China Paradise Electronics, the mainland's third-largest electronics retail chain, aims to raise up to $1.05 billion in an initial public offering in Hong Kong next month. According to market sources, it plans to sell 456 million shares at $1.58 to $2.31 each, about 20 per cent of the enlarged share capital. Morgan Stanley and Cazenove are the sale arrangers. Much of the funds would be used to open new stores and pursue acquisitions, the sources said, Paradise had won approval from the listing committee last week, they added. Paradise - also known as Yongle Electronics - planned to double its outlets to more than 200 this year, chief executive Huang Jianping said. Its 103 stores are mainly in Shanghai, Zhejiang, Beijing and Tianjin. New stores would be set up in Beijing, Shenzhen, Nanjing and other small cities. Sales this year were expected to reach 45 billion yuan from 15.9 billion yuan last year, Mr Huang said. Paradise's net profit has grown rapidly in the past three financial years, with earnings reaching 820 million yuan last year after 490 million yuan in 2003. Net profit in 2002 was 230 million yuan. Sources said the firm would start marketing the offering by the end of this month and launch the retail tranche next month. In January, Morgan Stanley took a 20 per cent stake in Paradise for US$50 million, becoming its largest shareholder. It will be the second Chinese electrical chain to list in Hong Kong after Gome Electrical Appliances. Gome's first-half net profit rose 4.48 per cent from a year earlier to $224.21 million, but net profit margin fell to 4.48 per cent from 5.51 per cent. 'Declining profit margin has been a threat to mainland home electrical appliance retailers, and opening new stores is a way to enjoy economies of scale,' an analyst said.