Lenovo's parent aims to jump on HK reit bandwagon
The world's third-largest computer manufacturer is also considering a listing in the United States
The parent firm of Lenovo Group plans to spin off its mainland commercial property subsidiary as a real estate investment trust in Hong Kong and may consider listing the world's third-largest computer maker in the United States, the group's founder and president said yesterday in Beijing.
DBS Vickers Securities analyst Joseph Ho said any plans to list in the US would be 'more a brand-building exercise' for Lenovo rather than an attempt to generate fresh funds. Hong Kong-listed Lenovo acquired US computer giant IBM's personal computer operations for US$1.25 billion last year.
Meanwhile, Lenovo's parent company, Legend Holdings, is in talks with a foreign investment bank about spinning off Raycom Real Estate Development, according to Liu Chuanzhi, the group's founder and president, who was speaking on the sidelines of the National People's Congress.
'Our commercial real estate business is very successful at the moment and we are in discussions to list it in Hong Kong as a reit,' Mr Liu said.
Raycom had about two billion yuan of commercial property assets and rental income on the properties rose 50 per cent last year to 60 million yuan, he said.
'We will also list our residential real estate business but we're not sure whether it will be on the mainland or in Hong Kong,' he said. Raycom has residential property developments in Beijing, Tianjin, Changsha, Wuhan and Chongqing.
Mr Liu also joined the debate in Beijing over whether China should be listing its best companies in Hong Kong and abroad.
'If Chinese companies with Hong Kong listings are allowed to list on the mainland without the status of their existing listings being affected, then I think it will be a good thing,' he said. 'But if listing domestically means not listing abroad or carving out parts of the business to list separately on the mainland, then we won't.'
He said Legend was considering dual mainland and offshore listings but that a US listing for Lenovo was a priority.
Lenovo's performance in the latest quarter was much worse than analysts expected and its shares have lost 15 per cent so far this year.
Last quarter's $365 million net profit was 'significantly below our published estimate of $655 million in addition to the market consensus', JP Morgan analyst Johnny Chan said.
He blamed intense international competition and problems in integrating IBM and Lenovo.
Lenovo's share of the mainland personal computer market rose to 34.5 per cent in the third quarter of last year, compared with 26.3 per cent in 2004, according to consultancy IDC.
The company's global market share was 7.2 per cent.
Additional reporting by Bien Perez