[ET Net News Agency, 28 December 2020] AAC Technologies (02018) has announced that it
is considering the proposed spin-off of its optics business, which will be held through
its non-wholly-owned subsidiary AAC Optics on a stock exchange in mainland China.
Given that AAC Optics is likely to remain a consolidated entity post-spin-off, BNP
Paribas believes that the impact on AAC's fair value estimate will be limited. It retained
its fair value estimate at HK42 and a "hold" rating.
The research house thinks the proposed spin-off of AAC's optics franchise is a positive
development for a few reasons. First, given the capital-intensive nature of the optical
lens business, BNP thinks it is prudent for AAC to tap the public equity markets to help
finance the growth of its optics unit.
Second, the planned listing of the optics unit on a mainland China stock exchange is
likely to enable the would-be listed entity to unlock more value than if it were to be
listed on the Hong Kong stock exchange, especially given the general price premium that
mainland Chinese-listed companies typically command versus their H-share listings.
Third, BNP thinks that the planned spin-off enables the faster-growing optics unit to
run a more focused strategy, which would support further gross margin and product mix
improvement. (KL)