Press Release

VIS Assigns Entity Ratings to Cine Star (SMC-Private) Limited

Karachi, December 31, 2019: VIS Credit Rating Company Limited has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Cine Star (SMC-Private) Limited (Cine Star). Long term entity rating of ‘A-’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment. Outlook on the assigned ratings is ‘Stable’.

Cine Star (SMC-Private) Limited (Cine Star) operates in the movie exhibitor (theatre) industry and is owned by Mr. Faraz Chaudhry. Cine Star has acquired exclusive rights for launching and operating IMAX theatres across Pakistan from IMAX Corporation, Canada (IMAXC). To date, Cine Star operates through seven locations and has a total of 11 screens in the city of Lahore, one of which is an IMAX screen. Cine Star has also diversified its presence in Multan and plans to launch screens in Faisalabad and Gujranwala. Moreover, IMAX screens are planned to be launched in Karachi and Islamabad.

Despite the cinema industry being characterized by its moderate cyclicality and competitive risk, revenue base of the company grew at an average rate of 32.9% during the past two years primarily on the back of additional screens coming online. However, increase in revenues from existing screens is expected to remain constrained over the short-term given the current ban on Bollywood movies. Nonetheless, comfort is drawn from growing viewership demand of local and foreign movies in general. Moreover, re-defining of audience demographics from lower income classes to higher ones has also historically impacted the overall industry’s audience population and attendance per screen. Overall sales are complemented by revenues from Cafeteria business and advertisements.

Assessment of financial profile incorporates healthy margins, favorable working capital cycle, elevated leverage indicators and modest debt servicing cushion. After healthy revenue growth in FY18, revenue growth slowed down in FY19. Given that revenue growth is expected to remain constrained in FY20, sustaining profitability indicators is considered important. Sizeable debt repayments over the rating horizon are expected to result in modest cushion in debt servicing ability while free cash flows are expected to remain limited given expansion plans. Favorable working capital cycle supports assessment of liquidity profile. With higher debt levels mobilized, leverage and gearing indicators were reported on the higher side at end-June’19. Ratings remain dependent on commitment of the sponsor to inject equity to the tune of Rs. 1b to strengthen risk profile of the institution. Moreover, maintaining adequate debt servicing cushion and reduction in leverage indicators is considered important. Any change in business risk profile from current levels will also adversely impact ratings.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Talha Iqbal (Ext: 213) at 021- 35311861-66 or email at

Javed Callea

Applicable Rating Criteria: Industrial Corporates - 2016

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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