History
This property investment and development company was formed in 1948 as South Sea Textile Manufacturing Co Ltd. It listed in 1964 by issuing 600,000 shares at $17 each in the public. The company has massively diluted the stock through additional placements in recent years. The number of shares outstanding jumped from 630 million to 1.7 billion between the middle of 1997 and the end of 1998, diluting the value of ordinary investor holdings by about two-thirds. CIM Co Ltd and China Strategic still hold 33% and 19% of the company respectively. CIM is in turn 50% owned by another firm (Sequence Inv. Ltd) which is 100% owned by Yu Pun Hoi, the company's chairman. The firm recently decided to pursue information technology opportunities in the PRC and changed its name in August 1999 from the South Sea Development Company to Sino-I.Com Ltd.
Current
Loss for the year to March 1999 was $386 million (36 cents per share) after $258 million of exceptional items compared to a loss in 1998 of $451 million (72 cents per share) after exceptional items of $301 million. The improvement is not an indicator of business success as revenue dropped from $712 million a year ago to only $188 million. Most of the decline is from property sales. Last year, Sino-i sold $390 million worth of property but this year under $15 million. The company, in its result announcement, focused on a $34 million exceptional loss due to an operation in the PRC. The main issue for shareholders, however, is the profitability of their regular businesses than one off write-offs that ultimately are a small portion of the year's results.
By the time Sino-i reported its interim results to September 30, many seemed to have forgotten this was a property player. Though the company is now claiming a new internet focus, the interim figures have little if any relationship to technology. Interim turnover improved 17% from $69 million for the six months ending September 30, 1998 to $81 million this period. Net losses improved with the bottom line showing a deficit of $46 million versus the $67 million last year. Basic loss per share appears much improved (loss of 1.88 cents versus 9.92 cents in 1998), but much of that is due to share dilution. If we apply the same number of shares used in 1998, the loss per share would be 6.79 cents rather than 1.88 cents.
Sino-I appears now to have a technology and communications focus, but aside from a few web sites, there is not much with which to judge their effectiveness. The company says it applied for a subscription television broadcasting license in Hong Kong and will team up with Hutchison Telecom to develop the network for cable TV in Hong Kong. Hutchison, however, has rejected the idea they are in partnership and says that Sino-I is simply a paying customer.
Future
The company has extremely high levels of debt and not nearly enough cash to service it. The ratio is total debt to equity is over 11 times. They have diluted shares too much, and there's nothing to stop them from using that tactic again. In addition, the company changed its name and hinted at a bright future in the IT industry in the PRC. If it can't handle its own core business, it probably shouldn't be jumping onto the high-tech bandwagon. Not an interesting investment.
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