The Ministry of Transportation and Communications (MOTC 交通部) said yesterday that the announcement of the valuation of Chunghwa Telecom's (中華電信) physical assets expected today would not be the only factor in determining share prices for the state-run's planned initial public offering next month.
Teng Tien-lai (鄧添來), director of the MOTC's post and telecommunication's department, said that in accordance with laws governing privatization of state-run firms, a number of factors must be taken into account when determining share prices for stake sales.
These include acquisition cost, book value, current market prices, possible future profits, the condition of the market, selling opportunities and revaluation of assets.
While the Legislative Yuan has decreed that a floor price for Chunghwa shares must not be below NT$60, the transport ministry is yet to determine stock prices for the IPO -- which will see a share release of 33 percent, or 3.18 billion units.
Teng said reports that the MOTC had valued Chunghwa's physical assets at NT$331.3 billion were generally accurate as were the results of the two independent valuations based on current market prices.
The two appraisals commissioned by the MOTC -- which owns 99.9 percent of Chunghwa -- put the market value of the firm's assets at NT$384.6 billion and NT$365.7 billion, according to reports, which were also generally confirmed by Teng.
Chunghwa's combined assets total NT$471 billion, said Teng.
But these figures were doubted by Chen Kuang-cheng (陳光徵), professor of telecommunications at Taiwan National University, who said that Chunghwa's massive real estate holdings would put the firm's combined assets closer to NT$1 trillion.
Chen said that Chunghwa owns prime real estate all over Taiwan, pointing to the new building across from Chiang Kai-Shek Memorial Hall in Taipei as an example of the kind super-expensive land the firm owns.
Higher valuation of company assets would likely force higher prices for Chunghwa's IPO, a situation that could spell trouble for the venture.
"Right now Chunghwa is capitalized at around NT$90 billion," said Chen. "So that means share prices would probably have to be NT$100 or even more than NT$200 per share based on assets alone," he said.
But if stock is "priced too high, then people can't afford it and the price will fall sharply," said Chen. "Higher is not necessarily better," he added.
With a paid-in capital of NT$96.4 billion, Chunghwa will replace United Microelectronics Corporation (UMC
The MOTC is expected to officially announce results of the asset revaluation today and will make a decision on a floor price for stocks within two weeks.
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