China Aerospace International Holdings (Casil), the listed arm of China's Ministry of Aerospace, is seeking to spin off its telecommunications business in Hong Kong. Chairman Wang Meiyue said an application to list a newly formed subsidiary comprising the group's telecommunications equipment and satellite global positioning systems manufacturer had been sent to the stock exchange on May 5. He said Casil was also in negotiations with potential strategic investors interested in taking an equity stake before the spin-off. A source said listing the telecommunications business was part of Casil's overall restructuring plan designed to rationalise operations and streamline management. 'After the spin-off, Casil will act as a holding company with a controlling stake of the listed arm as well as the company's non-industrial manufacturing business,' the source said. The new company is expected to hold a number of Casil subsidiaries, including Hung Nien Electronics and Southern Telecommunication Development Co, which manufactures switching exchanges in Huizhou, Guangdong province. The source said the ultimate parent - China Aerospace Corp (CASC) - would inject further assets into Casil. HG Asia assistant director of research Eddie Lau said: 'The attraction of most red chips is asset injections from the parent. Casil's success will depend on what kind of assets will be injected from CASC.' Casil yesterday announced that profit attributable to shareholders rose 11.3 per cent to $180.4 million last year, helped by cost controls and the development of new products. Operating profit jumped 87.4 per cent to $143.7 million, while turnover rose 11.9 per cent to $2.2 billion. There were exceptional gains of $16.4 million, compared with $84 million in 1995. The exceptional items arose from the sale of 60 per cent of a property development in Kwun Tong, which generated $26.3 million, but was offset by a provision of $16 million against doubtful debts. Earnings per share improved to 16.2 cents from 14.5 cents in 1995. A final dividend of four cents a share was recommended, against no dividend in 1995. Casil's share price has recovered recently, riding on favourable sentiment towards the red-chip sector.