NEW World Development Co is taking on a new challenge to lighten its financial strain through external funding. The property-based conglomerate announced its intention to realise about $1 billion through the proposed flotation of its hotel management business on the New York Stock Exchange, after the earlier policy decision to invite investors' capital support for its massive investments in China. It plans to raise another $1 billion through a separate 10-year note to be issued by the proposed listed vehicle under Renaissance Hotel Group. The Renaissance Hotel Group will comprise all the existing New World Hotels hotel management business in Asia and all the Ramada-Renaissance hotel management and franchise business. Baring Securities' latest report says New World's Renaissance Hotels manages 128 hotels with a total of 40,262 rooms around the world, mainly in North America and Europe. The report says it manages 13 hotels in Asia with a total of 7,065 rooms. The series of plans, if successful, will improve the developer's cash flow and reduce the size of its borrowings. Kleinwort Benson Research has estimated New World's gearing ratio at 28 per cent. Whether or not the move will be successful will largely depend on the market's perception of its hotel arm's outlook. Looking at New World's share performance yesterday, the move did not attract immediate support from the market. Shares in New World closed up five cents to $28.20 on a trading volume of $57.2 million. There is an argument the news was partly discounted because the proposal had been talked up in stock market circles for some time. Property analysts say investors would like to know the details of the flotation, including price-earnings multiples, business performance in the hotel management business, and the earnings outlook. Analysts say all these factors can determine the response to the flotation, and provide the proof or otherwise of the company's wisdom in making the move. It is generally believed that management of New World would like to list its hotel management vehicle at a price-earnings ratio of about 20 times - slightly cheaper than the hotel management stock trading in New York. Based on that assumption, some analysts say earnings per annum for the hotel management business should be about $400 million. Analysts expect an optimistic growth potential in New World's hotel management business in view of the recovery in the hotel industry in the United States. If New World can achieve a successful listing, the financial position will become more comfortable. The challenge to New World has not yet ended. The company is planning another flotation of its infrastructure investments in China. New World was one of the first Hong Kong companies to invest significantly in China. To date, $9 billion has been invested, of which $5 billion has been spent on infrastructure and low-cost housing projects. The issue is expected to be one of the largest single cash inflow items for New World in the near future. It will strengthen its cash flow and offset the proposed multi-billion dollar investments on its newly diversified local telecommunication industry and property developments for Tung Chung station on the new airport railway.