Roadshow Holdings begins IPO roadshows

The multimedia arm of Hong Kong''s Kowloon Motor Bus (KMB) company has begun presentations for a domestic listing.
Lead managed by CLSA, the company began to market investors in Hong Kong on Wednesday and moves to Singapore today (Friday). Institutional books will then close next Friday, after presentations in London on Monday through to Wednesday and New York mid-week.

Investors say that the deal is being pitched at a roughly 25% discount to NAV at the mid-point of its indicative range. Offering 240 million shares, Roadshow Holdings has gone out with a HK$1.69 to HK$2.55 price range, equating to a p/e range of nine to 12 times 2001 earnings. Proceeds will amount to roughly HK$550 million ($70.6 million) at the mid-point of the range.

With a 90% institutional placement and 10% Hong Kong retail offering that runs from Tuesday 19 June to Friday 22 June, the deal includes Kim Eng Securities and WI Carrr as co-leads and ICEA as co-manager. There is also a 15% greenshoe.

The company broadcasts advertising via LCD screens (liquid crystal display) on some 2000 KMB buses, leaving its parent to retain responsibility for advertising on the outside of buses and at bus stops. Observers say that one of the key attractions of the company is that it offers the ideal media combination of wide reach at low cost.

About 4 million passengers per day use the bus network in the Territory compared to only half a million on the MTR. Between them, KMB and Citybus, on which Roadshow Holdings also runs advertising, account for an 87% market share.

Bolstered by the fact that it has a captive audience, observers say that the system's main advantage over traditional broadcast media is that every advert has a one-day shelf life rather than a 30 minute slot. They also say that its great benefit over print lies in its audio-visual as well as print content.

In terms of the ratios used by analysts to determine the optimal balance between reach and cost, Roadshow Holdings is being pitched at a cost per 1,000 viewers of HK$37.4 compared to HK$48 for Hong Kong commercial radio, HK$85 for TVB Jade and HK$110,000 for the Oriental Daily.

In terms of p/e multiples, TVB is presently trading at 20 times 2001 earnings, the SCMP at 14 times and Oriental Daily at seven times.

Proceeds from the deal will be used to install more LCD screens. When the company began operations last December, it operated on 100 buses and increased the number rapidly to 2,000 as at the end of April. It is now targeting 4,000 to 5,000 within the next year or so.

Forecasting 30% profit growth over its early years of operations, the company saw net income jump from HK$31 million during 1999 to HK$180 million in 2000. Parent KMB is also said to be talking about forming a joint venture operation on the Mainland to expand its bus fleet.


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