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Focus Media Holding Limited (NASDAQ:FMCN)

Q3 2012 Earnings Call

November 27, 2012 8:00 p.m. EST

Executives

Jing Lu – IR

Kit Low – CFO

Jason Jiang – CEO

Analysts

Jiong Shao – Macquarie Research

Philip Wan – Morgan Stanley

James Lee – CLSA

Tian Hou – T.H. Capital

[Chao Huang] – Merrill Lynch

Ming Zhao – 86Research

Anne Ling – Deutsche Bank

[John Yutak] – [Presidential Capital]

Jaimin Shah – Canning Park Capital

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2012 Focus Media earnings conference call.

At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advise you that this conference is being recorded today, Wednesday, 28th of November, 2012.

I would now like to hand the conference over to your host today, Ms. Lu Jing. Thank you. Please go ahead.

Jing Lu

Thank you, operator. Welcome to Focus Media's third quarter 2012 earnings conference call. Today our management will discuss the company's financial results for third quarter 2012 and the business outlook for the fourth quarter of 2012.

With me here, Mr. Jason Jiang, Chairman and Chief Executive Officer, and Mr. Kit Low, Chief Financial Officer and Executive Director. After management updates you on our third quarter 2012 operational and financial performance, we will open the call for questions.

This call is also broadcasted through internet and available through our Investor Relations website ir.focusmedia.cn.

Before we begin, I would like to remind you that during the course of this call we will make forward-looking statements that are subject to risks and uncertainties. The statements include but are not limited to statements regarding Focus Media's business objectives and plans, the expectation of the development of our networks, and our outlook for the fourth quarter of 2012, for example. You can also identify forward-looking by terms such as will, expects, anticipates, future, intends, plans, believes, estimates and similar statements. The accuracy of these statements may be affected by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated.

These risks and uncertainties include but are not limited to our limited operating history for our current operations and the short history of the new digital media sector, which may make it difficult for you to evaluate the viability and prospects of our business, the integration of acquired businesses, competition from present and future competitors in China’s growing advertising market, and other risks outlined in our filings with the Securities and Exchange Commission including our registration statement on Form F-1. We do not undertake any obligation to update this forward-looking information except as required under applicable law.

Now I will turn the call over to our -- Mr. Kit Low, CFO.

Kit Low

Thank you, Jing. Welcome to Focus Media third quarter 2012 result conference call.

In the third quarter 2012, aggregate net revenues from the LCD display network, in-store network, poster frame network and movie theater network, or otherwise we call these our core business, was $247.7 million, which exceeded by approximately 2% the midpoint of the company guidance range of $241 million to $243 million. This represented a year-on-year increase of 26% from $196.1 million for the third quarter of 2011 and a Q-on-Q increase of 13% from $219.3 million for the second quarter of 2012.

Net revenue from the traditional outdoor billboard for the third quarter of 2012 was $8.6 million, below the guidance range of $13 million to $14 million which was primarily due to classification of revenues of a number of subsidiaries into net income from discontinued operations. We view this traditional outdoor billboard as not a core business of our business segment. The company, as a result, has decided to downsize the business segment, especially due to the recent economy uncertainties going forward.

Non-GAAP net income attributable to Focus Media was $94.6 million, exceeding the midpoint of the company guidance range of $92 million to $94 million by 2%, and representing a year-on-year increase of 14% from non-GAAP net income attributable to Focus Media of $82.7 million from the third quarter of 2011 and a Q-on-Q increase of 16% from non-GAAP net income attributable to Focus Media of $81.9 million for the second quarter of 2012.

Non-GAAP net income attributable to Focus Media per fully diluted ADS was $0.71, it's a year-on year increase of 20% from $0.59 per diluted ADS for the third quarter of 2011 and a Q-on-Q increase of 15% from $0.62 per diluted ADS from the second quarter of 2012.

Net cash inflow from operating activities for the third quarter of 2012, after deducting the purchase of equipment and subsidiaries as well as net cash outflow derived from dispositions of distributables, or otherwise we call as free cash flow, was $71.7 million, slightly decreased by 2% from $72.9 million of the third quarter 2011 and a Q-on-Q contraction of 18% from $87.2 million of the second quarter of 2012 which were primarily due to a slight decline in net cash inflow from operating activities.

In the third quarter of 2012 we've continued to see macroeconomic uncertainty impact on overall advertising spending in China. Despite, we exceeded our previous guidance of the company. We expect a similar trend to continue through the fourth quarter, particularly the recent pressured Japanese auto sales in China also resulted in advertising budget cutbacks from a number of Japanese auto labels. Despite near-term and possible medium pressure, we believe that our media platform remain strong and robust to weather these challenges ahead.

Now I'm going to turn to our business outlook for the fourth quarter of 2012. The net revenue for our core business, inclusive of our LCD display network, in-store network, poster frame network and the movie theater network, is expected to be in the range of $237 million to $246 million, the midpoint of which would represent year-on-year growth of 1% and quarter-on-quarter decline of 3%. Net revenue for the non-core business, which is the traditional outdoor billboard business, are expected to be in the range of $6 million to $7 million, again taking out the subsidiaries that we have been divesting that as a result you could see that the Q-on-Q decline of the revenue guidance on the traditional billboard.

The company non-GAAP net income is expected to be in the range of $93 million to $98 million. The company estimates the weighted average fully diluted ADS count for the quarter to be 133.2 million.

Thank you very much, and we shall open the call for questions at the moment. Thank you.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions].

Your first question comes from the line of Jiong Shao from Macquarie. Please ask your question.

Jiong Shao – Macquarie Research

Good morning. Thank you very much for taking my question. I was wondering, could you talk about your outlook beyond Q4 in terms of the advertising environment in China and your potential price increases next year and the magnitude? I recall you guys usually raise your price at the beginning of the year and then again in the middle of the year. That's my first question.

And the second question, to the extent you can share, I was wondering, could you talk about the potential timelines, I know your independent committee has not made any decisions, but I was wondering sort of what typical timeframe we should be expecting a decision and what's sort of the steps and procedures after that decision is made? Thank you very much.

Kit Low

Sure, Shao Jiong. Just give me one minute to translate to Jason and have him take the first question. I'll take the second one.

Jason Jiang

Okay. [Chinese language spoken]

Kit Low

So on the first question that you have, basically ad environment in 2013 remains rather uncertain, primarily because of the change in the senior government levels in China. So as most of the people know, China's very much a policy-driven economy, it depends on what sort of policy is going to be put in place over the next four to five years, that would dictate to a large extent on how the economy will look over the next few years.

But anyway, from our estimate for the market itself, the ad market overall for this year in 2012, we believe that the market grew roughly 4% to 5%. So next year we believe that from the preliminary sort of road shows that we have done so far -- as some of you may know, we do road shows to meet customers from basically around November all the way through January. So, as of this point, I think from our estimate, it's about zero percent to 5% overall market growth. We are striving for next year in terms of our target 10% to 20% growth in the overall advertising -- in terms of our overall core business in terms of improvements. So that's what we are looking at.

So there are still -- these are pretty preliminary views on the numbers, so these are not final numbers of any sort, so this is just basically in general how we look at the market at the moment.

So in terms of your second question, I know everyone is very eager to find out what's the end-result of the negotiation. There are two points I could share with you. One is that it is still progressing, it's progressing quite actively. And two, it is the goal of the company and the special committee to try to come up with a result as soon as they can. So as soon as we have updates, we'll provide it to all the investors.

In terms of steps, I think the steps that people, everyone is looking for, is basically at the moment when the special committee make decisions on whether to accept the offer or not to accept the offer, or accept the offer in other forms. So it's sort of the general sort of a progression at the moment. We will work as quickly as possible to try to come to a result as soon as we can. But at the moment there's not much we can share beyond the fact that it's still being actively negotiated at the moment.

Jiong Shao – Macquarie Research

The price hikes, I asked it earlier, next year?

Jason Jiang

[Chinese language spoken]

Kit Low

Yeah, Jason says we're making -- we will be making rate adjustment on our [rate cuts] around 10% for the key cities, not for all the cities though. When I refer to key cities, we normally refer to the heavy demand cities like Beijing, the major four cities, plus probably another 10 to 15 cities out there in terms of the so-called second-tier cities.

Jiong Shao – Macquarie Research

Okay, great. Thank you, Jason and Kit. That's helpful.

Kit Low

Thank you.

Operator

Your next question comes from the line of Philip Wan from Morgan Stanley. Please ask your question.

Philip Wan – Morgan Stanley

Hi, good morning. Thank you for taking my question. My first question is, could you please give us some color about your fourth quarter outlook by business segment? And also, besides this lower spending from Japanese auto customers, as you commented earlier in your press release, could you also share with us the trend so far in fourth quarter for other major categories? Thank you.

Kit Low

Sure. I'll have Jason take the question.

Jason Jiang

[Chinese language spoken]

Kit Low

Yeah. Philip, in terms of your question on the first part which is the overall segmentation, in terms of -- let me answer the first part of the question, then I'll take the second question for what Jason just said.

In terms of the by business segment, I think the trend will be fairly similar to what we -- currently what we could see probably pretty similar to the third quarter, i.e. that the growth is probably being led by poster frame, and then the rest of the business segment will be probably similar to what you would expect. The movie business, just to remind everyone, is a seasonal business. So in general what we expect, the movie business to be, from a revenue perspective, to be slower in the fourth quarter versus the third quarter. Typically, third quarter, because of the summer blockbusters, tend to be the strongest season for the year. So I think that'll be sort of the trend we expect with the movie business.

In terms of LCD in-store, we believe will be similar trends. There is some risk that the LCD may decline, but we hope to be able to strive up to some single-digit growth at the moment. It's hard to tell a complete picture without having the complete set of numbers together at the moment.

In terms of the by silos of different customer categories, the biggest impact in the fourth quarter, as you described, is basically Japanese auto. There are roughly about eight major labels in Japanese auto, which is a big composition of the overall auto segment. As some of you know, that takes up about 20%, 25%, it depends on a quarter, of our overall business every quarter. So I would say that the Japanese portion is probably at least 5 to 6 percentage points.

And the other observation we have seen in the fourth quarter is that most of the multinational corporations, unlike the previous years or a lot of the normal years, you see budget flushed towards yearend, this year is pretty tight. We don’t see a whole budget flush from the multinational customers. That said, we don't see a lot of major cutbacks from them either, it's just that we don’t expect any major budget flush for yearend this year as compared to other normal years that we would otherwise have seen. Hope that helps.

Philip Wan – Morgan Stanley

Great. Thank you very much.

Kit Low

Thank you.

Operator

Your next question comes from the line of James Lee from CLSA. Please ask your question.

James Lee – CLSA

Thanks for taking my questions. First question is on the fourth quarter guidance. I was wondering if you guys can give us help a little bit in terms of understanding where the weakness is coming from a geographic point of view. Is it more weakness across the board or is it more tier 1 and tier 2?

And second question is regarding potential cost-cutting effort knowing that your top line will be a little bit weak, I was wondering maybe you can talk about any potential cost cuts you can institute to offset any potential top-line weaknesses?

And last is privatization, I was wondering if you can help us understand if the deal gets approved by your committee, what is the next step after that? Do we immediately go to shareholder voting or is there other step that needs to go through before that process gets done? Thank you.

Kit Low

Sure. I'll take the second one, I'll let Jason take the first one.

Jason Jiang

[Chinese language spoken]

Kit Low

Thank you, James. Let me take the first question, then translating what Jason just mentioned.

Essentially the -- we don't see any future change in geographic. I think the weakness are mainly driven by the Japanese auto, as we mentioned, and that if you look at the orders that are usually in the tier 1 and tier 2 cities. So it pretty much impact these cities quite similarly. So in terms of allocation or breakdown by percentage of revenue of tier 1, tier 2, tier 3, even 4 cities, there hasn't been any major, major shift in terms of what is traditionally what happens. So that's sort of part of your question.

The other part that we have seen is that, for the multinational corporations, we have seen orders coming through. But from -- because of the auto impact, we haven't been able to assess exactly what the impact would have been. And more importantly, I think from our perspective, we have seen some of Japanese labels starting to come back towards the end of the year, i.e. in late -- the orders we have seen is probably late December. So what we hope to see is that, as we go into the first quarter and second quarter next year, this impact was slowly being minimized over time.

And the other part of your question in terms of bottom line, bottom line, from our perspective, we continue to control costs pretty tightly. So we have basically slowed down a bit on our network expansion going into the quarter, trying to control our costs both on a fixed perspective and also to the extent that we could minimize costs in other areas, we will.

Part of the reason why, unlike typical quarter that we have provided guidance in the past, our guidance range are relatively wider as compared in the past just because of that reason, because there are certain cost control measures we are trying to put in place, but I don’t have 100% certainty exactly where some of these costs would come to fruition. So that's why you see the range there based off on the guidance range that we have provided.

In terms of your second question which I will take, in terms of the privatization, assuming, this is a big assumption so I do not want to take people and try to get [inaudible] left and right, so, assuming the assumption that you made saying that if the deal were to be -- the offer will be taken by the special committee, what's the next step? The next step typically is that the company, assuming that it will go through the route of merger, then essentially the next step is for the company to file a document called 13e-3 over the course of that period. The 13e-3 is basically a document to basically detail out the process of the entire negotiation that happens during the entire privatization process over the past six months or eight months. That document will need to be filed and reviewed by the regulators. And subsequently, once that document is cleared, the vote will have to be sent out to different shareholders for ultimate voting.

So I don’t have -- I know everyone is very eager to find the timing, I don’t have a fixed timeline for this specific -- for ourselves in this case. You can look at other transactions that have been done. I think from what we have seen, it ranged from anywhere from two to three months to I've seen some that goes up to a year. So it depends on how quickly the clearance of the documents, of the filing by the company that got cleared. And then ultimately the voting process usually is sending out proxies to investors that usually take about anywhere from 30 to 40 days. And then from that point on it's basically a voting.

So that's sort of the general process I could share with you. But beyond that, I just can't promise in terms of anything else. I think that we made the commitment earlier that it is -- the negotiation has been actively -- is actively progressing, that's point number one. And point number two is that it is the goal of the company and the special committee to come up with -- [one or the other] come out with the decision as soon as possible.

James Lee – CLSA

Okay, great. Thank you.

Kit Low

Thank you.

Operator

Your next question comes from the line of Tian Hou from T.H. Capital. Please ask your question.

Tian Hou – T.H. Capital

Hi, Jason, Kit and Lu Jing. Good morning. The question is really regarding the -- the first question is regarding the general advertising environment. So I realize October was really bad. So, what's the situation after? Is there any progress in November and December? That's the number one question.

The number two question is regarding the cue card business, and can you give us some update on that part of the business? That's the two questions.

Kit Low

Thank you, Tian. Just give me one moment.

Jason Jiang

[Chinese language spoken]

Kit Low

So I'll answer the first question first then I will come back to the second question on the cue cards.

In terms of the overall trend for the quarter, October, as you indeed mentioned, is pretty weak. Primarily, one of the key reasons that was driven by that, besides the auto stuff that we mentioned earlier, was the fact that there's a pretty long holidays in October this year, just probably in the recent history of China the longest sort of October holiday. And that particularly has a big impact on the LCD business, you can tell, because during that there were probably only about 20 business days that we could actually do business during that month, probably less if you take out some of the holidays within it.

And the second part of it is that there is the progression of a Q-on-Q perspective -- sorry, month-on-month perspective going from October to November, November to December. The normal trend we would have otherwise seen in other fourth quarters, November definitely is stronger than October, and we expect December to be much stronger than November. But that said, this is on my part, is that because of the lack of budget flush this year, we're not sure how much the budget flush will come through given that most other companies, even the customers, they don't expect much of a budget flush. As a result, we do believe that despite December trend will be stronger than November, but it may not be as strong that we would like to have seen it to be. So, which basically what resulted in the guidance numbers.

Let me have Jason answer the second question that you have.

Jason Jiang

[Chinese language spoken]

Kit Low

Tian, on the cue card business, basically the progression is, one, is on the launch of the mobile apps. We have recently launched a mobile app for the cue card. If you download from the app stores, if you're interested, which is a very early sort of beta version that we have at the moment.

And the second part of the progression is that I think over the course of the last few -- at least five to six months, we have been slowly expanding the footprint of the interactive screen from seven cities and closer to the 20 cities as we speak at the moment. But given the economic uncertainty, it is a -- I think someone asked the question about bottom line how do we control cost. During sort of the time of uncertainty, usually we slow down on any sort of a new initiative in terms of the spending that we have. So as of late, we have been slowing down in terms of our spend on expansion in footprint, as well as any cost investment into this particular business at the moment. I think our focus right now is to continue to make sure that our core business remains strong and be able to weather through the near-term uncertainty. So that's sort of I think where we are at the moment.

Tian Hou – T.H. Capital

That's very helpful. Thank you.

Kit Low

Thank you.

Operator

Your next question comes from the line of [Chao Huang] from Merrill Lynch. Please ask your question.

[Chao Huang] – Merrill Lynch

Hi, good morning. Thanks for taking my questions. I just have housekeeping questions. Could you update on the utilization rate of each of your networks and also the top advertising categories over the quarter? Thank you.

Kit Low

Sure. In terms of utilization -- and again, as in previous quarters, these are purely estimates and these are not particularly bottoms-up numbers that we could keep you pinpointing and try to calculate. Roughly, I mean as you can tell, the LCD we don't have much of an increase in terms of the overall revenue, so the utilization for LCD hasn't changed all that much, and has been for the tier 1 cities probably in the sort of mid to high 60 range. Tier 2 cities probably in around the mid to high 30 range.

In terms of the poster frames, probably closer to the mid to high 40s range. And then in-store business, around 30% or so -- I'm sorry, for overall it's about -- for the so-called [F1], will be called [F1] to be the key, like Walmart and Carrefour, probably closer to 30%. And then the rest probably around sort of mid-teen sort of rate in terms of utilization.

In terms of business verticals, the biggest segment remains the fast-moving consumer goods. What I would do, I'll give you the Q-on-Q trend. FMCG last quarter is in the mid-30%, this quarter is around 32%. And then our expectation includes the auto, last quarter is about 26%, this quarter is around 20%. Again, this 20% reflects partially some of the cutbacks from the auto customers from Japan. Financial services, about similar, about 3% to 4%. Internet increased, internet-related, that includes, just a reminder, include the portals as well as the e-commerce, and that basically goes from roughly about 8% to about 11%. Telco and IT products went from 8% roughly to about 14%. Home electronics, about similar, about 3% to 2%. Real estate about 4% to 5%, hasn't been much of a change yet at those categories. So that's basically the key verticals.

[Chao Huang] – Merrill Lynch

Okay. Thank you very much.

Operator

Your next question comes from the line of Ming Zhao from 86Research. Please ask your question.

Ming Zhao – 86Research

Thank you for taking my question.

[Chinese language spoken]

My question is mainly about next year's outlook. Thanks.

Jason Jiang

Okay. [Chinese language spoken]

Ming Zhao – 86Research

Xie-xie.

Kit Low

[Chinese language spoken]

Let me just do sort of a summarized version of the translation on the question. I think the general question is basically about the outlook of next year given the fact that I think everyone sees that in the quarter, be it the other companies or comps of ours like [Sohu] and [Sina], in terms of guidance, including ours.

I think Jason's observations of I think three key points, and one key point is about normally, I think we've mentioned it earlier during the call, is that the economy is China more or less is a policy-driven economy. One of the key, in terms of getting certainty, we will not know usually, especially given the government transition, is that usually in December there's economic -- senior level economic sort of a meeting in Beijing, which basically set the policy going forward the next four to five years, and then official transition of the government actually takes place in March of next year. So, until then, we probably won't have a clear sense of what the overall macro environment looks like.

But I think assuming that things are going to normal, from what we could tell from our visit to customers, there has been sort of a -- right now I think customers, we think that the customers are in two different sort of a polarized camps. There are those who feel really good about, very aggressive, such as customers like the Chinese white wine, which is one of the major customers for [options] like CCTV and also some of the key satellite TV stations.

The other type of customers that also fear is the smaller to medium-size sort of customers, [feel the fear], especially given this slowdown in the year of 2012 and probably going to 2013, some of the smaller and medium customers, actually some of them are going out of business because of the cost inflation. As a result, margin pressure, and as a result, cash flow pressure. So, as a result, that also created another camp of them medium to larger customers which feel that this perhaps is an opportunity to expand market share.

So, people are still uncertain, but they want to be going really aggressive next year, especially for the medium and large-size customers and some of these local brands, whether they want to become more aggressive, as the other smaller competitions getting -- being squeezed out. So there's still uncertainty at the moment. So I think we have seen customers that are very aggressive, we're also seeing customers that have cut back way, way drastically. So I think that we still don't have a clear sense of how it's going to be like.

One other observation that Jason mentioned was that if you look at the overall macro numbers in China, I think a lot of you read it, PMI numbers and the numbers of different macros in terms of export numbers, especially on the industrial level, actually looking to be relatively stable. So that hopefully is a good sign, and maybe that will lead to stabilization in the real estate market, and that is basically what have a trickle-down in terms of a follow-through effect to the rest of the consumer segments of the country.

And then one additional point I would add is that on my personal observation, usually when the macro numbers basically -- what macro number gives you is basically when it feeds through to our light side of business, i.e. from advertising, there's usually about five to six-month time lag. So I think what we're feeling in terms of the slowdown right now, besides the Japanese auto, which is a political situation, some had to do with the sort of macro data point I was telling you in the middle part of the year that has been weakened. And given that it stabilized through October and November, hopefully in about four or five, six months from now, we would see the environment stabilizing also from that perspective.

Ming Zhao – 86Research

Got it. Thank you very much.

Kit Low

Thank you.

Operator

Your next question comes from the line of Anne Ling from Deutsche Bank. Please ask your question.

Anne Ling – Deutsche Bank

Thank you. I'd like to check also regarding the outlook for year 2013. If you take a look at by segment for the coverage that you discussed about in terms of the expense, which sector is like having a more positive outlook and which sector has a more negative outlook?

And then secondly is regarding VisionChina, could you -- do we have any impairment loss in the third quarter? And if not, what is the current plan for VisionChina?

And lastly is regarding the privatization. Could you remind if there's any like debt line regarding the privatization offer or is there any prospect trigger the termination of this privatization? Thank you.

Kit Low

Sure. I'll take the second and third one and I'll let Jason take the first one.

Jason Jiang

[Chinese language spoken]

Kit Low

Okay. I'm going to take -- so I'll translate the portion on the first question.

In terms of the strength of the different segments, I think in terms of overall market, first, we see two major strength, one is in the child-related products, be it baby-related products to child education, anything kids related, I think we've continued to see pretty heavy demand, especially given the one-child policy as these kids grow up, a lot of people have been spending very heavily on their kids.

And the second statement, we believe the continued strength is basically mobile-related products, basically the so-called telco, IT products category. And we believe that with the launch of 3G and potentially the iPhone 5 and the war between Samsung and Apple, we believe that that segment will continue to be one of the stronger segments going to 2013.

That said, besides the market, I think from company-specific sector for us, one of the major segments we are targeting, despite overall market is not a great growth segment from our perspective, we don't do a whole lot of Chinese white wine, which is one of the major, major customers for most of the traditional TV stations. So this is one of the area that we're focusing on a lot in terms of making sure that we could actually gain our market share in this particular segment in 2013.

In terms of VisionChina, I think you'll probably see on our third quarter results, if you'd go through our press release, you would see that we actually took impairment loss of $7 million during the quarter in the third quarter. We do not expect much left to portfolio impairment. Basically what we did in terms of impairment being done in the second and third quarter this year was we're just marking the market in terms of the share price, so -- as of the end of that quarter. So right now we are really mark-to-market based on roughly about 20-plus cents per ADS for that company. So, unless the share price have significant decline from that level, we do not expect any sort of -- much of a further impairment, if there's any at all.

In terms of the balance sheet in terms of what's left on the balance sheet, it's very minimal, it's only a few million -- probably less than $7 million to $8 million in terms of on the balance sheet, in terms of the asset value on this particular investment.

As far as our investment on the operating business perspective, we continue to be a long-term shareholder of this company. We will continue to look for this company hopefully to improve over time and we'll continue to support the company. That said, I don’t think we have any intention of making any further investment into this particular company nor any sort of a major -- any sort of major investment horizon in line in terms of what we see in the near term.

In terms of privatization, I think we mentioned that earlier in terms of the deal. The special committee is working very diligently in trying to come up with a result as soon as they can. It's still being actively negotiated. The offer wasn't given as definitive offer from the buyer's group, so in theory, basically there's not much of a sort of particular dateline of any sort being put out there in terms of negotiation. But from our perspective, we understand that a lot of shareholders are pretty eager to find out what the end-result is going to be. We'll try to move as quickly as we can in trying to come up with a result as soon as we can.

Jing Lu

Hello, operator? Please go ahead to take the questions.

Operator

Thank you. Your next question comes from the line of [John Yutak] from [Presidential Capital]. Please ask your question.

[John Yutak] – [Presidential Capital]

Good morning, Jason, and thanks for taking my call. Congrats on the quarter.

Can you talk about the decision to terminate the cash dividend in light of the extended potential go-private period? It seems like that could still be paid in the meantime.

Kit Low

Sure. So let me clarify. Thanks for the question actually. That's a good question.

We're not terminating the dividend in any way or form from the Board perspective. What we are saying is that typically the next dividend will paid in sometime next year. So if you look at the year this year, we paid our first dividend, for those who are on record on March 30, we paid it back in April. And then for those who are on record on June 30, we paid back in July. And for those who are on record on September, we paid in October. In theory, for those who are on the record on December 30, we'll pay the next dividend probably sometime January or February next year.

Because of the ongoing negotiation with the buyer's group, one of the key reason is that, as part of the negotiation, what typically happens from a bank perspective is that people, once -- if there were going to be anything to inked with the bank, at some point the bank does not want a leakage after signing. So, any sort of dividend in terms of negotiation will more than likely be reflected as part of the negotiated price.

So the Board is not deciding to basically -- to cancel the dividend one way or the other. What we're saying is that we will inform the investors before yearend we will -- if -- there are two possible scenarios. One possible scenario is that by yearend the negotiations continue to go on, and the Board will decide whether we'll resume, basically telling you exactly what date you're going to continue to get your dividend. Or on the other scenario is that there is end-result on negotiation. Then as a result at that point, either the dividend gets suspended and whatever dividend will be probably reflected in the share price that are going to offer, or we're going to leave it as such.

So, just for that sort of administrative matter in terms of making sure that we allow the special committee to continue to negotiate with the buyer's group so that they could do it in a much more efficient manner than -- because as you issue dividends, as you pay dividends, that just starts to affect part of the negotiated price. So that's sort of I think that's one of the consideration being put in place. So we are not canceling dividends at the moment. So we're just trying to see whether -- it depends on the progression between now and the yearend, the Board will come back and make a position one way or the other.

[John Yutak] – [Presidential Capital]

Okay. Thank you for that clarification.

Kit Low

Thanks.

Operator

Your next question comes from the line of Jaimin Shah from Canning Park Capital. Please ask your question.

Jaimin Shah – Canning Park Capital

Hi, good evening. That was decent sort of results for a struggling [economy], so, quite good work there. I have three questions, firstly, in terms of, could you detail your M&A or probably CapEx plan for next couple of years? Where do you see growth and where do you keep -- would keep on investing?

And secondly, if it's not much of a hassle, if you can at least provide details in terms of the bankers on the transaction, like who's probably giving debt to consortium? Because probably not heard anything from company, there are few reports floating at hand, but probably would be interesting to see where the [debt progression that's] going on? Thank you.

Kit Low

Sure, sure. To the extent we'll share, we'll definitely share with you. In terms of the CapEx plan, I think for the most part we don’t have any, as I mentioned slightly earlier, is that we don’t have any major sort of investment in place in the near term at least for the next 12 months or so. I think most of the investment near term is basically in the expansion of our network. As the company's sort of style in the past, if we see certainty in terms of the recovery of the ad market, we'll probably be more aggressive in the expansion of our network, expanding our network.

Just to remind everyone to see that LCD business we are right now in over 100 cities but directly operated probably 80 cities plus. We believe that there are a lot of rooms to continue to expand in a few cities every year. So that's one area of expansion. The other area of expansion is poster frame, we are right now sitting in about 50-plus cities. We're still a long way to go before we get to sort of a saturation point, especially given residential buildings has a lot more than commercial buildings in the market as a result. So I think most of the CapEx will be going into the network expansion.

And then currently on the movie business, as theater screens increase, we'll continue to sign more theater screens, and that would help us to also get our footprint expansion. So I think for the next year or so, I think our CapEx plan is probably similar to what we otherwise have seen this year, probably in the range of $30 million to $40 million, if not, max maybe $50 million, sort of our plan there.

In terms of the -- I think the announcement was made back in August about the consortium in terms of banks or financing. I think the three banks being named, one is Credit Suisse, the other one is Citibank, and the other one is DBS Bank in Hong Kong. So I think beyond that, I think because it's really the consortium sort of information, so we are not in the position to share anything further than what is being publicly announced from that part. I hope that's understandable.

But again, I think I'll emphasize the point from privatization, it is our goal to come up -- the special committee to come up with a decision as soon as possible. And as soon as that happens, we will make announcement from that point on.

Jaimin Shah – Canning Park Capital

Right. And in terms of M&A, do you plan to like acquire any business or looking to actively into any of acquisition targets?

Kit Low

We don’t have any major acquisition target in line. I mean, the acquisitions that we do every year are pretty small. Like for example, as we expand into additional cities, that city may have a small operator in the market. As you may be aware, like for example, in poster frame business, every market, every city you go into, there'll probably an incumbent player, maybe one or two, usually we take those up.

In terms of major ones, we don’t have one in mind at the moment. So I think the areas that we're interested in is anything that will help in the sort of medium term to expand our ability to be -- to turn our -- the media to become more interactive and a lot more measurable. I think that's two goals that have always been in our mind in terms of going for in terms of looking for areas for expansion.

Jaimin Shah – Canning Park Capital

Okay. That helps.

Kit Low

All right. Thanks.

Operator

Ladies and gentlemen, we have now come to the end of our question-and-answer session. I will now turn the call back to Ms. Lu Jing for closing remarks. Please go ahead.

Jing Lu

Hello. That concludes today's conference call. Thank you, everybody, and see you next quarter.

Kit Low

Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.

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