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Affirmed BBB/Stable on senior debts of GEO Corporation | Jan 05, 2010 |
Issuer: GEO Corporation (2681)
JCR has affirmed the BBB/Stable rating on senior debts of the issuer.
Senior debts: BBB/Stable
<Rationale>
Geo Corporation is engaged in rental, "recycling" (sales of used items) and sales (sales of new items) businesses in terms of DVDs, CDs and games. The Company has the second largest rental revenue in Japan's rental industry and the largest sales volume in terms of the sales of new and used games in its industry. Its sales for FY 2009 ending March 31, 2010 is expected to decrease, compared with a year earlier because of a sharp fall in consumption. On the other hand, its ordinary profit is expected to increase as a result of its measures to cut administrative and selling expenses and increase DVD rental revenue and, in our view, the Company can maintain its relatively high earning power even under its tough business environment. However, JCR also considers it necessary to watch such economic situations which could continue over the short term. The Company's consolidated ratio of equity capital to total assets has been around 30 percent. It can maintain its current level of financial structure, as it plans to use its internal funds to cover capital investments. Its content distribution business through the Internet has gradually started the operation along with the development of broadband infrastructure. JCR considers it necessary to watch how the distribution business will affect its media business financially in the future. In our view, its issue is to diversify its revenue sources by building businesses after the media business, which will be material from a management point of view, as most of its earnings come from its media business.
JCR has affirmed the BBB/Stable rating on senior debts of the issuer.
Senior debts: BBB/Stable
<Rationale>
Geo Corporation is engaged in rental, "recycling" (sales of used items) and sales (sales of new items) businesses in terms of DVDs, CDs and games. The Company has the second largest rental revenue in Japan's rental industry and the largest sales volume in terms of the sales of new and used games in its industry. Its sales for FY 2009 ending March 31, 2010 is expected to decrease, compared with a year earlier because of a sharp fall in consumption. On the other hand, its ordinary profit is expected to increase as a result of its measures to cut administrative and selling expenses and increase DVD rental revenue and, in our view, the Company can maintain its relatively high earning power even under its tough business environment. However, JCR also considers it necessary to watch such economic situations which could continue over the short term. The Company's consolidated ratio of equity capital to total assets has been around 30 percent. It can maintain its current level of financial structure, as it plans to use its internal funds to cover capital investments. Its content distribution business through the Internet has gradually started the operation along with the development of broadband infrastructure. JCR considers it necessary to watch how the distribution business will affect its media business financially in the future. In our view, its issue is to diversify its revenue sources by building businesses after the media business, which will be material from a management point of view, as most of its earnings come from its media business.
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