Richard Li, who presided over one of the corporate world’s biggest implosions of value, is back tapping the public markets.
The second son of Hong Kong tycoon Li Ka-shing plans to raise $2bn-3bn through the sale of a 15-20 per cent slice of his pan-Asian multiline insurer FWD, valuing it at $13bn-15bn. A couple of decades separate him from the value destruction debacle during his years as a tech wunderkind.
Pacific Century CyberWorks traded on little more than the Li family name and a tsunami of money chasing the dotcom bubble. It acquired a string of internet start-ups before out-bidding more established rivals to snatch Hong Kong’s then telecoms monopoly. It paid $28bn or so of cash and shares. Today PCCW is worth $4bn.
FWD, by contrast, made a post-tax operating profit of $75m last year, according to filings. It pitches itself as a trailblazer in a high-growth market — although its mantra of digital first is hardly fresh. There is no denying the rapid pace of growth. The value of new business — the group’s preferred measure — increased fivefold from 2014 to $617m last year.
Part of that reflects FWD’s appetite for buying and rolling up insurers in under-penetrated markets such as Vietnam and the Philippines. Asia is a region where established insurers count on doubling operating profits every six years or so, FWD should be able to handily trump that. For now, though, a third of business comes from relatively mature Hong Kong and almost as much again from Thailand.
Growth like that does not come cheap. The price implies a stratospheric price/earnings multiple. A $13bn valuation represents 2.6 times last year’s book value. That is more than double more established players but a discount to Prudential, which is spinning off its US operations to become a purer Asian play.
Li can sometimes work wonders. This is the man who flogged a richly priced chunk of his pan-regional TV network to media magnate Rupert Murdoch in negotiations on a yacht off the coast of Corsica. He will need to call on those powers again to justify the mooted price for FWD.
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