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Perfect Treasure buys Wharf's Sichuan Cable TV
25th January 2000 (revised 26-Jan-00)

On 20-Jan-00, HK-listed camera distributor Perfect Treasure Holdings announced a placing of 55m shares at $3.68 per share to raise net proceeds of HK$197m. That came after the stock surged from $0.55 at 31-Aug-99 and $1.65 on 29-Dec-99, less than 4 weeks ago, to $4.20 the day before the placing. Gravity has taken its toll and the price is now back to $3.00. The company, which distributes Ricoh and Nikon cameras, made a loss in the year to 31-Mar-99 after a $49m provision for doubtful debts.

Almost as a footnote to the placing announcement, the company said it was buying 70% of Artland International Ltd from unnamed parties. Artland owns 50% of Sichuan Allday TV Development Co. Ltd, a PRC company which "has the right to provide cable television network through coaxial and/or optic fibre cable in Sichuan Province". The consideration for the acquisition was not disclosed, so it must be less than 15% of Perfect Treasure's last audited net assets, i.e. less than $46.3m.

If Artland sounds familiar, it should be. Back in 1993, Artland was set up as a joint venture owned 40% by Wharf (Holdings), 30% by Wharf's controlling shareholder Peter Woo Kwong Ching, and 30% by HK-listed MKI Corp, which went spectacularly bust in 1995. Some time in 1996, Wharf increased its interest in Artland to 70% presumably by purchase from Mr Woo.

MKI's 30% interest was transferred to a listed company called Chesterfield (since renamed Mult-Asia International Holdings) in part settlement of an MKI debt in 1995. The Mar-99 accounts of Multi-Asia show that they still held 30% of Artland International Holdings Ltd as an investment. Multi-Asia had no representation on the board of Artland, and it will be interesting to see what they do with their stake, now that Perfect Treasure holds 70%. Multi-Asia hasn't recorded a full year's profit since 1991 or earlier.

The initial planned investment in the project was about RMB33m (then HK$44m). The plan was, like Wharf Cable in Hong Kong, to use microwave distribution systems to provide cable television to the 20m citizens of Chengdu and its surroundings. The service was to be launched with four cable channels, broadcasting 18 hours per day. Trial broadcasting began in Sep-93.

1993 was the last time that the project was mentioned in the Wharf annual reports, but the interest in Artland was recorded in the list of subsidiaries up until 1997 and was absent in the 1998 accounts, meaning that it had either been sold or was no longer considered a "principal subsidiary".

Speaking exclusively to Webb-site.com, Perfect Treasure Executive Director Clare Wong Mung Yiu said that they had purchased the 70% of Artland from a third party and not directly from Wharf. She declined to disclose the vendor or the consideration, or the profitability of Sichuan All-day. Ms Wong said that the station carries 5 channels, including the government's CCTV, and claims some 5m subscribers in Sichuan province with a monthly subscription of RMB12 each. She said that the bulk of the distribution is still by microwave, but they have established fibre backbones in the major cities. 

Now, Perfect Treasure plans to take up where Wharf left off, and to develop a two-way HFC (Hybrid Fibre-Coaxial) broad band network "to be operated by the Company or Sichuan Allday". As a foreign investor, development by the Company itself would presumably be subject to regulatory approval, so it is not yet clear whether Perfect Treasure will be the operator, or Sichuan Allday, its 35% associate. Ms Wong said the company plans to invest HK$400m in the project.

Wharf did not return a call seeking comment on the sale of Artland. The question is, if they know so much about TV, and have hands on experience of running Wharf Cable (now i-Cable Communications), then why did Wharf sell Artland, and can Perfect Treasure really do any better with it? 

© Webb-site.com, 2000

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