Sept 10, 2013 (LBO) – Sri Lanka’s EAP Broadcasting Company Ltd (EAPB), has been rated ‘BBB’ by RAM Ratings which said the firm was planning a billion rupee listed debenture sale. “The ratings are upheld by the Companyâ€™s notable presence in TV industry,” RAM Ratings said.
“EAPB has one of the largest television networks in Sri Lanka in terms of viewership, with a strong coverage island-wide.”
The company was earlier known as EAP Networks Ltd.
The full statement is reproduced below:
RAM Ratings Lanka assigns BBB/P3 corporate credit ratings to EAP
Broadcasting Company Limited
RAM Ratings Lanka has assigned EAP Broadcasting Company Limited (â€œEAPBâ€ or â€œthe
Companyâ€), formally known as EAP Networks (Pvt) Ltd respective long- and shortterm
corporate credit ratings of BBB and P3.
Concurrently, a long-term rating of BBB
has been assigned to EAPBâ€™s proposed LKR 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 (â€œFTAâ€) television broadcasting and radio
broadcasting in Sri Lanka.
The ratings are upheld by the Companyâ€™s notable presence in TV industry. EAPB has
one of the largest television (â€œTVâ€) networks in Sri Lanka in terms of viewership, with
a strong coverage island-wide.
The Company owns and operates Swarnavahini – a
premier TV channel broadcasted in the Sinhala language. The Companyâ€™s viewership
in 2012 stood at 14.30%, compared to the 15.40% held by the leading private TV
broadcaster. EAPBâ€™s viewer ratings were mainly upheld by its news and teledrama
Meanwhile, the ratings are also upheld by EAPBâ€™s adequate debt-protection metrics.
EAPBâ€™s debt protection metrics are deemed adequate, despite its increasing debt load.
Its funds from operations (â€œFFOâ€) debt coverage had improved to 1.08 times as at
end-March 2013 from 0.74 times previously. However, debt-funded expansion is
envisaged to erode the Companyâ€™s FFO debt coverage to 0.45 times in FY Mar 2014.
Nevertheless, we expect the ratio to still compare better to that of similar-rated
However, we note the Company is susceptibility to economic cyclicality. The
Companyâ€™s revenue mainly stems from advertising expenditure (â€œadexâ€) and closely
reflects TV industry adex, which in turn is highly correlated to the countryâ€™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 Companyâ€™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 Companyâ€™s adequate
liquidity position to cater to its working capital requirements.