CDC Corp. (CHINA) Updates on Private Equity Fund Investment

QualityStocks would like to highlight CDC Corporation (NASDAQ: CHINA), a China-based value-added operator of, and growth investor in, hybrid (on premise and SaaS) enterprise software, IT, and new media businesses.

In the company’s news yesterday,

CDC issued an update on its subsidiary’s investment in a Beijing-based private equity fund.

CDC said the investment has been producing significant returns; China.com, the subsidiary, has committed approximately (USD) $14.0 million in the PE Fund, and has received approximately (USD) $3.0 million in distributions since 2009.

“We are very pleased with the impressive return on our investment,” Sammy Cheng, CFO and executive director of China.com stated in the press release. “China.com plans to collaborate with certain of the portfolio companies to help optimize their operational efficiencies through our China portal, on-line gaming and webgame business operations in China. We are seeking either to invest in, or co-manage, more China-focused funds. We are also planning to launch similar funds in China. We believe that our investments will help shareholder value through our participation in the robust returns of China’s rapid economical growth, particularly in the high tech and new media sectors.”

This particular PE fund invests in leading China-based enterprises. As of December 31, 2010, the latest audit report of the PE fund demonstrates that it has achieved a gross internal rate of return in excess of 70 percent.

“The recently issued audited financial statements of the PE Fund indicate that it is been doing very well, achieving an almost four times return on investment since inception in 2007,” John Stone, CFO of CDC stated. “China.com carries the value of this investment at its historical cost basis of $10.0 million. This particular fund has achieved significant returns in the year ended December 31, 2010, since almost half the businesses the fund invested in have been listed in relevant stock exchanges. While past results are not a guarantee of future performance of this or any other PE Fund, we believe that China.com has a reasonable expectation of realizing significant income from this important investment.”

Stone noted that the PE fund has a maturity date in 2014, and for this reason the company cannot currently determine the final return.

CDC said it anticipates more distributions in 2011 that will generate additional cash flow contribution to the group. Nearly 50 percent of the companies in the fund’s portfolio are listed on the China and Hong Kong stock exchanges; CDC plans on pursuing partnerships with some of these companies.

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