Legend's Digital China lifts IPO target

Digital China forecasts a 20 percent annual growth rate, boosted by China's soaring IT market

In this story: Impressive growth China IT set to soar RELATED STORIES, SITES

By CNN's Kristie Lu Stout and wire reports

HONG KONG, China (CNN) -- Digital China, the distribution unit of China's leading PC maker Legend, is lifting the size of its share offer in a bid to raise $41.6 million.

Digital China's initial public offering (IPO) of 88.3 million new shares is 2.5 percent more than the 86.08 million new shares it said it would offer a week ago.

The shares will be priced at between HK$3 and HK$3.68 each and will represent 11.5 percent of the target market capitalization of $362 million.

Executives of the Legend unit are forecasting 20 percent annual growth, boosted by China's soaring IT market.

Impressive growth

Of the 88.3 million new shares to be sold, 10 percent will be offered to the public while the remaining 90 percent will be placed with institutional investors.

Shareholders of the Hong Kong-listed Legend are entitled to one Digital China share for every 10 Legend shares they hold. Shareholders who opt to receive cash will be paid based on Digital China's IPO price.

Legend Group, which holds a 57 percent stake in Legend, said it would take its entitlement in the form of shares.

Digital China plans to list on the Hong Kong main board on June 1.

The PC distribution unit generated 15 percent of Legend's earnings in the nine months through December 2000, and posted revenues during that period of $825.6 million.

It is forecasting profit for the fiscal year ended March 31 of at least $17.8 million.

The unit's executive vice president Lin Yang told a news briefing on Tuesday that Digital China will experience impressive growth over the next few years

"We are expecting 20 percent annual growth for our company in the next few years," he said.

Nomura's tech analyst Theodore Teo agreed with Yang's bullish projection.

"It's a fair target," Teo told CNN.

"I think most market projections for the IT market in China is 20 percent, and it is a fair target."

China IT set to soar

According to research group IDC, China's IT market is set to soar at a compound annual growth rate of 25 percent between 2000 and 2003 -- double the growth rate in Western Europe and the U.S.

80 percent of Digital China's growth stems from the distribution of foreign brand computers -- from PC makers like Toshiba and Hewlett Packard -- to the corporate market.

Lin said his company's growth would be fueled by its burgeoning systems integration and networking business.

But there may be another driver to spark additional growth.

"With WTO, we'll see an IT spending spur," said Nomura's Teo.

"We are also seeing incumbent enterprises that are engaging in IT upgrades in preparation for future competition."

Legend is separating itself from Digital China so the management of each could focus better on its respective operations.

Legend closed Wednesday at HK$5.90, up from Tuesday's close of HK$5.85.

Reuters contributed to this report.

Legend sets price limit for spin-off
May 13, 2001

Digital China Limited
Legend

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