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Introduction:

Swing Media Technology Group is a Hong Kong based contract manufacturer, which produces media products required by the audio/video entertainment industry. These products include compact discs (CDs), digital video discs (DVDs), cassette housings and business cards CDs.

The company was started in the 1980s to make audio cassette tapes and later video cassette housings. Later, the company identified the growing acceptance of compact discs and expanded into the business. They also ceased their operations in blank audio cassette manufacturing around the same time.

In order to reduce their reliance on contract manufacturing, the company set up Swing Studio, which would acquire copyright licences of films and television series. They would make the CDs, then distribute and market them. The group has identified Business Cards CDs as a promising prospect for the future. They plan to promote the product aggressively in China.

China accounts for 44%, the majority, of the Group's sales and 62% of the Group's profit before tax in FY01. The rest of Asia accounts for 24% of total sales and 19% of pre tax profits.

Here's how Swing Media measures up to the rest of its peers on the SGX:

Name of Company	Market Capitalisation ($m) (as of 10 Jan 02)	Current Price Earnings Ratio
Datapulse Technology	234.86	9.4 (estimate)
SM Summit Holdings	51.84	46.67
Eastgate Technology	58.50	6.29 (estimate)
Mentor Media Ltd	81.0	11.25 (estimate)
International Press Softcom	98.52	9.4 (estimate)
Swing Media	33.6*	12^

* Based on issue price

^ Based on Wallstraits.com calculation and issue price.

IPO Details:

Public Shares Offered: 1,000,000 shares

Placement Shares Offered: 36,000,000 shares

Total Shares Offered: 37,00,000 shares (25.29 of enlarged capital)

Offer Structure: 34,500,000 New Shares and 2,500,000 Vendor Shares

Offer Price: S$0.23/share

Offer Period: 23 Jan - 30 Jan 2002

Commence Trading on SGX: 1 Feb 2002

Manager: SBI-E2 Capital

Placement Agent: UOB Kayhian Pte Ltd & Millennium Securities Pte Ltd

Underwriters for Public Offer: UOB Kayhian Pte Ltd & Kim Eng Securities Ltd

Net Proceeds: S$5.5 million

Use of Proceeds:

To expand manufacturing facility: S$2.0m
Repayment of loans: S$2.0m
General working capital : S$1.5m

BUSINESS OVERVIEW

Swing Media is mainly involved in contract manufacturing of storage media such as Video Cassette Housing, CDs and DVDs.

Video Cassette Housing (V-0) Manufacturing

They manufacture video cassette housing products at their facilities in Dongguan, the PRC. The video cassette housing products is called (V-0). These are distributed to recording companies and video cassette tape manufacturers which would then load the recorded the tape or the blank tape in to the empty housing.

CD Manufacturing

They can manufacture music CDs, VCDs, DVDs and CD Roms. They can also print designs on the surface of the recorded CDs and DVDs. They could pack the manufactured CDs and DVDs into the CD jewel boxes.

To complement this business, they have obtained copyright licences of certain television series and movies. This strategy reduces their reliance on contract manufacturing orders and expand their business scope.

COMPANY HISTORY

Swing Media Group was set up in 2001 after they acquired their subsidiaries Yat Lung (BVI), Yat Lung (HK), Man Power, Swing Studio (BVI) and Swing Studio (HK)

Yat Lung (HK) was established in 1986. The company manufactured blank audio cassette tapes as a sub-contractor, which received orders from trading companies who are agents for companies such as Wal-mart and K-mart. In 1989, the company started to manufacture video cassette tape housing products or V-0 in Dongguan. Their production grew from 1 million V-0s per month in 1989 to 3 million V-0s per month in 1995.

When demand exceeded the company's production capacity, they outsourced the assembly of blank audio cassette tapes to third parties in the PRC. In 1989, they shifted their manufacturing operations to Dongguan, the PRC, as the cost of operating in Dongguan was significantly lower than in Hong Kong. Their production output grew to 60 million in 1990 from 12 million in 1986.

In 1990, they started to subcontract some of their orders for audio cassette housings and blank audio cassette tapes to third parties. In 1994, Yat Lung took orders for the manufacture of 3.5 inch floppy disks and subcontracted the manufacture to Hunan Yat Lung Magnetic Co., a Yat Lung joint venture in Hunan. By 1996, Hunan Yat Lung has ceased to take their orders and their operations when it was no longer profitable.

In 1996, the company stopped making blank audio cassette tapes but they continued to take orders. They subcontracted the orders to third parties to manufacture the blank audio cassette tapes.

Yat Lung, later, correctly identified the growing trend in the use of CD in audio/ video entertainment. They diversified their business to include the manufacture and the sale of CDs.

Before 2000, the company outsource their requirements for CDs to third parties. In 2000, they started to produce their own CD at its facilities in Hong Kong. In the beginning they sold the CDs to VCD/ DVD player manufacturers in the PRC. Later, they started selling through agents to customers, which include record companies and publishing houses in the PRC.

Swing Studio (HK) was set up in 1999 to complement their CD and DVD manufacturing business. The company has obtained copyright licences for the manufacture of CDs and DVDs of films and television series as well as the right to distribute them. They manufacture and distribute CDs/ DVDs for China Federation of Literary and Art Circles Audi-Video Press and Continental Film Distributors Limited and Pan Asia Enterprise (HK) Ltd.

As at 30 November 2001, the Group has 2 production lines with annual production capacity of 41 million video cassette housing products and 4 production lines with an annual production capacity of about 31.7 million units of CDs/ DVDs.

BUSINESS MODEL

Swing Media will focus on its current media relate business and its planned geographical expansion into China. They plan to:

Expand their CD and DVD manufacturing facilities
They intend to increase their CD and DVD production capacity to meet increased demand. They plan to set up a CD and DVD manufacturing in the PRC and expects the new facility to produce 1.3 million CDs per month.
Obtain copyright licences for Hong Kong and Macau markets
They plan to obtain more copyright licences for Hong Kong and Macau markets to expand their business beyond manufacturing. They will enter into agreements with both Hong Kong and PRC licences to procure copyright licences of both movies and television serials for production and distribution in Hong Kong and Macau.
Develop their business in Business Card CDs manufacturing.
The company will develop the business in Business Card CDs. These CDs are gaining popularity among business for use in new product launches, sales presentations, video game demos, annual reports, brochures and multimedia presentations. Presently, they have 20 sales personnel to promote the Business Cards CDs in the PRC. They are already selling in Hunan and Guangzhou and intend to expand their sales efforts to Chongqing by end June 2002.
Expand and develop their business in the PRC.
The company intends to diversify beyond manufacturing and expand their business in the PRC. They intend to provide management services for retail outlets in the PRC.

IPO VALUATION

Swing Media Technology IPO prospectus points out their historical FY 2001 pre-dilution earnings per share as 2.50 cents if new service agreements for management were in place. This profit is effectively diluted by the issue of new shares, raising the existing shares outstanding from pre-IPO 111,787,120 shares to post-IPO 146,287,120. Assuming if the post IPO number of shares existed at end of last financial year, earning per share is 2.19 cents before service agreement and 1.91 cents after service agreement.. Thus, the fully-diluted post-IPO price/earnings (PE) ratio, at issue price, 10.5x before service agreement is in place and 12.0x after service agreement in in place. The convention method of calculating PE (using pre-IPO shares), before service agreement, is 8.0x (EPS: 2.86cents) in the prospectus.

FINANCIAL PERFORMANCE

HK$'000 (FY ends Mar)	Audited FY 99	Audited FY 00	Audited FY 01	Unaudited 8 mths FY 02
Sales	134,770	153,892	242,249	161,097
Cost of sales	(125,961)	(138,1900)	(208,878)	(131,361)
Gross Profits	8,809	15,702	38,371	29,736
Gross Profits Margin	6.5%	10.2%	13.8%	18.5%
Administrative Expenses	(2,795)	(3,960)	(9,145)	(5,386)
Foreign Exchange gain/ (loss)	66	253	488	(37)
Profit before depreciation, interest and income tax	6,116	11,995	29,714	24,313
Depreciation	(42)	(1,354)	(2,026)	(1,781)
Finance costs	(3,878)	(5,425)	(9,536)	(5,586)
Other income (expenses)	2,736	92	(1,069)	344
Profit before tax	4,932	5,308	17,083	17,290
Income tax	(1,451)	(774)	(2,753)	(2,761)
Profits attributable to shareholders	3,481	4,534	14,330	14,529
EPS (cents)	3.11	4.06	12.82	13.00

MANAGEMENT / LEADERSHIP

Hui Yan Sui, William

William is the Founder, Chairman and CEO of the Group. He has more than 15 years of experience, is conversant in all aspects of the operations and is involved in the day to day operations of the business. He has been and will continue to chart the strategic growth and direction of the business. He worked as a marketing officer in Beautiful Star Magnetic Limited and is an executive committee member (youth group) of Eastern District Industrialists Association, a committee member of the Hong Kong Fujian Charitable Education Fund Limited and the honorary chairman of the Hong Kong Basketball Association.

Hui Yan Moon

He is the Executive Director (Operations and Marketing) of the Group. His responsibilities include overseeing operations, finance and administrative functions and marketing activities of the Group. He joined the Group after his graduation and was responsible for setting up the manufacturing facility in Hong Kong. He holds a bachelor degree (first class honours) in Business Administration, from Baruch College, City University of New York and was awarded a scholarship by the New York State Society of Certified Public Accountants.

Teo Kiang Kok

He was recently appointed as an independent Director of the Company. He is a senior partner of Messrs Shook Lin & Bok, a firm of advocates and solicitors. He has more than 18 years of experience in legal practice and is currently the head of the corporate finance and China practice groups of Shook Lin & Bok. His main areas of practice are corporate finance, international finance and securities.

Yuen Shu Tong

He was also recently appointed as an independent Director of the Company. He is a partner of Messrs Moores Rowland, a firm of certified public accountants in Hong Kong since 1993. He graduated from Hong Kong Polytechnic with a higher diploma in accountancy in 1975. He completed a Master degree in Business Administration from the University of Hong Kong in 1987. Between 1975 and 1979, he worked with two international accounting firms as an auditor. He is a fellow of the Institute of Chartered Certified Accountants and an associates of the Hong Kong Society of Accountants.

COMPETITION

The company explains that the manufacturing industry where they operate in is highly competitive. They believe there are more than 100 CD/ DVD manufacturers in Hong Kong.

CD/ DVD

Swing Media named the following companies as their main competitors in the FPC market:

CMC Magnetics (HK) Ltd
Viva Magnetics Co., Ltd

Video Cassette Housing Products

The competitors are:

Acme Cassette Ltd
Tat Tsuen Ind Ltd
Wing Li Cassette & Video Tapes Manufacturing Co., Ltd
Wai Shing Cassette Tape Mfy Ltd.

RISK FACTORS

The Group:

faces substantial competition from their competitors in the video and optical data storage industries.
may incur high charges and costs if they have to defend against intellectual property infringement claims.
would be affected if technology changes
would be affected if they cannot retain the services of their key personnel.
faces certain laws and regulations.
is vulnerable to fluctuations in the prices of raw materials.
will need additional financing as they expect to incur significant capital expenditure.
depends on their customers who are in the video and optical data storage industries.
would face cash flow problems if they fail to collect trade debts from their customers.
may report poorer financial performance if foreign currencies fluctuations are not in their favour.
would face problems with their operations if there are changes in political and economic conditions in the PRC.
has limited protection if there is a takeover.
explains that any future sale of shares may adversely affect their share price.
cautions that new investors will incur immediate dilution and could experience more dilution in the future.
cautions that there has been no prior market for their shares and the initial public offering may not result in an active or liquid market for their shares.

Major Shareholders

Shareholder	Before the Invitation		After the Invitation
Hui Yan Sui, William	81,535,016	72.94%	79,035,016	54.03%
Hui Yan Moon	9,610,098	8.60%	9,610,098	6.57%
Hue Poh Leng	5,491,485	4.91%	5,491,485	3.75%
Hui Shu Pei	2,745,742	2.46%	2,745,742	1.88%
Others	12,404,779	11.09%	12,404,779	8.48%
Public	-	-	37,000,000	25.29%

MAJOR CUSTOMERS

Name/ Percentage of sales (%)	FY 99	FY 00	FY 01
BBK Corporation	-	3.91	5.06
Foshan City Hongxuan Technology Ltd	-	2.30	5.70
Malata Group LTD	0.41	5.15	7.30
Saehan Group	13.9	8.32	9.7