2007'02.01.Thu
Xinhua Far East Downgrades Youngor Group to BBB Credit Rating, Outlook Remains Stable

March 29, 2006

HONG KONG, March 29 /Xinhua-PRNewswire/ -- Xinhua Far East China Ratings today downgraded the domestic issuer credit rating of Youngor Group Co., Ltd. ("Youngor" or "the Company", SH A 600177) from A- to BBB. The rating outlook remains stable. The downgrade reflects Xinhua Far East's concerns over the slow growth of the Company's garment business, traditionally its main sector, and the increasing operational risks brought about by its real estate operations. Moreover, sharply rising debt levels have stretched the Company's financial flexibility. This is expected to continue as the Company expands its distribution channels in the garment sector and continues its real estate operations. Xinhua Far East attributes the slow growth of the Company's garment business to the competitive nature of the industry, both domestically and internationally. The Company's market position in China faces greater pressure as more Chinese firms and foreign brands enter the market. Youngor's overseas sales have also been negatively affected by the unfavorable textile trading environment and RMB appreciation pressures. Youngor's garment business is likely to encounter long-term pressures despite recording a growth rate of 12.5% in 2005, compared with less than 3% in 2003 and 2004. The Company's expansion into the real estate sector inevitably brings more operating risks due to the cyclical nature of the industry. Real estate now accounts for a considerable part of the Company's business, contributing to 28.8% of total turnover and 32.9% of gross profits in 2005. Xinhua Far East is also concerned about Youngor's rising financial leverage resulting from the large capital expenditure involved in its business expansion. The Company's gross debt and net debt increased almost threefold from RMB 1.1 billion and RMB 0.9 billion at the end of 2002 to RMB 4.1 billion and RMB 3.4 billion at year-end 2005. The Company's gross debt to total capital ratio reached 48.3% at the end of 2005. Most of the debt was short-term in nature. On the other hand, Xinhua Far East believes the Company's rating outlook is stable, as its garment business can still provide relatively consistent revenues and profits, while it has gained some experience in the real estate sector. Youngor Group Co., Ltd. is one of China's leading garment manufacturers. In fiscal year 2005, the Company realized a turnover of RMB4.6 billion. At the end of 2005, Ningbo Shengda Development Co was Youngor's largest shareholder, with a 26.13% stake. Youngor is a large cap company constituting the Xinhua/FTSE China 200 Index. As of March 28, 2006, its total A-share market cap equaled RMB 6.5 billion, with investable market cap of RMB 2.6 billion. For the rating report summary, please visit http://www.xinhuafinance.com/creditrating . Note to Editors: About Xinhua FTSE China 200 Index Xinhua FTSE China 200 Index is the large cap index in the Xinhua FTSE China A Share Index Series and includes the top 200 companies in China by market cap. It is designed as a tradable index and is calculated in real-time every 15 seconds. For daily data and further information, see http://www.xinhuaftse.com . About Xinhua Far East China Ratings Xinhua Far East China Ratings (Xinhua Far East) is a pioneering venture in China that aims to rank credit risks among corporations in China. It is a strategic alliance between Xinhua Finance (TSE Mothers: 9399), and Shanghai Far East Credit Rating Co., Ltd. Shanghai Far East became a Xinhua Finance partner company in 2003 and the first China member of The Association of Credit Rating Agencies in Asia in December 2003. Capitalizing on the synergy between Xinhua Finance and Shanghai Far East, Xinhua Far East's rating methodology and process blend unique local market knowledge with international rating standards. Xinhua Far East is committed to provide investors with independent, objective, timely and forward-looking credit opinions on Chinese companies. It aims to help investors differentiate the credit risks among the corporations in China, thereby, cultivating their awareness and promoting information disclosures and transparency in China market. For more information, see http://www.xfn.com/creditrating . About Xinhua Finance Limited Xinhua Finance Limited is China's unchallenged leader in financial information and media, and is listed on the Mothers board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China's financial markets and the world, Xinhua Finance serves financial institutions, corporations and re-distributors through four focused and complementary service lines: Indices, Ratings, Financial News and Investor Relations. Founded in November 1999, the Company is headquartered in Shanghai with 21 news bureaus and offices in 18 locations across Asia, Australia, North America and Europe. For more information, please visit http://www.xinhuafinance.com . About Shanghai Far East Credit Rating Co., Ltd Shanghai Far East Credit Rating Co., Ltd. is the first and leading professional credit rating company with comprehensive business coverage in China. It is an independent agency established by the Shanghai Academy of Social Sciences with the mission to develop internationally accepted standards for capital market in China. The company is a pioneer in conducting bond-rating business in China. For years, it has been authorized by the Shanghai branch of the PBOC to undertake loan certificate credit rating. Since establishment, it has rated over 1,000 corporate long-term bonds and commercial papers, based on the principles of objectivity, fairness and independence. The company has also maintained over 50% market share in the loan certificate-rating sector in Shanghai for three consecutive years. With its strong local presence and knowledge, it provides investors with unique and the most insightful credit opinion. For more information, see http://www.fareast-cr.com . For more information, please contact: Hong Kong Joy Tsang, Corporate & Investor Communications Director, Xinhua Finance Tel: +852-3196-3983, +86-21-6113-5999, or +852-9486-4364 Email: joy.tsang@xinhuafinance.com US David Leeney, Taylor Rafferty (IR/PR Contact in US) Tel: +1-212-889-4350 Email: david.Leeney@taylor-rafferty.com SOURCE Xinhua Far East China Ratings
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