Hong Kong-based injection press maker LK Technology Holdings Ltd. plans a HK$230 million (US$29.5 million) public offering to fund development of an all-electric injection molding machine and expand production in China.
The company, which also said it's the largest maker of die-cast equipment in mainland China, said it plans to build a factory in Shenzhen, China, to commercialize prototypes it has made of both electric and direct-clamp injection molding machines.
LK plans to use proceeds to make larger versions of its injection presses, up to 2,200 metric tons, develop a computer system to network molding machines, and expand a factory in Ningbo.
It said demand is rising in the automotive and home appliance markets in China. It also builds presses in Zhongshan, China.
Some of the proceeds would go to growing its die-casting business, including developing equipment, buying stakes in a European manufacturer and raw material suppliers, and paying off debt.
Die casting accounted for 70 percent of its 2005 sales, and it has a 44 percent market share in China, it said in a filing with the Hong Kong Stock Exchange.
LK officials declined to comment, but one fund manager who attended closed-door presentations on the initial public offering expressed some skepticism.
The manager told Hong Kong's South China Morning Post newspaper that LK's policy of loose credit to get market share and its falling margins were a concern.
``Such hefty credit loss caused by its imprudent credit policy makes us cautious towards the IPO,'' the paper quoted the manager as saying.
The company's IPO filing also disclosed that LK's founder and significant shareholder, Liu Siong Song, was detained by Shanghai authorities for nine months from 2002-03, and given a suspended sentence for his role in the tax evasion scheme at an apparently unrelated company he also owns, steel trading firm Shanghai L.K. Machinery Co. Ltd.
That company was convicted in the Shanghai court of not paying the full import duties on mold steel from 1994-98, and fined HK$4.9 million (US$628,000), LK said in its filing.
The deputy general manager of that firm was imprisoned after the court ruled that the manager was ``primarily'' responsible for the scheme, and Liu given a suspended sentence, LK said.
``Mr. Liu's sentence was based on the court's findings that it was the [deputy general manager] who acted as the principal, proposing and carrying out the arrangement, whereas Mr. Liu was considered as an accomplice because he did not oppose the [deputy general manager's] carrying out the tax evasion arrangement,'' LK said in the IPO filing.
LK said Liu resigned from all management positions in 2004, and for several years before had been playing a diminished role in the firm.
Liu's wife, Chong Siw Yin, is LK's chairwoman, and his nephew, Liu Zhao Zhang, an executive director.
The firm said it has been growing rapidly in the last few years, increasing its capacity 57 percent since 2003, and can make 4,800 die-cast and injection machines a year. It employs 3,500 in Hong Kong and mainland China.
For the year ended March 31, LK reported sales of HK$851.5 million (US$109.3 million).