Optical components

Optical Firm Preps Hong Kong IPO

IPO mania continues in the optical sector: O-Net Communications (ShenZhen) Ltd. is ready to launch its public offering in Hong Kong next week.

O-Net plans to offer roughly 193 million shares at a price between HK$2.17 (US$0.28 cents) and HK$2.90 (US$0.37 cents) apiece. The exact price is due to be announced on April 28, and O-Net shares would start trading on the Stock Exchange of Hong Kong Ltd. the next day, under the stock code 877.

At the high end of the range, O-Net's expected valuation would be HK$2.2 billion (US$289 million), more than six times the company's 2009 revenues.

Table 1: O-Net's Net
2007 2008 2009
Revenues (US$M) 29.6 36.7 43.6
Net Profit (US$M) 2.6 3.0 10.2
Source: O-Net

The company expects to net about HK$444.1 million ($57.2 million) from the IPO. About 45 percent of that is slated for construction of new facilities in Shenzhen, according to the prospectus [PDF]. O-Net has already acquired the 38,000 square meters of land for the site.

Another 30.8 percent is being set aside for what's listed as "potential acquisitions."

A Shenzhen, China-based company incorporated in the Cayman Islands, O-Net specializes in passive components, the type that don't alter a signal. Examples are wavelength division multiplexers or variable optical attenuators.

Its largest customers include Alcatel-Lucent (NYSE: ALU), Huawei Technologies Co. Ltd. , and -- through their respective contract manufacturers -- Ciena Corp. (NYSE: CIEN) and Infinera Corp. (Nasdaq: INFN).

Those customers combined represented 39.8 percent of O-Net's revenues in 2009. O-Net's largest customer, which isn't specified in the prospectus, represented 15.7 percent of revenues.

Other interesting numbers in the prospectus: O-Net ended 2009 with HK$26.5 million ($3.4 million) in cash and equivalents -- slightly more than the amount it had at the end of 2008. At the end of 2009, O-Net had 1,518 employees, 992 of them in manufacturing.

O-Net is a Chinese company in most respects, but it's incorporated in the Cayman Islands. It started in 2000, acquiring the fiber optics division of Shenzhen Kaifa, a publicly traded company in China. O-Net had been created as a joint venture between a Shenzhen Kaifa subsidiary and a private equity fund called Mandarin IT Fund I; those two entities will hold a combined 73 percent of O-Net shares after the IPO.

Telecom-related IPO filings are flying lately, from companies including BroadSoft Inc. , Force10 Networks Inc. , and even Calix Inc. (NYSE: CALX), while Metaswitch Networks has its eye on a public listing. On the optical side, it's NeoPhotonics Corp. (NYSE: NPTN) that most recently set itself up to go public. (See NeoPhotonics Readies Its IPO, Broadsoft Files for IPO, Force10 Files for an IPO, Metaswitch Eyes an IPO, and Calix Stock Leaps on NYSE Debut.)

Last August, optical components company Accelink Technologies Inc. went public in China, right after Avago Technologies Pte. held its IPO in the United States. (See Accelink Spikes in IPO.)

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:38:43 PM
re: Optical Firm Preps Hong Kong IPO

I've seen the O-Net name at OFC but haven't gotten to know them.  Anybody out there familiar with them?  Is the IPO a surprise or not?

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