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Public company info - Asiaray Media Group Limited , 01993.HK

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Asiaray Media Group Limited, 01993.HK - Company Profile
Chairman Lam Tak Hing, alias Vincent Lam
Share Issued (share) 476,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Advertising
Corporate Profile Business Summary: The Group is principally engaged in the development and operations of out-of-home advertising media, including advertising in airports, metro lines, billboards and building solutions in the People’s Republic of China and Hong Kong. Performance for the year: The revenue of the Group for the year ended 31 December 2019 decreased from approximately HKD1,928.9 million to approximately HKD1,878.4 million, representing a year-on-year decreased of 2.6%. The gross profit of the Group for the year ended 31 December 2019 decreased from approximately HKD484.1 million to approximately HKD397.8 million and the Group’s gross profit margin decreased from 25.1% in 2018 to 21.2% in 2019. Loss attributable to owners of the Company was approximately HKD126.4 million for the year ended 31 December 2019, compared to profit attributable to owners of the Company approximately HKD63.0 million in 2018. Business Review: For the year ended 31 December 2019, the macroeconomic environment has remained challenging, owing to the Sino-US trade war and economic slowdown in Hong Kong and Mainland China. Nonetheless, with the Group’s solid business foundation and well developed network, it was able to achieve stable revenue inflows, which amounted to HKD1,878.4 million (2018: 1,929.0 million) even in the face of challenging conditions. Excluding RMB depreciation, the Group’s revenue managed to record modest growth. Due to the fluctuating business environment in the second half of 2019, the Group recorded a gross profit of HKD397.8 million, with gross profit margin at 21.2%. Furthermore, EBITDA (Earnings before interest, taxes, depreciation and amortization) amounted to HKD808.7 million, representing an increase of 312.6%. The combined revenue, which provides a more concise representation of total business scale by including consolidated revenue and revenue of all associated companies, amounted to HKD2.630 billion (2018: HKD2.799 billion). However, as several newly secured project were still at a ramp-up phase during the review year, including Haikou Meilan Airport, Beijing Metro Line 14, Hangzhou Metro Line 5 and Wenzhou Metro Line, and the Hong Kong Financial Reporting Standard 16 Leases became effective as of 1 January 2019, the combination of factors led to an initial heavy impact on the Group’s performance as reflected by a loss of the Company of HKD108.7 million in 2019. 2019: Another milestone year Despite the industry slowdown, the Group was still able to outperform the peers through various breakthroughs, including the Group’s expansion overseas, specifically to Singapore through ties with Land Transport Authority (“LTA”) involving the new Thomson East Coast Line (“TEL”), as well as the recording of increased revenue from certain existing projects, including Kunming Airport, Zhuhai Airport, Urumqi Airport, Wuxi metro, Hangzhou metro, Hong Kong billboards and High Speed Rail (Hong Kong Station). Asiaray’s entry into the Singapore market, in particular, is a significant milestone, and will enable the Group to benefit from a first mover advantage that it will seek to capitalize on, including the country’s strategic position along the One Belt One Road route. Another breakthrough in 2019 involves the securing of agreements between the Group and The Kowloon Motor Bus Co. (“KMB”) and Long Win Bus Company Limited (“LWB”), which will enable it to expand its footprint in Hong Kong while tapping a new medium – bus advertising. Aside from bolstering its depth and breadth of media coverage, the Group entered into a subscription agreement with a wholly owned subsidiary of Ant Small and Micro Financial Services Group Co., Ltd. (浙江螞蟻小微金融服務集團股份有限公司), (“Ant Financial”) – owner and operator of the world’s leading payments and lifestyle platform Alipay. Under this agreement, Ant Financial became a strategic shareholder of Asiaray. Ant Financial has a solid online presence while Asiaray has extensive offline resources. This strategic move is expected to add value to both parties as the future of Asiaray will depend on implementing and maintaining an effective online and offline (“O&O”) strategy. This will also enable the Group to explore cooperative opportunities in fields that can generate synergies with the Group’s existing businesses. With the Group’s years of experience in adopting O&O strategy to its advertising solution, it has built a wide-ranging project portfolio. Riding on the cooperation, the Group officially launched its pioneer “O&O new media” strategy, which aims to further enrich its offline Out Of Home (OOH) media base and provide comprehensive advertising solutions. Already, several projects are currently underway. With market consolidation opportunities ahead, these new projects are expected to benefit subsequent to their ramp-up period. At the same time, Asiaray will utilize proceeds from the share subscription of Ant Financial to fund projects in Mainland China and Singapore, as well as for general working capital. UPDATE OF BUSINESS SEGMENTS Metro lines and billboards Over the past year, the Group has continued to direct focus on increasing sales contributions from its existing metro lines. However, affected by the weakened operation environment, and a decline in revenue experienced by its business partner, MTR Corporation Limited, which was greatly affected by social unrest in Hong Kong in the second half of 2019, as well as a shortfall faced by the Shenzhen Metro Lines due to the negative impacted brought by Sino-US trade war, revenue of this segment decreased to HKD919.3 million (2018: HKD974.9 million), with segment gross profit recorded at HKD136.7 million (2018: HKD184.3 million) and gross profit margin at 14.9%. Nevertheless, the Group secured a number of new media resources during the first half of 2019, including Beijing Metro Line 14, thus expanding its business presence in the key transportation hubs of Mainland China, particularly the Beijing-Tianjin-Hebei region. This was followed by the addition of the Wenzhou Metro Line S1 and Hangzhou Metro Line 5, which will allow the Group to broaden the business presence in the Yangtze River Delta. In the second half year, Asiaray secured an advertising concession right with LTA of Singapore for the Thomson-East Coast Line, which will commence operation in January 2020. It has become the Group’s first business foothold outside of Greater China. Asiaray has thus again strengthened an already robust business network in the Greater Bay Area, with media resource found at Shenzhen Metro lines (No.3 and No.4), Hong Kong-Zhuhai-Macau Bridge (ZhuhaiMacau port), High Speed Rail (Hong Kong Section) and several metro lines in Hong Kong. With regard to the billboard operation, Asiaray has numbers of media resources in Hong Kong, including at the Star Ferry Carpark in Central, 1 Leighton Road, Laforet and Lin Fook House in Causeway Bay, and Sim City in Mongkok. During the review year, the Group has added several new billboards, including some LED resources and building wraps that are new mediums for the Group, and represent more value-added media solutions for advertisers. Some of the significant projects include 5 Canal Road, Firfort North Point and 8 Russell Road. It is worth noting that the Group also secured media resource of two billboards in Macau, including the Emperor Nam Van Centre and Hotel Inn, marking the first operation in Macau. Airport Revenue from the airport media advertising business has increased 1.6% to HKD739.3 million during the year. Excluding the impact of RMB depreciation, segment growth of 5.7% was recorded, which was attributed to the improved performance of existing projects, including Yunnan airports, Zhuhai Airport and Urumqi Airport together with new projects such as Haikou Airport and Beijing DaXing Airport, which helped offset the discontinuation of the Hangzhou airport. Gross profit margin of 29.4% was recorded, with gross profit amounting to HKD217.3 million for the review year. Following the strategic planning and subsequent awarding of media resource at the first SKYTRAX five-star airport in China, i.e. Haikou Meilan Airport, and the securing of media resources at the BoAo airport and Sanya Phoenix International Airport Terminal 2, it now possesses media resources covering the entire Hainan Island. With the benefit of the offshore duty-free policy in Hainan Island, Haikou Meilan Airport is one of the very few locations in the Island operated under a provincial state-owned enterprise with permit for duty free goods operation. In view of this strategic location and its ability to enrich the comprehensive network of the Group, as well as enable premium brands tap advertising opportunities, the Group has placed considerable effort on the advertising operation in the Haikou area. Furthermore, the Group once again secured the exclusive concession rights to continue operating media resources in the Kunming Airport since its first operation in 2006, which is one of the 50 busiest airports in the world in terms of passenger traffic. Although the new airport wins are in their ramp-up period while the renewal of Kunming Airport led to a short-term impact, these latest concession rights will further strengthen the Group’s business presence in South and Western China, and reinforce its leading industry position in Greater China. Innovative advertising solutions During the past year, Asiaray has continued to deploy both the online and offline strategies to maximize the impact of its DOOH business, hence to provide integrating strategies for a seamless audience experience. The O&O strategy along with the programmatic DOOH platform are apparent given its high level of flexibility and the capacity to deliver measurable results. The programmatic aspect is also appealing in that advertisers have complete access to all the digital media resources and can readily book placements to launch their advertising campaigns. It can provide a more interactive advertising experience for the audience while generating useful data to advertisers for analysis. In 2019, the advantages of the Group’s integrated O&O strategy and existing programmatic DOOH platform were among the factors that attracted Ant Financial to the Group. Ant Financial has a solid foundation built in the online realm, which, along with Asiaray’s unique “Space Management” approach, can create an effective bridge linking advertising solution from the physical world to the virtual domain. Over the years the Group has been exploring different O&O strategy with great success and won numerous awards. The Group along with this tradition commenced collaborations with key opinion leaders (“KOLs”), complemented by mobile applications including TikTok that echo the offline campaigns. Leveraging the strengths of the Group, including its rich experience in O&O strategy, combined with the attributes of the Ant Financial, it is expected to bolster its existing businesses while exploring new avenues, supported by the synergies between the two parties. New mediums In 2018, Asiaray was awarded the exclusive media resources of High Speed Rail (Hong Kong Section) and the Hong Kong-Zhuhai-Macao Bridge (Zhuhai-Macao Port), which marked new business frontiers for its comprehensive media resources portfolio to tap. Subsequent to the two national projects, the Group has secured another new advertising medium via exclusive concession rights with KMB and LWB in November 2019. The exposure and impact of bus advertising can be highly significant and effectual given its easy reach to a huge swathe of the population, comprising young and old and of all income levels. By leveraging its unique ‘Space Management’ approach, and ample experience in public transport advertising, it is believed that the cooperative ties with KMB and LWB will maximize all parties’ strengths and enable opportunities to be seized in the public transport advertising industry. Moreover, these new frontiers will provide a solid foundation for reinforcing the Group’s market leading position. Awards The Group has proven time and again of its ability to create advertising campaigns and powerful, innovative solutions that set industry standards. In 2019, Asiaray has garnered total 91 awards. The Group state-of-the-art advertising campaigns earned strong recognition from various circles, including the Annual Grand Prix Awards at The 19th IAI International Advertising Awards, marking the Group’s strongest showing of the year – capturing nine awards in total. Another distinction of note was the garnering of a Certificate of Merit at the 2018 Hong Kong Awards for Environmental Excellence from Business Environment Council, which is a testament to its commitment to green management, including Asiaray’s outstanding performance in environmental innovation. The Group will continue to effectively utilize its unique “Space Management” approach to create an all-encompassing immersive experience, at the same time, implement strategies that advance environmental sustainability and promote green initiatives. Prospects: Looking ahead, the global economy is expected to experience significant headwinds led by the Sino-US trade war and the outbreak of the COVID-19 novel coronavirus, yet, despite such glum projections for the global economy, with infections gradually stabilizing and pent consumption demand continuously building, the Group remains optimistic on the long-term outlook. With a new era of consolidation likely to commence in the wake of COVID-19, it is expected to see an economic rebound which lead to enormous opportunities. Asiaray will leverage its robust network that covers all range of city tiers, as well as its strong cash position and sophisticated management to facilitate and capture opportunities that arise. Further, armed with the strong collaboration among the new strategic investor, it enables the Group to expand its business outreach. Especially in Mainland China, the Group will continue to take a long-term approach, spare no effort to further enhance its extensive business footprint, and provide a comprehensive network to maximize advertising value, thus to capture the favorable opportunities. In Hong Kong, the Group remains optimistic about the OOH media industry, despite ongoing political and economic uncertainties. Its dynamic mix of media solutions, comprising metro lines, billboards, High Speed Train stations and now, bus advertising, will stand the Group in good stead in coping with whatever challenges that may come. Moreover, with the Group’s outstanding O&O experience, it is able to provide more value-added advertising solution to the customers. What is more, it will continue to bolster these business facets, as demonstrated by the securing of exclusive concession rights at MTR Tuen Ma Line Phase 1 subsequent to the review year. The rights will enable the Group to operate media resources at the new MTR Tuen Ma Line Phase 1, which connects Wu Kai Sha and Kai Tak. Asiaray will look to further strengthen the foundation to better penetrate the public transport advertising market, as well as seize new opportunities that reinforces its leadership in the OOH advertising industry in Hong Kong. Having established a beachhead in Singapore during the review year, the next objective will be to leverage this geographical position as springboard for expanding the Group’s footprint in Southeast Asia. Consistent with this objective, the Group will direct more resources to reinforce its presence in the Lion City, as it also strives to enhance ties with other mass transit operators. According to market research, e-commerce is forecasted to account for 42.4% of all digital advertising spending by 2020.1 This trend aligns with its own long held view that the online world possesses enormous opportunities. Such a view is reflected in the completion of a programmatic transformation project with Rubicon Project in January 2020, which is one of the largest advertising exchanges in the world. Consequently, Asiaray will be able to programmatically trade its DOOH display and video inventory across Hong Kong and Singapore, and enhance its O&O capabilities and strategy. In respect of advertisers, they will be able to place dynamic and responsive advertisements that can adapt quickly to the fast-changing preferences of commuters on the Thomson-East Coast Line, Phase I, which is set to commence operation by the end of January 2020. The programmatic transformation project creates a winwin situation with great synergies for both Asiaray and advertisers; achieving exceptional reach and facilitating data-enriched buying options that are essential for realizing DOOH campaign goals. Going forward, Asiaray will seek more opportunities for cooperation and strive to develop even more effective O&O solutions that cater for advertisers’ needs. Although the business environment is expected to be highly challenging, with Asiaray’s solid foundation, strong client portfolio, outstanding business network and unparalleled leadership, the Group remains optimistic about the Group’s prospects and will spare no effort in turning challenges into successes.

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