(ATF) Lenovo Group told the Hong Kong Stock Exchange on Tuesday evening (Jan 12) its board has approved the possible issuance of China Depository Receipts, plus an application for CDR listing and preliminary recommendations.
Under the proposal, Lenovo intends to issue new common shares, which will account for no more than 10% of the company's total issued common shares after expansion.
The funds raised will be used for the research and development of technologies, products and solutions, strategic investment in related industries, and supplement the company's working capital.
These mentioned recommendations for issuing CDRs and listing on the Science and Technology Innovation Board are subject to market conditions, shareholder approval, and the necessary approvals of relevant stock exchanges and regulatory agencies.
Yang Yuanqing, chairman and CEO of Lenovo Group, said: “The A-share listing plan announced today will help strengthen the company’s strategic link with the booming domestic capital market, enhance the convenience for mainland investors to invest in Lenovo, and further release the value of Lenovo."
Shen Meng, executive director of Chanson Capital, said in an interview with China Business News that the PC industry had experienced consecutive years of decline. Over the past year, Lenovo still maintained basic growth. However, the Hong Kong market’s valuation of Lenovo was very low. The flexible advantage of the Sci-tech Innovation Board was that it does not require privatization and delisting from Hong Kong and the removal of the red-chip structure, and it could also obtain higher valuations on the Mainland. Both advantages outweighed the disadvantages for Lenovo and its investors, he said. Also, Hong Kong stock investors and A-share investors had a high degree of overlap, and a more thorough understanding of the Sci-tech Innovation Board.
Over the past year, Lenovo’s stocks fell sharply in Hong Kong due to reports from short-selling agencies, that caused its price to drop to a low of HK$3.26 per share. In the past two months, its share price had entered an upward channel. Tuesday’s closing price saw it rise nearly 9% to HK$8.05 per share.
From a performance point of view, the Chinese PC market experienced an unprecedented winter in the first quarter of 2020, after it was affected by the coronavirus epidemic. Lenovo faced many challenges such as a delayed start of reopening factories and production stagnation, increased relative operating costs, and delayed user demand.
However, the epidemic has also catalyzed new business opportunities such as online education, remote office, and online entertainment. From the second quarter, the PC market has gradually recovered and global shipments of computers have entered a stage of rapid growth.
Preliminary results of the International Data Corporation Global Quarterly Personal Computing Device Tracking Report yesterday, showed that in 2020 the global PC market shipments exceeded 300 million units, an increase of 13% year-on-year, setting a new high in recent years. And Lenovo's shipments ranked first in the market, with a share of 24%.
According to Lenovo's latest 2020/2021 fiscal second-quarter results, the turnover in this fiscal quarter exceeded 100 billion yuan for the first time, reaching 100.5 billion yuan, an increase of 7.4% year-on-year, and net profit reached 2.15 billion yuan, an increase of over 53% year-on-year.