BYD targets HK$6.2b spin-off

PUBLISHED : Thursday, 24 May, 2007, 12:00am
UPDATED : Thursday, 24 May, 2007, 12:00am

BYD, the mainland's largest maker of rechargeable batteries, said it would book an exceptional gain of more than five times its profit for last year from a separate listing of its handset unit.

The one-off gain would amount to between HK$1.93 billion and HK$6.24 billion, the company said yesterday.

That compares with its net profit of 1.12 billion yuan for last year, which was up 123 per cent from 2005, BYD said in March.

Shares in BYD, which gained 253 per cent over the past year, jumped as much as 7.5 per cent yesterday before closing at HK$48.85, an increase of 5.05 per cent.

'The spin-off of the handset business is necessary and good for BYD as the company needs more cash flow to run its business,' said Michael Meng, an analyst at Citigroup Investment Research.

'Due to strong orders from Nokia as well as the company's aggressive capacity expansion, we have raised BYD's handset component sales forecast this year.'

BYD said it might sell a 25 per cent stake in the handset unit, BYD Electronic, for the proposed initial public offering and keep a 67.35 per cent stake. The remaining 7.65 per cent will be owned by 35 BYD employees.

UBS has been appointed as the sole global co-ordinator of the IPO. Sources had said the company hoped to complete the deal in August or September this year.

'The net proceeds from the sale of BYD Electronic will provide us with additional funding to reduce our level of indebtedness and would enhance our cash flow position,' BYD said.

Mr Meng expected BYD's sales in handset components, including keypads, camera modules and liquid crystal display screens, would grow 27 per cent to 6.52 billion yuan this year, while profit would increase 25 per cent to 1.1 billion yuan.

BYD Electronic runs production of handset components and modules, the printed circuit board assembly service and high-level assembly service to make near-completed handsets.

BYD Electronic recorded sales of 3.04 billion yuan and net profit of 727.2 million yuan for the year to December.

The spin-off plan should be approved by the listing committee and the company's shareholders before it is implemented, BYD said. A shareholder meeting would be held on June 14 to vote on the plan, it added.

'Sharing of common customers between the remaining group and BYD Electronic is inevitable but we believe that this will not give rise to issues on competition or reliance because the two companies are operated independently,' BYD said. 'We will also enter into a non-competition covenant.'