International equity issuance from Asia this autumn has got off to a highly inauspicious start, with the first deal from the pipeline withdrawn because of the highly uncertain state of global equity markets. Formal roadshows for a 30 million new share issue by Taiwan's High Tech Computer were scheduled to start in Asia today (Wednesday), but were cancelled yesterday by lead manager UBS Warburg.
Some meetings that had already been set up in Hong Kong will still take place, but the company will not now proceed any further with the prospective GDR offering after investors pushed for a discount greater than 10%. This marks the second time that High Tech has postponed its debut international capital markets deal. The company first hoped to launch an issue in early June, but similarly pulled back because of poor equity markets.
This time round, the lead took the sensible decision to move forward very carefully and did not send its analyst out during pre-marketing, nor set up investor meetings in either Europe or the US. Instead, a couple of conference calls were enough to underline investors' unwillingness to participate in primary market deals until the situation in Iraq becomes clearer.
Indeed observers report something of a disconnect between Asia and the rest of the world. While, for example, some of the region's bourses appear to have insulated themselves from growing tensions in the Middle East, bankers report extreme nervousness, particularly from funds in Europe, where plans to invade Iraq dominate all national news bulletins. In Taiwan yesterday, however, the TWSE index rose 3% to close at 4668.01, its largest percentage gain in over a month.
High Tech closed at NT$114. Having listed in late March, the company's share price hit a high of NT$274 on April 4, before falling steadily to a low of NT$93.5 on July 3 and has been fairly range-bound ever since.
Had the company gone ahead with its 15 million unit deal at a 10% discount, it would have raised about $90 million, significantly less than the $130 million it hoped to raise earlier in the summer. The deal, which incorporated a 1.25 million unit greenshoe, would have also been fairly dilutive, equating to about 15.6% of the enlarged share capital. Alongside UBS Warburg, joint-leads were Credit Suisse First Boston and Morgan Stanley, with Yuanta Securities as co-manager.
Nevertheless, analysts have an upbeat long-term view of High Tech, the world's largest manufacturer of Pocket PCs with a 48% market share. For its biggest customer Compaq, High Tech manufactures the iPAQ and the company has also recently started supplying the xda for mmO2, the former wireless unit of British Telecom. The xda is the world's first integrated phone and hand-held computer, which combines GPRS (General Packet Radio Service) and Pocket PC (the operating system that runs Microsoft applications over a PDA).
Indeed, according to Gartner Dataquest research, Compaq was virtually the only major PDA supplier able to buck the second quarter's downward shipment trend, in the process doubling its market share to 16.1%. Gartner also concluded that the only PDA manufacturers increasing sales are those able to connect into a corporate PC environment such as Compaq and mmO2, which are both linked to Microsoft.
High Tech reported sales of NT$1.5 billion in August, up 88% from a year ago and also higher than July's NT$1.34 billion. Over the course of 2002, the company still hopes to ship about two million units, up from 1.49 million during 2001.
During the second half of the year, it is also hoping to roll out its first smart phone. Analysts say that the main difference between a smart phone and Pocket PC is that the former is primarily a mobile, with some PDA functions, while the latter can receive calls, but is primarily a hand held with a larger screen and touch screen stylus.
