Analysts at SWS Research said the spin-off of Magic would improve the valuation of both the drugs and the facial mask businesses because the two product lines would be separated in the process.

Hua Han wants to focus on expanding its biopharmaceutical product range, including a foray into making products from human placenta and the introduction of a drug for diabetes patients.

Magic's products are sold by Watsons, Carrefour and Wal-Mart and other retailers on the mainland. The company has a joint venture with Hanbul, a South Korean cosmetic and skincare company.

According to a pre-listing document posted on the Hong Kong stock exchange, Atlantis China Star Fund and China Cinda (HK) Investments Management are among the shareholders of Magic. Their capital will be locked up for six months after the flotation.

Hua Han's equity interest in Magic will be reduced to 25.9 per cent from 36.4 per cent after the listing.

About 35 per cent of the sale's proceeds would go into marketing, 25 per cent would be used to expand facilities and 20 per cent would be used to develop new products, the term sheet said.

The indicative price range of Magic's shares is between HK$2.40 and HK$3.30. The target listing date is September 24.

Magic is the latest spin-off of a pharmaceutical firm tapping the mainland's growing demand for health care products. Prescription drug maker Lansen Pharmaceutical Holdings, majority owned by London-listed Cathay International, which has investments in property and pharmaceutical sectors, raised more than HK$500 million in April.

According to investment bankers, some mainland pharmaceutical firms in need of cash will be tapping Hong Kong's capital market in the next two months.

Big market

Of Hua Han's turnover last year, sales of women's healthcare products totalled HK$373.7 million, or: 37.7%