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Hong Kong-based chip designer Solomon Systech, founded by former employees of US mobile phone giant Motorola, plans to raise up to HK$1.24 billion (US$159 million) from an initial public offering (IPO) early next month.
But analysts said despite the firm's impressive array of new products, its valuation was "pricey" in a choppy Hong Kong market, with the firm possibly pricing itself out of the market for regional investors.
"Solomon Systech is a promising prospect, and I buy into the story that there will be robust demand for its display IC (integrated circuit) products for mobile phones and other display units," Louis Wong, director of Phillip Securities in Hong Kong, told China Daily.
But he said the company was overvalued, with a price-to-earnings ratio at about 30 times at the upper end of the scale.
"The response from the retail sector may not be very keen, though I expect institutional investors, who know the firm, to be very keen," said Wong.
The company and its bankers, led by JP Morgan, kicked off an investor roadshow for the listing on Monday. The IPO is expected to open to retail investors tomorrow, with official pricing due to be set on March 30 or 31, and trading set to begin on April 8.
Solomon's shareholders may fear the company is pricing itself out of a Hong Kong market in the doldrums after bullish early-year gains, and a sector hit hard by weakening valuations.
Analysts said sentiment for electronics and chip players has been dampened by disappointing recent listings by mainland chipmaker Semiconductor Manufacturing International Corp (SMIC) and internet company Tom Online.
The company's shares fared particularly poorly amid a generally dire Hong Kong market, which has been battered in recent weeks by faltering US markets, weak American economic figures, global terrorism fears and regional instability.
Vincent Koo, managing director at Kingsway Fund Management, said the lacklustre performance by SMIC since its listing is due to a combination of factors.
"Regional elections have had an effect (on SMIC's stock) but there are also concerns that a major portion of its placement shares were allocated to non-mainstream investors, which has worried the markets," Koo told China Daily.
Phillip Securities' Wong said SMIC's shares had been hit by selling pressure from short-term speculators cutting their losses.
He said the market was also abounding with conspiracy theories that some major investors had jettisoned large amounts of stock just after the start of trading last week, and were planning to buy it back after shares had stabilized at much lower levels.
Despite reservations from analysts about SMIC's stock, however, the company's outlook remains generally upbeat. The mainland chip market has huge potential, with China forecast to account for 24 per cent of world integrated circuit (IC) demand by 2008.
SMIC, founded in April 2000, offers a wide range of integrated wafer-manufacturing services and is building a state-of-the-art 300-mm wafer plant in Beijing. Its shareholders include Shanghai Industrial Holdings and US mobile phone giant Motorola.


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