Hong Kong's billion dollar idea

Investors in Hong Kong prove that the tech sector flight to quality has yet to take off.
Tech investors in Hong Kong appear to have gone one better than their counterparts elsewhere. While the rest of the region is scrambling for a slice of profitless internet companies, the cyber-savvy people of Hong Kong have found a revenue-less bit of online action in the form of Greater China Technology, which next week lists on the Growth Enterprise Market.

The company is raising net proceeds of HK$261 million via the placing of new shares at HK$1.38 each, giving it an initial market capitalization of around HK$936 million. This is in the wake of a number of flopped tech sector IPOs, at a time when the Special Administrative Region's investors are supposedly becoming more choosy and Nasdaq is taking a bath.

What's worrying is the listing doesn't seem to have raised any eyebrows.

"On GEM, there are a lot of new issues coming and individually they have their followers ... when you have a story to tell, there are still people willing to put money into it," says Eugene Law, director at Celestial Asia Securities.

"It's not so unusual. This sort of thing does happen," says Howard Gorges, vice-chairman of South China Brokerage.

So what is this billion dollar idea? Investors are apparently taking a substantial gamble that people throughout Greater China, and subsequently Japan and Korea, will in future go to greaterchinaherbs.com instead of a doctor when they are ill. Once there, they can, via email, post details of their ailments to three Chinese herbalist doctors who will then, via return email, send details of the cure. What's more, from June, site users can then buy the cure online at the site and hope they don't die while it's in the post. Better still, it might not work.

"Most of the Chinese herbs are not scientifically tested or researched and the effect of consumption of such Chinese herbs by human beings are not proven and are unknown or may even be hazardous to health," says the first line of the Risk Factors section in the company's prospectus.

The document then goes on to point out that it could face claims and it doesn't have any insurance.

In the two years and four months to November 1999, Greater China Technology recorded a net loss just short of HK$5 million and had no income. To be fair, however, the company's website didn't go live until November. Since the beginning of the year, Greater China Technology has been enjoying monthly advertising revenues of around HK$500,000, according to chairman Kelly Cheng Kit-yin.

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