Following the announcement of the proposed issuance of a USD-denominatedbond on 23 Sept, it is reported that the bond size will be USD500m with a rateat 3.625%, according to Bloomberg (29 Sept 2016). The proceeds will be usedto fund the digital new media business, other capex and strategic investments,management said in the announcement.
Deutsche Bank’s view
Although we believe the deal is good, as the rate is at the low end of the offerrange, the bond issue was still a surprise to us, given the company’s ~HK$3bnnet cash. Ordinary capex is unlikely to be high. We believe the company mighthave more plans for its new media business and TV/movie production in Chinain the future. Thus, it is leveraging the current low rate environment andtapping the market for capital as a reserve.
To recap, on 25 Aug, it announced the production of Line Walker II, the firstdrama title in collaboration with Tencent (0700.HK, Buy). It also announced theplan to co-produce three dramas with iQiyi and one of the titles will be Againat the Threshold of an Era.
On 15 Sept, it also announced the launch of TVB Anywhere for overseasviewers in Canada, the UK and Australia. It offers TVB Jade, News and otherthematic channels, including Asian Action, Entertainment News, TVB LiveShows and TVB Radio, as well as video-on-demand programs which can beviewed on the prescribed set-top box or mobile app.