INNOVATIVE International (Holdings) is planning to spin off its toy-making subsidiary Rhino Toys Manufacturing to list on the exchange. Sun Hung Kai International has been appointed as adviser for a listing of Rhino, which may take place by the end of this year. In preparation for the listing, Rhino has undergone a restructuring and brought in a Chinese shareholder, according to a source. An investment vehicle controlled by the local government of Shelong, in Dongguan, has taken a 25 per cent stake in Rhino by way of a cash injection. The restructuring has effectively reduced Innovative's shareholding in Rhino to 38.5 per cent from 45 per cent. The source said the Chinese link-up was intended to strengthen the shareholding base of Rhino and increase investors' appetite for the company. He said Sun Hung Kai Hongkong Industries was interested in taking a stake in Rhino. Rhino is considering diversifying into production of car parts and rechargeable hand tools, which would mean additional capital expenditure, according to the source. The planned listing would raise funds to diversify and expand the company's production facilities in Shelong. Rhino currently makes die-cast toys at four Dongguan plants, which have a total production space of about 200,000 square feet. The source said Rhino planned to consolidate all production facilities under one roof. Innovative, which makes car antennas and has diversified into businesses including property, acquired a 45 per cent stake in Rhino in January last year for $22 million. The stake was bought on a price-earnings ratio of only 2.4 times guaranteed profit of $30 million for the year to March 31 this year.