The IPO Buzz: An Asian IPO Menu

This duo of Asian IPOs is scheduled after an unusual week on Wall Street. The stock market danced among the stars last week as the three major U.S. indexes reached new highs for 2009. But it was a downbeat tune that wafted over the new-issues market: One IPO stumbled and flopped on the dance floor; the other deal never got out the door. (More on those deals later.)
 
But that was last week. This one looks different.
 
A Chip Off the Singapore Sling
Avago Technologies is a Singapore-based chip supplier that offers a broad range of analog semiconductor devices. The company focuses on compound III-V semiconductor-based products. Avago has a 40-year history dating back to its origin within Hewlett-Packard. It serves a customer base of about 40,000. The company offers about 7,000 products to industrial and automotive electronics customers, including chips, wired infrastructure and wireless communications as well as consumer and computing peripherals.
 
On the consumer side of its business, Avago’s LED displays, sensors and other products are used in plasma TVs, desktop and notebook computers, digital cameras, printers, copiers and appliances.
 
The economic downturn has hit Avago’s numbers:
  • For the three-month period ending May 2, 2009, the company reported a loss of $31 million on net revenues of $325 million.
  • For the three-month period ending Feb. 3, 2009, the company reported net income of $6 million on net revenues of $368 million.
  • For the three-month period ending Nov. 2, 2008, Avago reported net income of $18 million on net revenues of $447 million.
Nevertheless, there is a plus factor:
  • The Dow Jones U.S. Semiconductor Index has been soaring. On Friday, July 31, it closed at 932.93, UP 43.9 percent from 648.43 on Dec. 31, 2008, and UP 64.7 percent from 566.33 on Feb. 23, its 2009 closing low.
Joint-lead managers Deutsche Bank Securities, Barclays Capital, Morgan Stanley and Citi plan to price 36 million shares at $13 to $15 each to raise $504 million on Wednesday evening, Aug. 5, to trade Thursday, Aug. 6.
 
Note: The company will offer 21.5 million shares. Selling shareholders will offer 14.5 million shares.
 
Hong Kong’s Tailored Software
CDC Software is a Hong Kong-based global provider of scalable enterprise software applications to customers in selected industries. The company offers its products through more than 1,120 resellers, distributors and franchise owners in over 20 countries. This year, the company was a Microsoft Worldwide Partners Conference Awards winner for information worker solutions.
 
Before the offering, all of CDC Software’s common stock was owned by CDC Corporation (NASDAQ: CHINA).
 
The numbers for CDC Software also have taken a hit:
  • For the three-month period ending March 31, 2009, the company reported net income of $4 million on total revenues of $50.4 million.
  • For the three-month period ending March 31, 2008, the company reported a loss of $36,000 on total revenues of $59.2 million.
  • For the period ending March 31, 2009, the company reported sales and market expenses of $7.7 million, DOWN from $15.6 million for the same period of a year ago.
Nevertheless, there are a couple of pluses:
  • The Dow Jones U.S. Software Index has been strong. On Friday, July 31, it closed at 534.94, UP 24.5 percent from 429.52 on Dec. 31, 2008, and UP 54.1 percent from 347.07 on March 9, its 2009 closing low.
  • In some of Wall Street’s watering holes, a 4.8- million-share offering is considered a block trade. Expect allocations to be given out with an eye dropper.
Joint-lead managers Lazard Capital Markets and JMP Securities plan to price 4.8 million shares at $11 to $13 each to raise $57.6 million on Wednesday evening, Aug. 5, to trade Thursday, Aug. 6.
 
Note: The company will offer 4 million shares. Selling shareholders will offer 800,000 shares.
 
Down and Out on the IPO Dance Floor
PennyMac Investment Trust (NYSE: PMT), a Calabasas, California-based REIT, priced 16 million shares at $20 each — DOWN from 20 million shares. All the aftermarket orders went into the offering. The IPO opened at $19 per share on Thursday morning, July 30. The shares never traded at the IPO’s offering price. PennyMac closed the week at $18.80, DOWN 6 percent from its IPO price.
 
Sutherland Asset Management (NASDAQ: SLD – proposed), a New York City-based real estate investment trust, or REIT, never priced its IPO. At press time, it had no offering date.
 
Each of the above is a specialty finance company planning on buying toxic assets from banks under the U.S. government’s Public-Private Investment Plan, or PPIP.
 
That wrapped up July’s IPO traffic. Now it’s on to August.