Bangkok--Nov 12--TRIS
Thai Rating and Information Services (TRIS) announced Wednesday, 12
November 1997 that it has downgraded the 1,000 million baht senior
debentures of Nation Multimedia Group PLC (NATION) to "BB" from "BBB". The
downgrade is based upon darnpened advertising industry prospects,
particularly newspaper advertising, and its weakened financial position as a
result of the country's overall economic difficulties slashing advertising
demand and elevating newsprint costs as well as the commpany's debts burden.
The baht depreciation makes NATION likely to breach the debentures' issuing
covenant which requires the company to maintain its debt to equity ratio not
over 2.5 to 1. However, these are balanced by its strong position as the
country's leading supplier of English-language and business dailies, The
Nation and Krungthep Turakij, its competent management as well as the
benefits brought by the company's diversification especially into television
and radio.
TRIS reported that NATION is operating in an unfavourable business
environment resulting from sluggish advertising demand and a major jump in
newsprint costs. The slackening economy caused the growth in advertising
spending to slow from 17% in 1995 to 10% in 1996. The slump in the property
sector has most harshly hit newspaper advertising. Newspaper market share
of advertising diminished from 30% in 1994 to 23% in the first half of 1997.
Thailand's prolonged economic crisis is expected to further depress the
advertising industry, leaving no growth at the end of 1997 and a downturn in
the next few years. Constituting over 50% of newspaper production costs,
newsprint costs inflated from the depreciated baht will certainly
deteriorate operating results. Considerable cost cut-backs remain to be
seen while the publishers' opportunity to increase ads rates is thin, given
the existing limited demand for newspaper advertising. Competition for
advertisers will intensify. Under the current economic situation, raising
cover prices may adversely affect circulations.
NATION's consolidated turnover reached 1,426 million baht 1996, only
a 4% increase over the previous year. The group's key business lies in its
publishing activities which contributed 67% of group earnings in 1996. Its
two principal publications, despite slow circulation growth, are firmly-
entrenched in the English-language and business segments with daily
circulations of 54,000 and 75,000 respectively, closely trailing major
competitors, Bangkok Post and Phoo Jad Karn, NATION's competitive edge
includes its nationwide network, supportedly by satellite-transmitted
printing systems in strategic regions, enabling readers in all regions to
receive timely copies. This marketing strength gives a competitive edge in
tapping the provincial market. In the long term, newspapers will continue
to face the challenges of maintaining household penetration, controlling
potential cost increases and halting the slide in media market share. Also,
new information technologies such as electronic media may eventually capture
some of the newspapers' most profitable advertising categories. NATION's
media diversification into television and radio helps mitigate adverse
impacts from heavy reliance on publishing by allowing a broader customer
base and marketing flexibility for ads sales while reducing costs of
newsgathering. Earnings have shown strong growth in recent years,
continuously increasing from a 22% in 1995 to a 33% share of contributions
in 1996. However, media diversity provides limited advantages as operating
performance of all media reacts similarly to the advertising environment.
NATION's overall financial position raises concern. Although the
company was able to maintain its consoldated performance level and was less
affected by newsprint prices surge than many publishers during 1995-1996,
its operating margin dropped substantially to 15.7% in the first half of
1997, down from 26.3% in 1996. Such disappointing results reflect much
slower advertising sales and a considerable rise in direct labor and
overhead costs which surpassed a drop in newsprint price. Its increased
debts level raised the leverage ratio to 67.7%, which will definitely
deteriorate as a result of USD 36 million unhedged in foreign exchange. This
addresses major concern because it will breach the 1,000-million-baht-
debentures' issuing covenant that requires NATION to keep debt to equity
ratio not over 2.5 to 1. Interest coverage is unlikely to improve due to the
depressed advertising environment and increasing newsprint costs. Funds
from operation to total debts, currently at around 12%, should also decline
with operating cash folw just meeting capital needs.
NATION's rating is removed from CreditAlert, where it was placed on
3 July 1997, due to the decision by the Bank of Thailand to alter the
country's foreign exchange regime from a basket of currencies to a managed
float which is a de facto devaluation of the bath.
Note: Nation Multimedia Group PLC (NATION) TRIS's rating
NATION#1: 1,000 mb sr debs due 1999 Downgraded to BB from BBB
End.
Thai Rating and Information Services (TRIS) announced Wednesday, 12
November 1997 that it has downgraded the 1,000 million baht senior
debentures of Nation Multimedia Group PLC (NATION) to "BB" from "BBB". The
downgrade is based upon darnpened advertising industry prospects,
particularly newspaper advertising, and its weakened financial position as a
result of the country's overall economic difficulties slashing advertising
demand and elevating newsprint costs as well as the commpany's debts burden.
The baht depreciation makes NATION likely to breach the debentures' issuing
covenant which requires the company to maintain its debt to equity ratio not
over 2.5 to 1. However, these are balanced by its strong position as the
country's leading supplier of English-language and business dailies, The
Nation and Krungthep Turakij, its competent management as well as the
benefits brought by the company's diversification especially into television
and radio.
TRIS reported that NATION is operating in an unfavourable business
environment resulting from sluggish advertising demand and a major jump in
newsprint costs. The slackening economy caused the growth in advertising
spending to slow from 17% in 1995 to 10% in 1996. The slump in the property
sector has most harshly hit newspaper advertising. Newspaper market share
of advertising diminished from 30% in 1994 to 23% in the first half of 1997.
Thailand's prolonged economic crisis is expected to further depress the
advertising industry, leaving no growth at the end of 1997 and a downturn in
the next few years. Constituting over 50% of newspaper production costs,
newsprint costs inflated from the depreciated baht will certainly
deteriorate operating results. Considerable cost cut-backs remain to be
seen while the publishers' opportunity to increase ads rates is thin, given
the existing limited demand for newspaper advertising. Competition for
advertisers will intensify. Under the current economic situation, raising
cover prices may adversely affect circulations.
NATION's consolidated turnover reached 1,426 million baht 1996, only
a 4% increase over the previous year. The group's key business lies in its
publishing activities which contributed 67% of group earnings in 1996. Its
two principal publications, despite slow circulation growth, are firmly-
entrenched in the English-language and business segments with daily
circulations of 54,000 and 75,000 respectively, closely trailing major
competitors, Bangkok Post and Phoo Jad Karn, NATION's competitive edge
includes its nationwide network, supportedly by satellite-transmitted
printing systems in strategic regions, enabling readers in all regions to
receive timely copies. This marketing strength gives a competitive edge in
tapping the provincial market. In the long term, newspapers will continue
to face the challenges of maintaining household penetration, controlling
potential cost increases and halting the slide in media market share. Also,
new information technologies such as electronic media may eventually capture
some of the newspapers' most profitable advertising categories. NATION's
media diversification into television and radio helps mitigate adverse
impacts from heavy reliance on publishing by allowing a broader customer
base and marketing flexibility for ads sales while reducing costs of
newsgathering. Earnings have shown strong growth in recent years,
continuously increasing from a 22% in 1995 to a 33% share of contributions
in 1996. However, media diversity provides limited advantages as operating
performance of all media reacts similarly to the advertising environment.
NATION's overall financial position raises concern. Although the
company was able to maintain its consoldated performance level and was less
affected by newsprint prices surge than many publishers during 1995-1996,
its operating margin dropped substantially to 15.7% in the first half of
1997, down from 26.3% in 1996. Such disappointing results reflect much
slower advertising sales and a considerable rise in direct labor and
overhead costs which surpassed a drop in newsprint price. Its increased
debts level raised the leverage ratio to 67.7%, which will definitely
deteriorate as a result of USD 36 million unhedged in foreign exchange. This
addresses major concern because it will breach the 1,000-million-baht-
debentures' issuing covenant that requires NATION to keep debt to equity
ratio not over 2.5 to 1. Interest coverage is unlikely to improve due to the
depressed advertising environment and increasing newsprint costs. Funds
from operation to total debts, currently at around 12%, should also decline
with operating cash folw just meeting capital needs.
NATION's rating is removed from CreditAlert, where it was placed on
3 July 1997, due to the decision by the Bank of Thailand to alter the
country's foreign exchange regime from a basket of currencies to a managed
float which is a de facto devaluation of the bath.
Note: Nation Multimedia Group PLC (NATION) TRIS's rating
NATION#1: 1,000 mb sr debs due 1999 Downgraded to BB from BBB
End.