The share offer will be conducted entirely on a placement basis of 160 million shares at HK$0.20 per share for a total of HK$32 million, (US$4.1 million). Lead manager Tai Fook Securities is granted an over-allotment option of up to 16 million additional shares – 10% of the initial offer.
The GEM listing is being sponsored by Tai Fook Capital. Also participating in the underwriting are Celestial Capital, Core Pacific Yamaichi Securities, Kingsway SW Securities and Sun Hung Kai International. Bookbuilding closes on Friday 8 December and the stock will begin trading on GEM on 14 December.
The proceeds of the placement, expected to be about HK$22 million after expenses, will be spent primarily on further developing artificial intelligence on the company’s website – Opphunt.com – as well as further geographic expansion. US and London offices are planned and the company also plans to promote a franchisee and affiliate system to further extend their reach in mainland China.
Most of LP Lammas’ fees since its establishment in 1993 have derived from its business broking services – sourcing parties for small to medium merger and acquisition deals involving Hong Kong and mainland companies. According to Pong, the mainland’s anticipated accession to the WTO will spark frenzied M&A activity among China’s 10 million small-to-medium sized enterprises (SMEs), and also generate interest from foreign investors.
China play
LP Lammas has also signed deals resulting from reforms in China’s financial sector. As China’s banks now have to keep their capital adequacy ratios under control, assets derived from the non-performing loans (NPLs) of state-owned banks have been re-organised under special-purpose asset management companies.
In October, the company signed a non-exclusive deal with China Orient Asset Management Corporation (COAMC), the asset management company charged with managing and disposing of RMB260 billion ($34.1 billion) in assets derived from the NPLs of the Bank of China.
As at the date of the prospectus, COAMC had referred 52 assets, of which Lammas is conducting in-depth analysis of seven. Pong admits that not all of these assets are the right fit for LP Lammas’ model and says that COAMC is talking to a large US institution about packaging and securitizing some of the debt.
“But as for business brokers like us that specialise in middle market M&A, between HK$25 million and HK$500 million, we believe we’re the only corporatized one on the scene,” he says.
The company has also been named by Huaxia Bank as its first overseas agent to assist in handling its NPL assets. In particular LP Lammas has been given the mandate to find partners for a PRC steel manufacturing company. Pong was reluctant to disclose the total value of NPL-derived assets controlled by Huaxia Bank, saying that a non-disclosure agreement related to the bank’s imminent A-share listing prevented him from doing so.
Web strategy
In July 2000, LP Lammas launched a website aimed at matching potential investors and investees in a cost effective manner. The website, Opphunt.com (short for Opportunity Hunting), is effectively a free advertising board, serving buyers and sellers of assets/businesses, seekers and providers of finance, franchisees and franchisers, and companies in need of joint-venture partners. LP Lammas has a monopoly on advertisers' details until a mandate is signed, and hence ensures itself a slice of the action if any deals are struck.
Rather than keeping the site as a virtual bulletin board, LP Lammas is investing in technology from BonVision Technology, a company started up on the basis of artifical intelligence research at the City University of Hong Kong, which is still a minority shareholder. This artifical intelligence system will be developed over the next two years to eventually include “softbots”, or autonomous programs that can be used to search databases and the internet, to find suitable business opportunities for members of the site.
Since the site launched, nine mandates have been signed for business brokerage services, of which two transactions have taken place, yielding HK$434,000 in revenue.
For the year ended 31 March, 2000 the company’s turnover increased 6.6 times from the previous year to HK$8.04 million, 85% of which derived from its business brokerage services. Net profit for the year ended 31 March, 2000 was HK$4.9 million.
In the first quarter of the current financial year the company posted a net profit of HK$1.02 million.
