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Film producer Huayi Brothers plans IPOPublished: 26 Sep 2009 10:02:01 PST

A poster of the latest Feng Xiaogang movie produced by Huayi Brothers, If You Are the One. Photo:AFP

By Chen Yang

Private-owned Huayi Brothers Media Corporation, which hopes to raise 620 million yuan ($91 million) by going public on China's Nasdaq-style Growth Enterprise Board (GEB), is reviewed by the China Securities Regulatory Commission Sunday.

Huayi Brothers, one of China's top film and TV producers, said in a prospectus issued at the Shenzhen Stock Exchange Thursday that it plans to sell 42 million shares for a 25 percent stake in the company, with the goal of raising 620 million yuan ($91 million) for movie and TV productions. The additional money raised will be invested in building movie theaters.

Huayi Brothers' net profits have surged in recent years, nearly tripling from 23.6 million yuan ($3.5 million) in 2006 to 68 million yuan ($10 million) in 2008. Its profits already reached 32 million yuan ($4.6 million) in the first six months of 2009, despite the economic downturn.

However, its net cash flow was negative from 2006 and 2008, and only switched to positive in the first six months of this year, with a total of 13.1 million yuan ($1.9 million).

Lack of capital has been the main barrier for the company to produce more movies and TV shows. The company will put six movies and 600 TV show episodes into production after the IPO funds come in, the company said in the prospectus.

"Huayi Brothers started planning an IPO three years ago, and it failed to be listed on the main board last year mainly due to the financial crisis. With financing from the GEB, it could have more money to produce movies and TV shows," Yin Hong, director of the Center for Film and Television Studies at Tsinghua University, told the Global Times.

Analysts said Huayi Brothers' celebrity shareholders are more appealing to investors than its financial gains.

Feng Xiaogang, director of the war film "Assembly" and the romantic comedy If You Are the One, which made more than 300 million yuan ($44 million) at the Chinese box office, owns 2.88 million shares of the company. Famous actors such as Huang Xiaoming and Li Bingbing also own large amounts of the company's shares.

"Well-known entertainment companies like Huayi Brothers are welcomed by the GEB, as they can easily attract investors' attention," said Wang Ran, CEO of China eCapital, a private investment bank in China.

Huayi Brothers is not the only movie company with IPO plans. China Film Group, the largest State-owned movie company, also is working on having an IPO in the first half of next year, according to its CFO Jiang Tao.

"State-owned companies find it harder to get listed due to complex company structures and administrative barriers," said Tsinghua's Yin.

Huayi Brothers' move comes after the government released a stimulus plan to bolster the domestic culture industry by allowing in more private and foreign investment.

"Government support will encourage private media companies to find opportunities in the capital market," Yin added.

Hu Ming, secretary general director of Huayi Brothers, is bullish on his company's impending IPO, saying, "If our company makes good use of this opportunity, profits will go through the roof over the next five years."

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