UPDATE 1-BYD handset unit plans up to $987 mln HK IPO

(For an expanded IPO diary, please click <HK/IPOMENU>) (Adds details)

By Kennix Chim

HONG KONG, Nov 30 (Reuters) - Chinese rechargeable battery maker BYD Co (1211.HK) plans to spin off its handset components unit in a Hong Kong initial public offering that could raise up to US$987 million, according to a term sheet obtained by Reuters on Friday.

BYD Electronic (International) Co Ltd, which manufactures handset casings and keypads, kicked off a marketing roadshow for its IPO on Friday.

It is offering 550 million shares, or 25 percent of its enlarged share capital, with a price range of HK$10.75 to HK$14.00 each, the term sheet said. Of the shares on offer, 60 percent are new shares and 40 percent are existing shares.

The company, which is 91 percent owned by BYD Co, provides handset components, as well as module manufacturing and assembly services, to brand name handset vendors such as Nokia (NOK1V.HE) and Motorola Inc (MOT.N).

BYD Electronic does not manufacture products under its own brand.

The indicative price represents a price-to-earnings multiple of 13.5 to 17.6 times the syndicate earnings forecast for 2008.

The sponsor, UBS (UBSN.VX) (UBS.N), expected the company could increase net profit 44 percent to 1.05 billion yuan ($142.2 million) in 2007 and more than 57 percent to 1.66 billion yuan in 2008.

By comparison, its rival Foxconn International (2038.HK) now trades at 17 times 2008 forecast earnings.

Other peers include Jabil Circuit Inc (JBL.N) and Flextronics International Ltd (FLEX.O), which both trade at about 14 times prospective earnings for 2008.

BYD Electronic and its parent company are exposed to pending litigation instigated by Foxconn, UBS said in a research report.

"BYD Electronic may be involved in intellectual property disputes, a result of operating in a fast-growing technology segment," UBS said. ($1=7.382 Yuan=HK$7.8) (Reporting by Kennix Chim; Editing by Edmund Klamann)