By Hui Ching-hoo (China Daily)
Updated: 2007-12-05 09:39

Mainland Internet service provider Pacific Online said it is confident its Hong Kong initial public offering (IPO) would not be affected by the recently sluggish IPO market.

Expected to raise as much as HK$622 million through the deal, the firm will open its order book for retail investors today. Its shares will be sold within an indicative range of HK$2.98 to HK$3.58, while its trading debut is scheduled for December 18.

"Although the market is highly volatile, we are confident with the future growth of the company," a company spokesperson said.

"We think our shares are set at a reasonable level."

In response to sluggish revenue growth for the first half, the spokesperson expected the second half-result would be "satisfactory", with the support of newly launched products and advertising investment.

Pacific Online runs five portals with a wide spectrum from IT products to childcare targeting mainland Web surfers.

In the first half of the year, the company reaped 40 million yuan in net profit, representing year-on-year growth of about 33 percent.

As for the drop in marginal profit for the first half of the previous three years, the spokesperson attributed it to commission expenditure increased on advertisements.

The company pockets benefits from the advertising fees of vendors and suppliers.

Company management said that IT and car portals constitute more than 95 percent of its revenue and the company is trying to explore new income sources from computer games, women's products and childcare portals.

According to the listing document, the HK$130 million of the IPO-raised proceeds will be used for upgrading and expanding their portals, while HK$225 million is earmarked for future acquisitions and investment.

In recent weeks, listing candidates in Hong Kong have been feeling the pinch after market sentiment turned bearish. Two recent listings - Sinotrans Shipping and Sinotruck - slumped more than 10 percent on their first day of trading.

The harsh IPO market has prompted two firms - aluminum foil maker Xiashun Holdings and motorcycle manufacturer Vietnam Manufacturing and Export Processing - to scrap their listing plans.

Patrick Shum, chief portfolio strategist of Karl Thomson Securities, said Pacific Online is unlikely to perform well in view of the prudent attitudes of investors toward the IPO market.

"Although its price-earnings ratio is relatively low compared to its counterparts, the size of the company is too small to draw the interests of investors."