September 4, 2014 / 6:56 AM / 3 years ago

Fitch: Wanda Group's E-Commerce JV Essential for Online Presence

(The following statement was released by the rating agency) SINGAPORE/HONG KONG, September 04 (Fitch) Fitch Ratings says that Dalian Wanda Group's (Wanda Group) recently announced collaboration with internet companies Baidu, Inc. (Baidu; A/Stable) and Tencent Holdings Limited (Tencent) is essential for the development of the group's online presence. The generous capital allocated to the e-commerce venture reflects the strong commitment from Wanda Group, China's largest commercial property landlord, and its partners to build it into an important platform to serve Wanda Group's customers online at a time when the lines between online and offline consumption are blurring. The partnership, among the largest yet in the nascent online-to-offline (O2O) field in China, would tap the growing integration of online technologies at physical points of sale. The partners will be able to provide a range of lifestyle solutions across Wanda Group's numerous offline businesses, including shopping malls, cinemas, department stores, KTV lounges, hotels, and its cultural/tourism businesses. They have allocated to the Hong Kong-based venture an initial capital of CNY5bn, with the option of increasing it to CNY20bn if necessary. Fitch expects the O2O model will be increasingly embraced by traditional retailers and companies in the service industry in China, including Wanda Group, to operate their online businesses. Having strong partners like Baidu, which operates China's largest internet search engine, and Tencent, whose messaging services QQ and WeChat are market leaders in China, is important to Wanda Group as it develops an online community. We expect Baidu, Tencent, Alibaba Group Holding Limited and other internet companies to continue to seek partnerships with providers of physical goods and services to enrich their O2O ecosystems and deliver better experiences to online users. Fitch believes that Wanda Group has sufficient liquidity, excluding the cash from its majority-owned subsidiary, Dalian Wanda Commercial Properties Co., Ltd. (Wanda, BBB+/Stable), to meet its O2O ambition. In addition, Wanda Group is committed to listing its subsidiaries to help fund its growth. The initial investment of CNY3.5bn for Wanda Group's 70% stake in the O2O joint venture is small relative to its total assets of CNY460bn in 1H14 and the company has stable dividends from Wanda - Wanda paid CNY1.1bn in 2012 and a similar amount in 2013 to Wanda Group. Fitch is closely monitoring the rapid expansion of Wanda Group's cultural business because the large cash flow needs by Wanda Group may affect Wanda's dividend policy. Wanda itself has also expanded significantly overseas in the past 12 months. It unveiled plans to build hotels and development properties in places like London, Madrid, Chicago, Los Angeles, and Australia's Gold Coast,; with projects in the last three announced in the past two months. While the initial investments will be small in many of these businesses and projects, it remains to be seen if Wanda Group can replicate the strong operating cash generation of its Chinese property business in all of these new industries and markets. Contact: Su Aik Lim Director +65 6796 7233 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower Four Singapore 038986 Kelvin Ho Director +852 2263 9940 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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