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Focus Media Holding Ltd. Message Board

  • paultradestoday paultradestoday Apr 11, 2008 10:05 AM Flag

    My Research indicates

    Jason Jiang needs to spin off the Mobile/Internet business NOW as talked about last yesr. This is the perfect time. This would be a very positive approach for shareholders and immediately boost the remaining business. This needs to be done so that costs of their new pull ad effort restructuring does not impact the remaining business for the rest of the year.
    Additionally, 1Q08 operating costs will be ~$133KK due to the ~$90KK goodwill impairment loss. THAT WILL RESULT IN A NEGATIVE OPERATING INCOME FOR 1Q of ~$70KK. SPIN IT OFF TODAY!!!! TOO LATE TO FIX THAT CAUSE IT IS BAKED INTO 1Q08.
    Also, 1Q08 GAAP dilluted EPADS will be negative ~ -0.41. This is too late to repair. But the spin off now would wash away the fear and alllow the rest of the business to run away from the stink. NOTE: the Non-GAAP will be positive ~ 0.42 on ~133.3KK ADS.
    I gleened the above financials from the Citigroup report yesterday; so I'm not inventing anything.
    FMCN stillwill see 70% top line growth in 08 and 24% growth in EPADS!!! And 09 will see 44% growth in EPADS!!!! BUY NOW RIGHT HERE>

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    • Yes, have seen the same equity research and at this price buy ratings are still maintain with target prices adjusted to $60 from S&P to $80 from Citi Resarch. 1st quarter financials will write down of all amortization of wireless business. Good news is that 2nd quarter financials will not carry any amortization for this anymore and net income will be up. After company reports their 2qtr, the share price should be back to $40-50. Too bad about the bad press because this company makes lot of money. I will hold out until at least August with this stock.

      From Citi

      “Adjusting our estimates; cutting target price to US$80 — We take our ‘08 revs from US$906m to US$861m and EPADS from US$2.07 to US$1.95, and our ‘09 revs from US$1,216m to US$1,145m and EPADS estimates from US$2.97 to US$2.81. Even after these cuts, Focus Media is set to grow earnings 24% YoY in ’08E and 44% YoY in ’09E. Our new TP represents 29x our ’09 estimates, and hence we maintain our Buy (1L) rating notwithstanding these latest events. If there is any silver lining in this whole affair it is that Focus has completely written off the SMS businesses, which means this issue is not likely to be hanging over the company for the next couple of years.

    • I would be very careful here -- I agree with your general point that advertising in China is strong and that FMCN is seemingly well placed. However, there are going to be more earnout surprises coming. Put together what you already know. They have made acquisitions in online advertising and billboard but not disclosing how much these contribute to revenues nor what the cash and non-cash payments will be. They are not insignificant. Look at the Framedia business - analysts thought that was all organic growth and according to Goldman more than half of growth was inorganic. Look at the internet advertising business growth and put 2 and 2 together.

      I would be inclined to be long but probably 20% lower from here and only after the company adopts better disclosure policies. I am neither short nor long this stock -- it is uninvestable until management adopts greater transparency.