Poly Cul­ture Group Corp plans IPO in Hong Kong

China Daily (Canada) - - BUSINESS - By HUANG YING huangy­ing@chi­nadaily.com.cn

Poly Cul­ture Group Corp Ltd, a cul­ture sub­sidiary of State- owned China Poly Group Corp, is plan­ning to raise up to $331 mil­lion in an ini­tial pub­lic of­fer­ing in Hong Kong.

Es­tab­lished in 2000, Poly Cul­ture mainly op­er­ates businesses in three sec­tors — art auc­tions and man­age­ment, per­for­mance and the­ater op­er­a­tions, and in­vest­ments in film and the tele­vi­sion in­dus­try.

Ac­cord­ing to sources fa­mil­iar with the sit­u­a­tion, Poly Cul­ture orig­i­nally planned to go pub­lic on the Shang­hai Stock Ex­change but aban­doned it ear­lier this year be­cause of reg­u­la­tory un­cer­tain­ties on the Chi­nese main­land.

“Hong Kong is a good op­tion for main­land com­pa­nies ea­ger for an IPO but who are strug­gling with the pro­longed wait­ing and un­cer­tain­ties,” said Shao Gang, deputy di­rec­tor of con­sult­ing for the cul­ture and en­ter­tain­ment in­dus­try at Hori­zon Re­search Con­sul­tancy Group in Bei­jing.

Poly Cul­ture gen­er­ated an­nual rev­enues of 1.65 bil­lion yuan ($272 mil­lion) in 2012, down 6 per­cent com­pared with a year ear­lier, ac­cord­ing to a cor­po­rate state­ment.

The com­pany’s net profit de­clined 30 per­cent year-onyear to 242 mil­lion yuan, the state­ment said.

In the first 10 months of last year, its rev­enue in­creased 17 per­cent year-on-year to 1.46 bil­lion yuan, while net profit dropped 9 per­cent on a yearly term to 174 mil­lion yuan. The com­pany ex­pects to­tal rev­enue in 2013 to ex­ceed that of the pre­vi­ous year.

An­a­lysts said it chose to go pub­lic not to raise cap­i­tal to fuel the de­vel­op­ment of its art auc­tion busi­ness but to ex­pand its per­for­mance and in­vest­ment in the cin­ema, movie and tele­vi­sion ar­eas.

“The IPO would bring Poly Cul­ture not only an in­flow of huge cap­i­tal but also a pro­fes­sional plat­form for cap­i­tal op­er­a­tions, which is crit­i­cal for strength­en­ing its cur­rent cul­tural busi­ness as well as ex­pand­ing into other cul­tur­ere­lated in­dus­tries,” said Liu Deliang, gen­eral man­ager of New Century Cul­ture Con­sult­ing Group, a Bei­jing-based cul­ture in­dus­try con­sul­tancy

“In the past years, many cul­tural en­ter­prises have opted to de­velop their businesses through merg­ers and ac­qui­si­tions, which in­volves much in the way of fi­nanc­ing pro­cesses,” said Liu.

“Also, the IPO will im­prove the com­pany’s in­ter­na­tional pro­file as an auc­tion house in its bid to chal­lenge the global play­ers such as Christie’s and Sotheby’s,” said Ma Xue­dong, ex­ec­u­tive di­rec­tor of the Art Mar­ket Re­search Cen­ter, the first aca­demic in­sti­tu­tion to con­duct re­search into the for­tunes of do­mes­tic and over­seas art businesses in the coun­try.

“It would take a long time for Poly to de­velop to the scale of Christie’s or Sotheby’s, but it will ac­cel­er­ate ex­pand­ing its foot­print out­side the Chi­nese main­land, such as set­ting up of­fices in over­seas mar­kets,” said Ma.

In the China art auc­tion mar­ket, do­mes­tic auc­tion houses have shown their strength over over­seas coun­ter­parts.

In 2012, Poly In­ter­na­tional Auc­tion and China Guardian Auc­tions, an­other large Chi­nese auc­tion house, ac­counted for 20 per­cent of the mar­ket share in China’s art auc­tions, while Christie’s and Sotheby’s took 15 per­cent, ac­cord­ing to The Euro­pean Fine Art Foun­da­tion Art Mar­ket Re­port 2013.

China’s art auc­tions wit­nessed a year-on-year growth of 49.4 per­cent to 85.65 bil­lion yuan in 2011 but fell 32.8 per­cent the fol­low­ing year, in­flu­enced by the global and na­tional eco­nomic slow­down, the first de­cline since ex­plo­sive growth started in 2009.

Af­ter the plunge in 2012, China’s art auc­tion mar­ket saw a jump in 2013, grow­ing be­tween 15 per­cent and 20 per­cent year-on-year to about 62 bil­lion yuan in trans­ac­tions, Ma said.

Poly Cul­ture ex­pects art auc­tion trans­ac­tions in China will main­tain growth mo­men­tum this year, driven by the rapid in­crease in the num­ber of rich Chi­nese, huge in­flows of money from in­sti­tu­tional in­vestors and the abun­dant stock of Chi­nese art­works.

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