TARGET
Intelligence Report
VOLUME XXI  No. 165 S A T U R D A Y August 3, 2019

 

 

 

 

 

CONTEL  TECHNOLOGY  COMPANY  LTD:

THIS  COMPANY  NETTED  ONLY  $HK19.80  MILLION

FROM  THE  SALES  OF  ITS  200  MILLION  SHARES

 

 

The trade ‘war’ between The United States of America and the People’s Republic of China (PRC), now having entered into its sixteenth month, has taken its toll of that which must have been the former business model of Contel Technology Company Ltd (康特隆科技有限公司) (Code: 1912, Main Board, The Stock Exchange of Hongkong Ltd).

 

So much so is this the situation that quite a number of mentions has been made in the Share Offer Prospectus of Contel Technology Company Ltd about it, a situation that has caused a great deal of international consternation.

 

This trade war has had direct implications on the business of Contel Technology Company Ltd, a company that relies on the sales of ICs* to its many customers; and, it has resulted, inter alia, in the Company, declining to sell its IC products to customers, known to be operating in or through The United States of America.

 

The Company, today, one is told, has been forced to depend on sales of its products to customers of the Hongkong Special Administrative Region (HKSAR) of the PRC and the PRC, proper, being separate and distinct from the HKSAR, only.  

 

 

EDITOR’S NOTE

 

* ICs – Integrated Circuits – are sets of electronic circuits, designed with specific functions and have a wide array of applications. However, without the appropriate hardware and software support, the ICs themselves cannot function independently.

 

 

The Initial Public Offering (IPO) Of Contel Technology Company Ltd

 

On Saturday, June 29, 2019, Contel Technology Company Ltd published and disseminated its Share Offer Prospectus in the HKSAR.

 

Management Offered a total of 200 million, one-cent Shares at the Indicative Offer Price Per Share, ranging from a low of 63 cents to a high of 68 cents.

 

Investors of the HKSAR were Offered the opportunity to subscribe to 20 million Shares (the Public Shares Offer tranche) and (presumably) Institutional Investors, Professional Investors and select, Well-Heeled Investors, along with any of the corporate entities in which they had equity control, were afforded the opportunity to subscribe to 180 million Shares via Share Placements (the Placing Shares Offer tranche).

 

On Monday, July 15, 2019, in a public announcement in respect of the Offer Price and the Allotment Results, it was announced that the Offer Price Per Share had been struck at 65 cents.

 

Management told its minority shareholders that, at the share price of 65 cents, it anticipated, netting about $HK78.80 million from the Share Offer.

 

With regard to the Public Shares Offer tranche of 20 million Shares, management stated that it had been ‘significantly over-subscribed’, representing about 39.90 times the total number of Offer Shares.

 

As for the Placing Shares Offer tranche of 180 million Shares, one was told that it had been ‘slightly over-subscribed’ with the valid applications for the Offered Shares in this tranche, being 140 million Shares after 40 million Shares had been reallocated from the Placing Shares Offer tranche to the Public Shares Offer tranche due to the significant oversubscription in the Public Shares Offer tranche.

 

At Page Seven of this pubic announcement, it was stated as to the intended utilisation of the net proceeds of the Share Offer:

 

a.

Approximately, $HK66.30 million, that is about 84.10 percent of the net proceeds, ‘will be used for financing the revolving purchase payment for the Group’s purchases of ICs imposed under the ship-and-debit arrangement’;

 

 

b.

Approximately, $HK2.90 million, that is about 3.70 percent of the net proceeds, ‘will be used for enhancing the Group’s design and R&D (Research and Development) capabilities through purchasing testing and R&D equipment for the Group’s Shenzhen and Shanghai laboratories’;

 

 

c.

Approximately, $HK7.80 million, that is about 9.90 percent of the net proceeds, ‘will be used for recruiting and maintaining high calibre talent’; and,

 

 

d.

Approximately, $HK1.80 million, that is about 2.30 percent of the net proceeds, ‘will be used for working capital.

 

The History And Business Of Contel Technology Company Ltd

 

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