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CIBC is out with some comments on Xinhua Finance Media (XFML) noting that last week XFML shares declined 18% during a strong week for China Media stocks. Firm believes weakness in the shares is due to peripheral factors, including the re-occurrence of a nine-year old lawsuit related to the former CFO and management departures at a subsidiary of the parent company.

Over the weekend, the company announced that Mr. Shelly Singhal resigned from its board, after being moved from the CFO to Exec Dir, Corp. Dev., on May 15. Additionally, Barron's reported that two senior staffers at Glass Lewis, a subsidiary of XFML's parent company, had resigned.

The trading pattern of the stock last week suggests that concerns over these two matter were already in the marketplace, even though the news was reported over the weekend.

While these type of events call into question the character of the current and prior management at XFML, CIBC believes these issues have no impact on current fundamentals, and that weakness provides a good buying opportunity ahead of seasonally strong 2Q results. Maintains $14 tgt and Sector Outperformer rating.

Notablecalls: First, let me tell you that XFML isn't a company I know too well. Yet, chewing through some of the initiation notes it certainly looks interesting. The Chinese ad industry is in a secular growth phase and it looks like XFML is in a good position to benefit from it. I especially like the companys exposure to the financial media side as numbers coming from China show the Chinese people are opening brokerage accounts at a healthy clip.

The news coming over the weekend look bad at first glance but I'm not so sure the impact is as bad as suggested by the decline in XFML's stock price. Also, it looks like a rather large short line was put out over the last week. Trading around 16x 08 EPS, the stock's not exactly expensive.

I would put XFML on my bounce play radar today.

XFML 1-yr chart

XFML

Source: Xinhua Finance Media: Selloff Overrated, Expecting a Bounce