Shares of Digital China Holdings Ltd (神州數碼), a Chinese integrated IT services provider, posted gains on the first trading day of its Taiwan depositary receipts (TDRs) yesterday, but the upside was compromised by political tensions on the Korean Peninsula, dealers said.
Digital China closed up 3.31 percent at NT$31.20 (US$0.99), off a high of NT$32.30, with 88.89 million shares changing hands. The benchmark weighted index fell 0.38 percent to 8,297.05.
“The [North and South] Korean political hostilities did interrupt buying interest in the stock,” Concord Securities Co (康和證券) analyst Allen Lin said. “At the moment, investors are tending to pocket the gains posted in a public subscription of the stock.”
Digital China set its listing price at NT$30.20 after completion of the public subscription, which offered a total of 260 million TDRs, each of which represented 0.5 common shares in the company.
Lin said the large number of shares offered in the public subscription also set the stage for profit-taking during trading.
According to underwriter KGI Securities Co (凱基證券), Digital China raised about NT$7.85 billion from the listing, the biggest fundraising among TDR issuers so far this year.
“I suspect retail investors bought a large portion of the shares from the public subscription. With the presence of the retail investors, the stock has become technically unstable,” Lin said.
However, Lin said the market remains optimistic about the company’s earnings outlook after taking into consideration the large share it has in the China IT product distribution market.
Digital China now ranks as the largest IT product distributor in China, with a 25 percent share of the market. It operates regional centers in 19 cities in China, with a network of more than 10,000 agents China-wide and strategic partnerships with more than 100 leading IT vendors worldwide.
The company said in a press release yesterday that the TDR issue provides Taiwanese investors with an opportunity to participate in the fast growth of IT in China as urbanization and industrialization gather momentum.
Grand Cathay Securities Co (大華證券) analyst Mars Hsu (徐振家) said he expects Digital China’s EPS will range between HK$1 and HK$1.10 for the year to March next year.
“Based on the fundamentals, I expect the stock will make an additional 10 percent gain,” Hsu said.
Yuanta Securities Corp (元大證券) recommended a “buy” rating on Digital China, with a target price of NT$38, it said in a client note yesterday.
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