Tue, Oct 28, 2008 - Page 11 News List

Business Briefs


CAL receives stable rating

Taiwan Ratings Corp (中華信評) yesterday affirmed its “twBBB” long-term corporate credit rating and “twA-3” short-term credit rating on China Airlines (CAL, 華航) with a stable outlook.

The rating affirmation reflects the agency’s expectations that CAL’s profitability and cash-flow generation would recover because of sharply falling oil prices, its cost-cutting efforts and the increasing number of cross-strait flights, Taiwan Ratings said in a statement yesterday.

This, together with limited capital expenditure, will enable CAL to reduce its leverage and generate cash flow protection measures commensurate with the ratings over the next two years, it said.

The carrier’s bottom line is likely to turn positive in the fourth quarter of this year, following huge operating losses of NT$7.3 billion (US$218.7 million) in the first half and anticipated further losses last quarter. The oil price has plunged to below US$80 per barrel this month from more than US$140 per barrel in July, Taiwan Ratings said.

CAL will also be the major beneficiary of increasing direct flights across the Strait thanks to its position as the nation’s largest airline. The carrier enjoys better margins in these routes because of the absence of competition from leading international airlines.

However, the benefit will become significant only after a substantial frequency increase from its current eight flights per week, which is still subject to political negotiations.

CAL also faces challenges to generate a satisfactory return on capital over the next two years because of a likely global economic slowdown and competition in Taiwan’s overcrowded aviation market, Taiwan Ratings said.

Loans to brokers may be raised

The central bank yesterday unveiled a proposal to relax the ceiling on loans that domestic banks can extend to securities brokerage firms to boost the liquidity in the securities sector.

The bank said in a statement that the proposed revision would allow banks to loan out 3.5 times the net worth of the securities firm applying for a loan — up from the current 2.5 times net worth.

Any opposition to the proposal should be reported to the central bank by next Tuesday before the bank starts reviewing arguments on the revision, the statement said.

China Dev. to buy back shares

Taiwan’s largest venture-capital company, China Development Financial Holding Corp (開發金), plans to buy back about 4.66 percent of its own shares.

China Development plans to buy 523 million shares, setting the price at NT$3.82-NT$12.29, from today through Dec. 26, the Taipei-based company said in a Taiwan Stock Exchange filing yesterday.

The stock plunged by the daily 7 percent limit to NT$5.45 yesterday.

Gamania’s net profits fall

Local game provider Gamania Digital Entertainment Co (遊戲橘子) yesterday reported that net profits in the first three quarters of the year fell 24.2 percent year-on-year to NT$248 million (US$7.63 million), or NT$1.62 per share.

Revenues during the same period were up 8.3 percent year-on-year to NT$2.85 billion, the company said in a statement.

Gamania attributed its sales growth to new products and two self-developed games, which were very popular in Japan.

The company’s subsidiaries in Hong Kong and Japan saw record 52 percent and 45 percent year-on-year growth in sales respectively for the first nine months.

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