RAM Ratings for EAP media companies
View(s):RAM Ratings Lanka has examined EAP Broadcasting Company Ltd (EAPB) and EAP Films and Theaters (Pvt) Ltd (EAPF) and given new ratings.
In the case of EAPB its long- and short term corporate has been given credit ratings of BBB and P3 and concurrently, a long-term rating of BBB has been assigned to EAPB’s proposed Rs. 1 billion Listed Senior Secured Redeemable Debentures (2013/2018).
Both long-term ratings carry a stable outlook.
EAPB is a leading media investment company with interests in a broad spectrum of electronic media such as free-to-air television broadcasting and radio broadcasting in Sri Lanka, the RAM media release said.
The ratings are upheld by the company’s notable presence in TV industry. RAM says EAPB has one of the largest television TV networks in Sri Lanka in terms of viewership, with a strong coverage island-wide.
EAPB’s debt protection metrics are deemed adequate, despite its increasing debt load. Its funds from operations debt coverage had improved to 1.08 times as at end-March 2013 from 0.74 times previously.
RAM noted that the company is susceptible to economic cyclicality. The company’s revenue mainly stems from advertising expenditure (adex) and closely reflects TV industry adex, which in turn is highly correlated to the country’s economic cycle. Advertisers tend to reduce adex spending in the event of economic volatility.
Given that TV is a more expensive advertising medium, TV adex is highly susceptible to economic cyclicality.
Furthermore, the company’s working-capital requirements increased owing to the weakening in the receivables cycle which clocked in at 140 days as at end-March 2013. “This was largely owing to a slowdown in corporate adex as a result of adverse economic conditions. However, we derive comfort from the company’s adequate liquidity position to cater to its working capital requirements,” it said.
In the case of EAPF, RAM assigned BBB+/P2 corporate credit ratings to the company’s has assigned respective long- and short-term corporate credit ratings and concurrently, a long-term rating of BBB+ has been assigned to EAPF’s proposed Rs. 500 million Listed Senior Secured Redeemable Debentures (2013/2018). The long-term ratings carry a stable outlook.
EAPF screens and distributes local and foreign films in Sri Lanka through its owned and managed screens. The company owns 17 screens and manages 28 across the island.
RAM said the ratings are upheld by the company’s dominance in film exhibition industry. EAPF has a strong market position in film exhibition. The company owns and manages 45 theatres in strategic locations in Sri Lanka, making it the second largest player in terms of number of theatres under its wing. (The largest player, Rithma circuit, is a national player which focuses on promoting the local film industry).
The company has an approximate 60 per cent share of the local film exhibition market, which gives it an edge over its peers.
EAPF’s financial profile has historically remained strong, underscored by its relatively low gearing and debt levels. The company is mainly funded by its parent, Swarnamahal Jewellers (SJL), and its directors.