HONG KONG, April 5 /Xinhua-PRNewswire/ -- Xinhua Far East China Ratings ("Xinhua Far East") today assigned a BBB+ issuer credit rating to Shanghai Oriental Pearl (Group) Co. Ltd. ("Oriental Pearl" or "the company", SH A 600832). The company's rating outlook is stable.
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The rating reflects the company's competitive advantage in resources held in city tourism, traditional media and certain new media areas, as well as its strong support from the local government and controlling shareholder, Shanghai Media and Entertainment Group ("SMEG"), China's second largest media group. The rating also incorporates the stable revenues generated by its tourism business, its comparatively conservative financial strategy and the likely realization of rising market value in its long-term investments. On the downside, the company relies heavily on monopolistic resources, raising the risk of government intervention affecting its future development. The success of its media operations has also yet to be seen over the long term, while its high percentage of short-term debt raises its risks in the short-to-medium term.
In 2005, the income generated by its traditional tourism business accounted for 61.2% of total revenue. The company has two major assets in this area: Oriental Pearl TV Tower, a Shanghai landmark, and the Shanghai International Convention Center, which plays a major role in the Chinese government's hosting of foreign delegations. The special characteristics of these assets enable it to enjoy stable revenue growth and help it withstand competition and changes in visitor preferences. We believe the buoyant development of Shanghai's tourism market provides a favorable operating environment for the company, and growth in tourist traffic to its attractions is expected to surpass 6% for the next three-to-five years, above the regional average.
Media and advertising revenue, primarily from data transmission and direct advertising, accounted for 27.5% of the company's total in 2005. We believe China's advertising expenditures are likely to continue their rapid growth in the near future, even though the growth rate may decline slightly. The company has a monopoly in terms of technology and resources for data transmission, television advertising and public transportation. We believe strong support from SMEG will also help stabilize related income and profitability for print media.
The company has relatively lower financial leverage and strong debt repayment capacity over the long term which, in Xinhua Far East's view, is the result of the high capital turnover rate of its tourism, media and advertising lines, as well as the company's conservative financial strategy. Furthermore, a recovery in the national capital market has boosted the market value of its securities investments, thus contributing to its liquidity and raising its ability to withstand capital expenditure pressures.
The company's city tour resources and the monopoly it holds in its traditional and certain new media markets reflects the strong support it enjoys from the government and its controlling shareholder. In terms of its credit profile, this is a double-edged sword. Although the risks in new media fields such as handset television is limited, due to the relatively low fixed investment and variable costs, these risks could grow if the local government requires it to increase its expenditure in this area as part of a plan to develop the local media markets.
The company also has yet to establish a track record and competitive edge or demonstrate its operating specialty in the new media markets. The proportion to which media contributes to its total revenues is also set to rise due to SMEG's limited tourism resources, further indicating possible operational risks.
Shanghai Oriental Pearl is a Shanghai-based conglomerate focusing on tourism and media sectors. The company operates Oriental Pearl TV Tower, the landmark of Shanghai, and is extending its presence in both the traditional and new media fields. SMEG is the company's controlling shareholder, with a 59.8% stake at the end of 2006.
Shanghai Oriental Pearl is also a constituent of the Xinhua/FTSE China 200Index and, as of market close on April 4, 2007, its total A-share market capitalization and investable capitalization were RMB30 billion and RMB15 billion respectively.
About Xinhua FTSE China 200 Index
Xinhua FTSE China 200 Index is the large cap index in the Xinhua FTSE China A Share Index Series and includes the top 200 companies in China by market cap. It is designed as a tradable index and is calculated in real-time every 15 seconds. For daily data and further information, see www.xinhuaftse.com.
About Xinhua Far East China Ratings
Xinhua Far East China Ratings (Xinhua Far East) is a pioneering venture in China that aims to rank credit risks among corporations in China. It is a strategic alliance between Xinhua Finance (TSE Mothers: 9399), and Shanghai Far East Credit Rating Co., Ltd. Shanghai Far East became a Xinhua Finance partner company in 2003 and the first China member of The Association of Credit Rating Agencies in Asia in December 2003.
Capitalizing on the synergy between Xinhua Finance and Shanghai Far East, Xinhua Far East's rating methodology and process blend unique local market knowledge with international rating standards. Xinhua Far East is committed to provide investors with independent, objective, timely and forward-looking credit opinions on Chinese companies. It aims to help investors differentiate the credit risks among the corporations in China, thereby, cultivating their awareness and promoting information disclosures and transparency in China market. For more information, see http://www.xfn.com/creditrating .
About Xinhua Finance Limited
Xinhua Finance Limited is China's unchallenged leader in financial information and media, and is listed on the Mothers board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China's financial markets and the world, Xinhua Finance serves financial institutions, corporations and re-distributors through four focused and complementary service lines: Indices, Ratings, Financial News and Investor Relations. Founded in November 1999, the Company is headquartered in Shanghai with 20 news bureaus and offices in 19 locations across Asia, Australia, North America and Europe. For more information, please visit http://www.xinhuafinance.com .
About Shanghai Far East Credit Rating Co., Ltd
Shanghai Far East Credit Rating Co., Ltd. is the first and leading professional credit rating company with comprehensive business coverage in China. It is an independent agency established by the Shanghai Academy of Social Sciences with the mission to develop internationally accepted standards for capital market in China. The company is a pioneer in conducting bond-rating business in China. For years, it has been authorized by the Shanghai branch of the PBOC to undertake loan certificate credit rating.
Since establishment, it has rated over 1,000 corporate long-term bonds and commercial papers, based on the principles of objectivity, fairness and independence. The company has also maintained over 50% market share in the loan certificate-rating sector in Shanghai for three consecutive years. With its strong local presence and knowledge, it provides investors with unique and the most insightful credit opinion. For more information, see http://www.fareast-cr.com .
For the rating report summary, please visit http://www.xinhuafinance.com/creditrating .
For more information, please contact:
Hong Kong
Joy Tsang,
Corporate & Investor Communications Director
Xinhua Finance
Tel: +852-3196-3983, +8621-6113-5999, +852-9486-4364
Email: joy.tsang@xinhuafinance.com
Scott Zhang,
Tel: +86-21-6113-5996,
Email: scott.zhang@xinhuafinance.com
US
Taylor Rafferty (IR/PR Contact in US)
Ms. Ishviene Arora
Tel: +1-212-889-4350
Email: ishviene.arora@taylor-rafferty.com
