Any time that announcements of postponed IPOs begin to outnumber actual listings could be perceived as a bad time to take a company public. But Hong Kong-based IT training and development company Infocan is preparing for a listing on Hong Kong’s Growth Enterprise Market (GEM), and is confident that the timing is right.

Infocan has passed its hearing with the GEM listing committee and therefore expects to list its shares sometime in the next two months. Infocan's sponsor for the GEM listing is CSC Asia Limited, a licensed investment advisor.

“The company has been growing over the past 10 years and basically we’ve reached critical mass. So to grow further we probably need to take up with some partners or go for a listing and continue to expand the company,” says John Rempel, a long time advisor of Infocan.

Asked whether the company has lower expectations, or anxiety, over the current state of technology stocks on growth boards such as GEM around the world, Rempel stresses that Infocan has a strong track record and a business that fits somewhere in between old economy and new economy. “We have lots of solid customers and not only do we have a revenue stream, we have an income stream,” he says. “It’s totally incongruous. No one could call us a dotcom because we make money.”

Infocan was established in 1989 and bills itself as a ‘provider of IT skills transfer and IT solutions’. In plain English that means they conduct technology training and certification courses, develop their own software and services for clients as well as acting as a distributor for other software vendors such as Microsoft, Compaq and Novell.

As proof of its success, Infocan points to the ‘Best Technical Training Centre’ award it has won from Microsoft Hong Kong every year since 1997. It is also the sole provider of Compaq’s Accredited System Engineering course to Compaq dealers in Hong Kong.

“We provide the skills to our customers to be competitive in the market. Sometimes even the dotcom companies come to us,” says Rempel.

As well as the dotcoms and dealerships, Infocan has large blue chip clients such as Nike, Citibank and the Stock Exchange of Hong Kong. It is the largest IT training provider for the government of Hong Kong, having served various government departments' needs in training and application development for the past six years. Infocan’s current contract with the government will run for another two years, says managing director Henry Tam.

“In general we find the demand is growing so we need to provide the training through additional means,” he says.

E-learning

To do this, the company began research and development of an online learning system in 1998. The result, which they call the ‘e-learning management system’, is now being used to deliver and enhance its established training courses. “Since we’ve been doing IT training for so long we have courseware for over 120 courses, and so we’re migrating this, plus our instructional skills, to the internet and making it interactive,” says Tam.

The company also plans to market the e-learning management system as a stand-alone content delivery package so customers can take it and add their own content to deliver within their corporation.

Kimble says he expects traditional training will continue to grow but probably not as rapidly as the e-learning business. “E-learning will basically be incremental revenue for us, and that will be less people intensive on an ongoing basis, though we still need the development people,” he says. “But from a hardware and financial support point of view it’s going to be more capital intensive, hence the reason for the listing.”

Bullish analysts are predicting substantial growth in the e-learning, or knowledge management, software market. This growth, they say, will be driven by companies that need to continually train their employees in the latest technology in order to stay competitive. International Data Corporation (IDC) predicts the two segments that make up the market – knowledge management access and knowledge management infrastructure – will carry the worldwide market from $1.4 billion in 1999 to $5.4 billion in 2004.

IDC says that the knowledge management access segment includes such things as intellectual capital management software, enterprise information portal software, corporate learning software and knowledge exchange platforms. This segment, it says, will lead the way in terms of revenue and growth and overtake the infrastructure segment in 2002. Its revenue will increase at a compound annual growth rate of 46%, from $500 million in 1999 to $3.3 billion in 2004.

Infocan says its balance sheet is reflecting that market growth. In the financial year ended March 2000 it reported a 49% growth in net profit compared with the previous year. Its revenue for the year, according to Tam, was HK$93 million ($11.9 Million), and already this year in the three months ended June 30, it claims revenue of HK$36.6 million.

If the shoe fits, wear it

Having been around for all of the last decade, and with a business that turns a profit, Infocan obviously isn’t attracted to GEM for the same reason as most technology companies – GEM does not require growth companies to have achieved a record of profitability as a condition of listing. Tam says instead that listing on GEM was more an issue of public perception. “Right now that’s how people categorize technology companies.”

Rempel points out that the reporting requirements on GEM are actually stricter than the main board in Hong Kong. “I think that’s actually going to change. I think they’re actually going to have to strengthen the main board reporting because six monthly reports aren’t good enough in today’s world,” he says.”

“If you do qualify [for GEM] and do have the reports and background you can get a much fairer valuation. In Hong Kong on the main board, if you’re not finance or property, people just basically aren’t interested.”