCCW itself in a decent way(isn't that many bankers planning to advise China Netcom) , or the other is to refuse and never cooperate with anyone.

Interesting findings today:

Lehman's relations

Rob Petty, the managing partner of Clearwater Capital Partners LLC, based in New York, once worked with Lehman Brothers, the advisor to PCCW on the deal, for 12 years. Lehman also worked with Ashmore on raising the funds. Hmmm, financial world is always small.....

PCCW's sale may be only a camouflage

The most breaking news in town these days is Tycoon Richard Li Tzar-kai, the biggest shareholder of PCCW, plans to sell the company's telecom assets, including broadband, mobile, wireless and TV services,(see PCCW's annual report here) ,possibly to one of the two private equity funds, one is Australia-based Macquarie Bank, and another is U.S. Newsbridge Capital.

People's attention was suddenly attracted to PCCW's rising share price, and the deal price, reportedly over HK$60 billion; Unfortunately, no one thinks on the other side: why the two private equity funds exposed their interests in PCCW, so early before any decision come? Any specific purpose to publicize it so quickly?

Private equity funds are famous for their deep pocket, and more importantly, beating return. Macquiarie Bank said on their website that the average return was 28 percent for its total portofolio by the end of 2004. Normally, the funds usually buy part or the whole stake in a company before restructuring it and selling out in three to five years.

So let's now guess the plan the two private equity funds are making on the PCCW deal right now. Maybe they see the trend for Hong Kong telecom operators to merge together in the future ten years, and make the assumption that PCCW, the biggest fixed line operator, will stay at last. They will have two options then: one is to list the assets on the stock market, possible, but difficult as it is hard to expect the situation of the stock market at that time: another option is to sell it to another party. In Hong Kong, except for Li's family, the only possibly buyers with enough capital are the mainland telecom companies including China Netcom. (China Mobile, which already bought a small HK operator, raised the example for further buying out from the four rich state-owned tele companies)

The plan sounds good, but unfortunately, China Netcom, the already second biggest telecom operator with 20 percent stake, couldn't agree on selling assets which will charge it more in the future. Off the record, I believe it has the assignment from the Ministry of Information Industry to do something in Hong Kong, the reason it doesn't want to make money from any share deals. Its spokeman also said it never plans to make money from the PCCW's stake.

So both Macquarie Bank and Newsbridge are facing a deal that will upset future buyers, which is unwise to do. Plus, HK$60 billion is not a small number to both parties. Newsbridge's total managed assets in the world is only US$3.2 billion, or nearly HK$ 25 billion, accounting for less than a half of the reported price on PCCW's assets, according to its website.(Macquarie's asset number couldn't be found)

Then, the only result I could get is that nothing will happen, except for the rising up stock price of PCCW. (Or maybe some secret deal between PCCW and China Netcom)

(Update on June 24 for some grammar mistake)

Thursday, June 22, 2006

China's Best Banks

One of my blog's readers sent me a letter asking for China's banking sector, while I always has conservative words to say. Banking stocks are the most popular stocks in the Hong Kong stock market, but in fact, investors, especially retail investors, had no idea about the bank espcially the brick-like IPO books. Dangerous to invest in some companies nothing familiar except for the name is really dangerous.

(P.S. the names for Chinese state-owned banks are really famous these days. I met someone from Germany a few days before, where he could recite all Big Four's names. Lol, isn't that amazing)

I will talk about some real experience in using the service of the banks, which I always believe will be helpful in choosing stocks and make long-term investments.

China Merchants Bank, is the best bank I've ever met. Its retail service will not be worse than, or even better than the HSBC, the largest retail bank in Hong Kong. As a new bank originated from the young city Shenzhen, China Merchants clearly develops its advantage on the high quality of the service as well as its good online system. With easy clicks, one could do everything on the lender's website. Also, its credit card is the best, too, and almost every of my friends living in big cities have one CMB credit card. I remember I received the short message confirming a deal on my mobile phone just 30 seconds after I paid on the counter using the card. Isn't the speed amazing?

The CMB's logan is most interesting "we are everywhere", and it does.

China CITIC bank and China Everbright Bank, the two mid-size lenders due to be listed in Hong Kong in 2006: I once used the card of CITIC banks, hmmm, how to say, not that comfortable, but required to use by the university to pay the tuition. Both belong to the conglomate group, but will that help?

Big Four:

Bank of China is good at its service in foreign currency service. Hong Kong investors are enthusiastic about its stock partly because Bank of China's Hong Kong branch has done a good job. Many friends used the account in BOC to buy U.S. dollars. If Bank of China has departed its foreign currency service, I will definitely invest.

Industrial & Commercial Bank of China: big,big,big. but in fact, never use its service before. Just too far away from me.

Agricultural Bank of China: farmers know the brand better than me. But it just want to escape from this special advantage. Come on, agricultural services could make a lot of money if you could focus on it.

China Construction Bank: the relatively smaller size made it flexible. One of its most famous serivice is to pay electronic and water bills. But I always have to queue up to pay them as there are so many people.

"Good housewives couldn't cook without rice", but with so many options in banks these days, why not go to China to test the services? All in all, it's the only and most effective way to know your investment.

Tuesday, June 20, 2006

Mainland Chinese telecom operators enter into the real capital market

Among all the Chinese state-owned companies listed in Hong Kong, the telecom sector have exposed most to the capital market. especially these days.

China Mobile: acquistions overseas, such as buying into Millicom and Pakistian Telecom.

Comment: Good way to expand, but the operator's lack of experience in overseas market may trigger the crisis in the management of new merged companies.

China Unicom: South Korea Telecom is in talks to buy 10 percent stake of China Unicom, possibly in the form of buying new issue covertible bonds.

Comment: Will the deal help with the performance of China Unicom? I wonder. 10 percent stake will not certainly improve the service as well as expanding the market share.

China Netcom: Australia-based Macquarie Bank may spend 40 billion HK dollars to buy the telecom assets of PCCW in which China Netcom has a 20 percent stake.

Comment: I guess PCCW is doing this to press on China Netcom, the second largest shareholder, to join the bid, but China Netcom may not want to do this, especially after Edward Tian suning, famous for his skill on capital market, left the company.

China Telecom: nothing has happened yet, as its performance isn't good these days. But I believe Wang Xiaochu, the former chairman of China Mobile, will do something soon.

One of my friends writing a "Gossip" finance column once did research on the places where state-owned companies held the annual group meeting. He found that all four telecom companies moved the place to Hong Kong from Beijing, which is unlike from giant companies. In my view, holding the AGM in HK at lease shows the company wish to expose to the capital market.

Now is the telecom sector, my next bet is the banking sector, active in M&A market in the next ten years.

Friday, June 16, 2006

I am in Nanjing

I am on a business trip to Nanjing now. Thing really change fast here.( I guess so do the other cities in China).

Picture: my little sister(not in a real family relation) and me in a coffee bar in the Interntional Trade Centre in Nanjing.

Monday, June 05, 2006

June 4, in Victoria Park, candela party

It has been raining these days, but I was impressed yesterday, when over 19000(official number) or 44000(non-offcial number) HK people went to Victoria Park to join the memorial pary for students died in June, 4, 1989. They were peaceful most of the time, but really enthusiastic when crying the slogan. (Picture will be uploaded soon). No matter what the truth is at that time, there HK people is respectful, for their 17-year persistance

Thursday, June 01, 2006

breaking stories make brands, but then

It's always breaking stories making brands for media. I broke a story last week(link), then the next day, Wall Street Journal, Financial Times, and South China Morning Post all made a follow-up story. Moreover, New York Time quote the Standard in one of its stories, which really made me flattered.

It's always cool to break news in the business reporting. But on the other hand, business reporting has to be careful to be critical, not that close to your business sources. It's hard to balance. Reporters are always tempted to make the deal with business sources in getting first-hand news, but then hard to be neutral to balance various business bodies.

I need to be careful all the time..... remember....