Coship Terminates DBS Project Investment
China Business News, 4/24/12
Chinese developer and manufacturer of satellite receivers and cable and terrestrial set-top boxes (STBs) Coship Electronics (002052.SZ) yesterday announced in a public filing that it had officially canceled plans to invest RMB 135 mln in the manufacture of direct broadcast satellite (DBS) receiver equipment. To date, the company has made no use of the funds it raised for the planned venture. Coship says that it will reallocate the funds to satisfy the demands of its existing manufacturing operations.
Coship announced in August 2009 that it would raise RMB 430 mln for investment into five major projects. One of these was the RMB 135 mln DBS project, which would have had an annual production capacity of 4 mln DBS receiver units upon its completion, contributing RMB 1 bln to annual operating revenues. Coship explained its cancellation of the project by saying that it had been affected by relevant state policies that made it difficult for investors to apply for the necessary equipment production permits. In addition, the sales model changed from centering on national-level procurements to centering on direct sales to customers in areas not covered by cable television operators - a situation that would require the company to set up and manage sales and service networks, increasing the necessary investment far beyond the planned amount. Coship predicted that it would be required to sink increasing amounts of money into the project, while gross profits could continue to fall sharply - leading to a waste of resources, were the company to continue as it had planned.
An industry insider said that there might be changes or delays to the other four investment projects Coship announced, as well. The company's annual report for 2011 indicated a change to a planned reliability project center, which subsequently became a new product testing center. Reports for the remaining three projects, into which Coship has invested 56.28%, 56.63%, and 10.94% of funds raised, indicate some of the inefficiencies in Coship's use of funds. There have also been a number of high-level resignations in recent years, revealing turmoil at the top of the company.
Editor's Note: For more background on this topic, please see "Coship to Raise Funds for STB Production Line" MD 1/08/09 issue.
Keywords: television DBS Coship 002052.SZ satellite dish set-top box
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