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Cyber Agent IPO seen boost for Japan Net shares

TOKYO: Japanese Web-based advertiser Cyber Agent is expected to make a strong debut on the Tokyo Stock Exchange on Friday, helping to mend frayed investor confidence in Internet-related shares, analysts say.

Cyber Agent's listing on the TSE's new Mothers market for high-tech start-ups comes on the heels of steep declines over the past month in some core Japanese Internet stocks, including Softbank Corp and Hikari Tsushin Inc.

"Internet stocks will soon be sorted out into winners and losers rather than advancing in a pack. Cyber Agent seems to belong to the winning side," said Masanori Fukunaga, an analyst at Sakura Institute of Research.

"Online advertising is set to grow in Japan and Cyber Agent's earnings will grow along with it," he added.

The company's prospectus, citing figures from top Japanese advertising agency Dentsu Inc, said the size of Japan's Internet advertising market will exceed 100 billion yen ($940 million) in 2005, up from 11.4 billion yen in 1998.

Cyber Agent, one of Japan's leading online ad placement firms, provides customised services that charge clients only after a targeted number of viewers have visited a given site.

INVESTORS GET CHOOSY ABOUT NET SHARES

Cyber Agent will issue 1,500 new shares in its initial public offering at 15 million yen a share, raising a total of 20.6 billion yen after brokerage fees. Most of the funds will be set aside for unspecified future needs.

It currently has 3,026 shares outstanding, nearly half of which are held by its president, Susumu Fujita, while Hikari Tsushin holds nearly five percent and Softbank two percent.

Softbank and Hikari Tsushin drew heated investor interest and became high flyers in the Tokyo share market over the past year with a slew of investments in Internet-related start-ups, many of which will be brought to market with IPOs this year and next.

But both stocks lost over half their value in a month-long slide from mid-February as investors cashed in gains before the business year-end on March 31, and while they are once again rebounding, the steep slide left players wary about Net shares.

This is not expected to dampen interest in Internet-related IPOs, however, as investors remain confident in the sector's growth prospects and in the chances these firms will continue fetching a large premium over the IPO price, analysts said.

Based on Cyber Agent's sales of 452.2 million yen for the year to last September, it has a price to sales ratio (PSR), a common valuation tool for Net stocks, of 150, meaning its IPO price is 150 times its latest per-share sales figure.

International blue-chip Toyota Motor Corp's is 2.4 on a parent-only basis, and Sony Corp's is 4.9.

But compared with some other Mothers stocks, Cyber Agent's PSR appears rather modest. Internet Research Institute (IRI), for example, had a PSR of 213 at the time of its IPO and the figure now stands at 595.

FIRST NON-NET STOCK COMES TO MOTHERS

The day before Cyber Agent's debut, Snova Corp, a developer and operator of indoor snowboarding centres, will become the first non-Internet firm to list its shares on Mothers.

Snova will issue one million new shares at 1,200 yen per share in the IPO, for a PSR of four.

After brokerage fees, it will earn 1.08 billion yen, most of which will be used to expand its business.

Snova is not expected to make the kind of flashy debut common among Internet stocks, but its strong business model is likely to push its share price higher in the long run, analysts said.

"Instead of competing with existing outdoor snowboarding slopes, Snova builds its facilities near metropolitan areas, creating new demand," said Masato Takizawa of the investment information section at Taiheiyo Securities.

"We can expect slow but steady gains in the share price as its profitability improves."-Reuters