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Focus Media Holding Ltd. Message Board

  • paultradestoday paultradestoday Dec 9, 2008 6:13 PM Flag

    Ok you've seen the news..

    ..now lets discuss the impact. It is insignificant. Just like the sale of their GYM business is insignificant and the write-off of wireless is insignificant. IT WILL BE A REVENUE LOSS> and, there will be take-downs again by the analysts on 09 and 10 as this looks like CGEN will now operate as a DISCONTINUED business. Non-GAAP earnings should not be affected by the write-offs but GAPP will be negative.

    The share counts used to calculate 09 and 10 EPS will be reduced by 1.5M ADRs due to the non-earn outs. So, that is beneficial. Also, share counts will be reduced by the buybacks; so, thats good for EPS too.

    The BIG downside is that target prices will get cut yet again because of the gloomy picture AND the salvitaing SHORTS. SO WE LONGS ARE IN FOR SOME HELLISH DAYS AHEAD>

    Allyes and OOH are valuable businesses. Cash is still great. Any upside in advertising activity will create better than expected margins and will force analysts to come back with upgrades>>> maybe by end of 1Q09. I'm holding and buying on an anticipated pullback from here.

    SO GRAP YOUR BOOTSTRAPS COWBOYS AND COWGIRLS AND GET READY FOR THE RIDE>

    OWN 17,000 shares under water.

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    • NEVER diversify. JUST pick the winners.

    • Just keep in mind that most of those solar stocks are dirt cheap based on absolute valuations on the likely earnings for next year - and these are earnings that have already been revised down without taking into account many of the positive stimulus that may yet come out of the US, China, and other regions. I mean, many are trading at single digit pes for next year, so historically that's cheap given the potential upside that hasn't been accounted for next year. The reason why I haven't over weighted the sector was mainly before of forex issues which I'm sure you heard me whine about a million times, as well as balance sheet/cash flow issues. For example, if I had to buy fmcn with no debt and positive cash flow or a solar name with debt and negative cash flow - at the same relative valuations of 4, 5, 6x earnings for example, in this market I'd probably add to fmcn before solar. Same can be said for many other sectors, which is why you've heard me say diversify because while solars are cheap, so are many other areas.

      On ldk, don't get me wrong, I'm not really negative on them or think there is funny stuff. I think just relative to others, you might have more execution risk with ldk. The earnings power is there, and by all measures ldk is probably trading at low single digit pes for next year also. But they are spending a ton of money on capex and their poly plant has yet to produce anything, 4-5 months late on when they first announced they would produce. I'm not saying they will fail, but you can see there is more risk here. The same can be said about yge, which I would have liked a lot better because they are very well positioned for next year - except for the fact they suddenly committed to a poly plant that will only increase capex and leave people wondering on the execution risk of that plant being ultimately successful when the price of polysilicon is expected to drop fast. Also they are buying it from their ceo, so some might wonder there also, although I'm not trying to imply anything here. It's factors like these that I take all into account when I pick names in groups, names that are the most discounted to potential, while also having the less potential forward risks. In an ideal world, everything goes smoothly and all these names will make a ton of money next year, but this year, this market, has shown that you can't always count on the ideal scenario panning out.

      ps I have a gut feeling even if any names come out with 'bad' news, they might not drop. Just look at fmcn today, although I didn't perceive the news as bad as others might have.

    • Thanks for this info Hobo. Also, I do read all your posts on the TSL board and appreciate the knowledge I have aquired.
      However, I do have a hard time keeping up with your tug-of-war posts with Floppy over the $kg costs and APS battles. I digest what I can, however.

      I have started to wean myself off LDK as I don't know if I trust them completely. First, there's the long forgotten inventory issue/scandal in which the controller was fired for not being able to count correctly by missing warehouse inventory at different locations. I didn't completely believe the company's version. Second, as you said, I don't think they're realistically forcasting earnings projections for 2009.

      I'm going to stick with TSL and YGE for now.

    • Well again congrats on your fmcn entry. I don't think you will lose price wise, although it may take more time for more sizable gains in this market. But if you were paying attention to some off topic discussions I had on the tsl board, fmcn is the kind of stock I prefer in this market, especially after the market has crushed it to current valuations. When I read these analyst reports, I just have to laugh. I've been investing and trading in this market for a very long time, but I have never heard as ridiculous rationale for some of the downgrades on fmcn. Take c today, cutting the price target to 9, based on a 6x earnings valuations. If you back out the cash, that's 4x enterprise earnings. I don't think I EVER recall top tier brokerages putting low single digit valuations on top tier companies in their industry. It's not like China's advertising market has already been fully monetized and saturated, nor is fmcn's balance sheet a weight, as they have no debt at all. I mean, yeah if fmcn warned so badly that c had to reduce earnings to .60 or something, I could understand a 9 dollar target better. Seriously, 4x enterprise earnings when those earnings will probably be a lot higher a couple years out... which if your customers did you let in today citi on your downgrade. Didn't you find it odd fmcn had huge volume the last 3 days, and surged despite two major downgrades? Yeah, you scared me, I'm going to sell into your 4x earnings target. Right.

      As for solars, if you been paying attention, you'd know I've been pretty cautious in the past several months on that group. Although I kept my few longs, I was hedged for a lot of the time, and have also recently hedged a small position back expecting the major US names to warn. Believe it or not, I still like tsl the best, although I like csun also. The reasons are both short and longer term oriented, in that they have lesser short term issues, while having longer term differential factors that make them relatively more attractive in my eyes. You can take the latest Q3 for example, tsl blew away all peers on earnings, and it will be more of the relative same for Q4 and Q1 09. They have just done a better job managing their business imho, doing better than larger peers who had vastly more resources to work with. yge is fine also if you only look at next year as a whole, since I still believe they Q4 and Q1 will be relatively much worse than tsl. csun will have a horrible Q4, but after that, their Q1 of next year should be really good and their prospects should accelerate into 2009. None of the other names really interest me. I only own tsl csun and wfr in that group, and when I do buy more, it's probably be to add tsl and csun only. Again I have a small relative solar position, but I'll stay cautious until I get the next bit of news flow. I still prefer to put most of my money in Chinese service oriented industries since they have low to no debt and high cash flows. The internet space is still my favorite by far and my largest percentage holding.

    • Yes HOBO, I did get FMCN from an off topic conversation on the TSL board about 1 1/2 weeks ago. Although I had followed the stock from time to time, I hadn't realized it had collapsed a few weeks ago. The chart showed the stock stabilized since then so I though I would take the plunge. I know nothing about advertising, though, but fairly familiar with China's economy though a close friend who was a former VC who lived in China part of the year.

      I try to stick only with Chinese stocks, especially solars but have gotten a exhausted dealing with them. I was about 40% ahead with Chinese solars until a few months ago. I then pulled out 60% of my money. Fine, except I kept trading solars with the remaining 40% thinking we had bottomed out. Wrong! I am now an average 8% underwater with all my funds combined....so I lost all my profits for the year. Still, I'm grateful when I look at others.

      My environmental organization gave me their trust funds to invest today and I hope that It will go into Chinese solars...but now am very nervous as you can imagine. I'm not worried about the money because I have agreed to guarantee the pricipal. fourtunely, I can afford to do this. Still, I want our investments to be environmentally oriented as it kind of supports and validates our work if our investments are also successful. YGE looks like the only solar that's back on it's feet with market support. I bought at 3.50 and sold at 5.25...waiting to buy back again...especially for the foundation. Last week I bought back into LDK, TSL, and SOL...and so far losing on all of them. Since I am not giving up on solars for the foundation, I still intend to invest that money there for them. Which one(s) do you like? I am pretty much retired now so I have plenty of time to research these stocks. I have done pretty well with my own investments until this year.

    • Oh did you get fmcn from an off topic discussion on the tsl board? Congrats you our fmcn profits, most of us here have losses lol. It's ok, fmcn is still dirt cheap with much less risk than a lot of other companies out there. Eventually sentiment will turn and the brainiac analysts will think 20pe is cheap again. Might be a while though. And yes, diversification is the only way to go. You don't have to get all of them right, but as long as you are right more than wrong, you will survive to play again.

    • HOBO; I have followed FMCN for a while and it looked like a good buy on the charts after it collapsed a few weeks ago. I picked up a good chunk at 7.30 about a week ago. It looks like a $12 stock on the charts in the near future.

      I am diversifing from my pretty heavy solar holdings even though I've vowed to stay environmental and solar. Seems to be paying off after I bought Alcoa too. Your constant hounding about diversification finally got through to me.

    • Hobo...you are probably right.

    • Probably, but if you watched the market lately, they have been buying "bad" news. Like yesterday after horrible semi news, a lot of the semis that warned badly ended the day up 10-15%. Same for the commodity space. But who knows. Personally I would have liked fmcn to throw out the kitchen sink already. They should have wrote off a ton of intangibles in Q3, but if they are going to start doing it now, write off all of it. We all know they need to get off the books at some point, and I don't want them to do chunks every quarter if you know what I mean.

    • UPDATES starting to come from analysts:

      MSDW Bull:
      Undervalued, yet catalysts needed: Focus is trading
      at 5x of our ’09e earnings, with a DCF-based fair value of US$37.8. We cut our forecast EPADS to -US$1.10 ( a loss)in 4Q08 (vs. $0.36 previously), due to the one-time charge, and left our ’09 forecast largely unchanged.
      Our bull-case DCF valuation produces a value of US$57.6 for the stock, implying over 50% upside relative to our
      base-case value (we assume its long-term outdoor advertising market share to be 13% and its long-term online advertising market share to be 17%).

      SmithBarney Bear:
      Our target goes to US$9 from US$18 on a lower target multiple and lower estimates.
      We apply a target P/E multiple of 6x (previously 11x) to our revised 2009E non-GAAP EPADS estimate of US$1.52 (excluding only SBC). Our 6x target multiple is set at a 0.2x PEG (previously 0.35x) to the standard par, based on a 26% 2007-10E earnings CAGR. We believe the significant 80% discount (previously 65%) is warranted due to the company's decelerating earnings growth prospects going into 2009, uneven execution, and restructuring of the CGEN acquisition. We use a PEG-based valuation methodology as we believe this more easily reflects valuations relative to earnings growth.

      SO HERE WE GO!

      • 1 Reply to paultradestoday
      • These analysts got it completely, COMPLETELY, wrong in their support with crazy high price targets and valuation premiums at 60 50 40 30 20... and now at their own admission, fmcn is trading at LOW SINGLE digit pes, operating in a country where the advertising market is still in its early infancy, yet downgrade, cut targets, and put even more ludicrous price targets. Seriously, is fmcn only worth 6x valuations?? I guess fmcn must carry a terminally ill balance sheet or China is on its last legs as a country. Buy when the penguins come out to play. I was hoping for the low 6s today but it looks like no one is really selling.

 

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