They are all audited by Deloitte and all four have advertising businesses in China.
While they do have similar business models, they all have different facets of their business that make each one unique and they are not direct competitors either. First, I want to go into some reasons as to why it is important that Deloitte audits these four unique businesses, especially considering the importance of an audit by a top 4 firm and the pressure that U.S. listed China stocks have come under over the last year.
1) It shows that Deloitte has experience within Chinese Advertising industry
2) They know what to look for and through
3) Viewing a wide range of contacts and relationships
4) Experience verifying cash
5) It makes it easier to find discrepancies
I could continue on in regards to the importance of Deloitte auditing all four of these firms, but it shows that when they sign off on these companies year end statements, it should be taken very seriously and shows that the numbers should be relied upon. Deloitte signed off on all four of their 2009 year end statements (AMCN p.85, CCME p. F-1 - F-2, FMCN p. 112, VISN p.97) and just recently VisionChina Media and AirMedia Group released their 2010 results. Focus Media will be releasing their earnings Today, March 8, 2011 and CCME is next in line to release their earnings, which Deloitte is already months into the process, if not already done. All of them are expected to release their 2010 audited 10-K sometime this month.
The most important aspect of investing is determining what stocks to buy and selecting the correct companies that will give the best return based on resesearch, including fundamentals of a company. Below, I am going to list a brief description of each company and also list the fundamentals of each as well, which will give a good view of each of their fundamental strengths and weaknesses. Take a look and decide for yourself.
CHINA MEDIAEXPRESS (CCME)
CCME plays ads on video screens in more than 26,400 coach and intercity buses in China. CCME media reaches tens of millions of passengers each month. Advertisers pay for access to the CCME bus screen media space. CCME video screens are placed on inter-city passenger coaches, airport shuttles, and tourist buses in major cities or scenic spots including Beijing, Shanghai and other cities and provinces including: Guangzhou, Tianjin, Chongqing, Guangdong, Jiangsu, Fujian, Sichuan, Hebei, Anhui, Hubei, Shandong, and Shanxi
2009 Revenue: $95.9 million
2010 Revenue(expected): $215 million
2010 Year-Over-Year Growth: 124%
Earnings Per Share: $2.70
Cash Per Share: $4.25
Cash Per Share/PPS: 32.7%
2011 Expected Revenue: $330 million
2011 Year-over-Year Growth: 53%
2011 Earnings Per Share(fully diluted): $3.37
Forward P/E(2011): 3.86
FOCUS MEDIA (FMCN)
Based on an audience-centric approach, Focus Media provides a broad portfolio of media advertising platforms, including our Commercial Location Network, In-store Network, Poster Frame Network, mobile handset advertising network (through Focus Media Wireless) and Outdoor LED Network. Each of these media platforms covers specific demographics of higher-than-average-income urban consumers at various out-of-home media interaction points, from office lift lobbies to entertainment and social venues, shopping districts, mobile phones and residential complexes.
2009 Revenue: $505 million
2010 Revenue(expected): $545.9 million
2010 Year-Over-Year Growth: 8.10%
Earnings Per Share: $1.18
Cash Per Share: $4.88
Cash Per Share/PPS: 17.75%
2011 expected Revenue: $596.21
2011 Year-Over-Year Growth: 9.22%
2011 Earnings Per Share: $1.34
Forward P/E(2011): 20.52
VISIONCHINA MEDIA (VISN)
VisionChina Media Inc., through its subsidiaries, provides advertising services in the China. The company operates out-of-home advertising network using real-time mobile digital television broadcasts to deliver content and advertising on mass transportation systems. Its mobile digital television advertising network delivers real-time content provided by the local television stations. The company's advertising network consists of digital television displays primarily located on (intra-city)buses and in subway trains that receive mobile digital television broadcasts of realtime content and advertising. Its network also displays real-time news and stock quotes, weather and traffic updates, sports highlights, and other programs, as well as disseminates public-interest messages and programs that promote the general welfare of society and other urgent messages during emergency situations, such as typhoons, earthquakes, and other events that concern public safety. In addition, VisionChina Media Inc. also operates a stationary advertising platform in subway stations in Guangzhou and Shenzhen.
2009 Revenue: $120.69 million
2010 Revenue: $138.10 million
2010 Year-Over-Year Growth: 14.4%
Earnings Per Share: ($1.83)
P/E: Negative EPS
Cash Per Share: $1.52
Cash Per Share/PPS: 38%
2011 Expected Revenue: $188.79 million
2011 Year-Over-Year Growth: 36.7%
2011 Earnings Per Share: $0.10
Forward P/E(2011): 40
AIRMEDIA GROUP (AMCN)
AirMedia Group Inc., through its subsidiaries, operates digital media network in China for air travel advertising. It operates digital frames and digital TV screens that display advertisements in airports and airplanes. The company also displays non-advertising content, such as weather, sports, and comedy clips; and documentaries and hidden camera type reality shows from other third-party content providers in its digital TV screen programs. In addition, it displays advertisements on interior or exterior walls of gate bridges, including billboard and painted advertisements, as well as operates light boxes and billboards at airports.
2009 Revenue: $149.43
2010 Revenue: $236.50
2010 Year-Over-Year Growth: 56.6%
Earnings Per Share: ($.07)
P/E: Negative EPS
Cash Per Share: $2.00
Cash Per Share/PPS: 37%
2011 Expected Revenue: $289.92 million
2011 Year-Over-Year Growth: 25.8%
2011 Earnings Per Share: $0.39
Forward P/E(2011): 15.38
Taking a look at each company, it is easy to tell their similarities, but also their differences based on each of the business models and fundamentals. While some are currently losing money, each of them have fairly good forward growth ranging from about 9% to 50%. Not all are trading where they should. Here is another comparison of stock price using 2011 estimated P/E.
CCME currently has a stock price of about $13
VISN, FMCN, and AMCN have an average 2011 forward P/E of: 25.3
With a P/E of 25.3, CCME would be at a price of: 25.3/3.86 = 6.55
$13 * 6.55 = $85.15
FMCN currently has a stock price of $27.50
CCME, VISN, and AMCN have and average 2011 forward P/E of: 19.74
With a P/E of 19.74, FMCN would be at a price of: 19.74/20.52 = .96
$27.5 * .96 = $26.40
VISN currently has a stock price of about $4.00
CCME, FMCN, and AMCN have an average 2011 forward P/E of: 13.25
With a P/E of 13.25, VISN would be at a price of: 13.25/40 = .33
$4.00 * .33 = $1.32
AMCN currently has a stock price of about $6.00
CCME, FMCN, and VISN have an average 2011 forward P/E of: 21.46
With a P/E of 21.46, AMCN would be at a price of: 21.46/15.38 =
$6.00 * 1.40 = $8.40
Is this necessarily where they will be trading at? No, but it does help to show which are undervalued or overvalued compared to one another. I don't expect VISN to drop that much as it does have good growth going forward and they just need to find a way to reduce their costs. There is no reason that any of these should not be trading at a forward P/E of at least 20 going forward. China is continuing to grow significantly. Advertising is a growing industry in China and soon it will catch up to the United States. All of these companies are in an incredible position to capitalize on the growth of China and the industry. For me, it is easy to decide which one out of the four I would choose to do it with.
Disclosure: I am long CCME.