Tom.com Business Model Restores Market Confidence

Home>>Business

Last updated at: (Beijing Time) Sunday, December 09, 2001

Tom.com Business Model Restores Market Confidence

Tom.com's cross media business model has restored market confidence in the internet firm controlled by Asia's richest tycoon, Li Ka-shing, leading to a share boost of more than 50 percent since it reported improved third quarter results, analysts said.

Tom.com's surging share price is a reflection of the company's intensive efforts to acquire offline publications to broaden its revenue base and add income sources.

The gains were expected to be sustainable on expectations the firm would embark on more merger and acquisition deals following its purchase of Sharp Point Publication of Taiwan for 85.3 million Hong Kong dollars (10.9 million US) last month, they said.

A possible deal to acquire another Taiwan-based publishing company, BusinessWeek, was expected to be finalised by the end of this year.

"It is fair to say investors have become more optimistic about Tom.com's earnings outlook. The market is hoping that such a cross-media model will turn Tom.com around after the Internet bubble burst," said KGI Securities analyst Patrick Sin.

Currently, Tom.com runs its cross-media model in print media, outdoor advertising, sports event marketing and on-line platforms.

Kim Eng Securities analyst Dennis Lam said that after the third quarter results he now expected the firm to break even at the earnings before interest, tax, depreciation and amortisation (EBITDA) level in mid-2002, ahead of his previous estimate of 2002.

In the three months to September, Tom.com reported a 76.77 million dollar net loss, compared with a loss of 163.85 million a year earlier, while the EBIDTA loss was down 26 percent at 35.3 million dollars.

During the period, the company cut its online operational expenditure by 10 percent while online revenue rose 43 percent from a year earlier.

"I am impressed by Tom.com's efforts in cost cutting in the last quarter. I expect Tom.com will be able to do the same as it restructures its print media sector," Lam told AFX-Asia, an AFP-affiliated financial newswire.

He predicted Tom.com would integrate the recently acquired PC Home Publication Group and Cite Publishing with Sharp Point and BusinessWeek, with the overlap of the four to be undergo restructuring.

Tom.com has previously said it expected net profit margins in PC Home Group, which will include Cite, to improve by 10 percentage points on an annual basis due to the business restructuring.

An analyst with ABN Amro, who asked not to be named, said Tom.com's strength lay in its China focus.

"Both its offline and online platforms focus on the greater China area. The huge market in China is the core of the cross-media model. Tom.com is the first mover to enter the China ad market by combining different media platforms," she said.

Despite Tom.com's brighter prospects, Wallace Cheung, an analyst with DBS Vickers Securities remained wary after the spectacular dotcom collapse last year.

"Some investors remain wary of buying loss-making stocks. I need Tom.com to show me real profits before I change the (neutral) recommendation," Cheung said.

Tom.com shares closed up 2.5 cents at 3.125 dollars on Friday.

The company was listed on the hi-tech Growth Enterprise Market at the height of the Internet frenzy in February last year. It debuted on the market at 7.75 dollars, more than four times its offer price but soon after was dragged down by the bursting of the dotcom bubble.