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I am an investor working in China, with extensive experience in the M&A and private equity area.
  • 2008 China MediaExpress Ad Raises Questions 62 comments
    Mar 1, 2011 2:33 AM | about stocks: CCME
    I mentioned in my earlier post that there were some evidence available in Chinese language that haven't been publicly discussed yet.  I had seen some other evidence that have made me suspicious of the company, but they are not as "black or white" as the evidence about the L'Oreal ads.  I had been hesistant about discussing these other evidence, but since I have been accused of hiding things by some longs, I am disclosing one example here and leave you to judge for yourself.  

    Below is excerpt from an an ad apparently posted by CCME in July 2008 on putop.com, a small Chinese B2B website.  You can use Google Translate to get the gist of its meaning.  
     
    In the ad, CCME is soliciting "investors" for the video systems it needs to install for its expansion.  The ad states that video system costs RMB 6000 each.  The "investment proposal" was for an investor to buy the systems (minimum of 10 systems per investor) and then lease them to CCME for a term of 5 years, and CCME would pay the investor an annual rent equal to 1/5 of the cost of the system.  At the end of the 5 years, the investor can choose to either sell the system at an unspecified price to CCME or renew the lease.  An obvious problem with this purported investement is that the video system will most likely be obsolete after 5 years of use.  If the video system is worth nothing at the end of the 5 years, then the investment is effectively a 5-year interest-free loan.    

    A translation of the cash flow table provided in the ad (see original below):
     

    Number of Vehicles Invested 

    Investment Cost

    Annual Rental Payment

    Total Rental Payments over 5 years

    Sum of Five years' Rental Payments plus Value of Equipment

    10 buses

    60K yuan

    12K yuan

    60K yuan

    120K yuan

    50 buses

    300K yuan

    60K yuan

    300K yuan

    600K yuan

    100 buses

    600K yuan

    120K yuan

    600K yuan

    1.2M yuan

    150 buses

    900K yuan

    180K yuan

    900K yuan

    1.8M yuan

     The ad is dated July 7, 2008.  The ad also mentions CCME was working with CTR marketing research, another indicator that the ads was written in 2008.  The CTR report on CCME was done in 2008.  
     

    Some immediate questions that arise from this ad:
     
    (1) With supposed nearly US$30 million in the bank, why did CCME resort to this kind of fundraising scheme?  

    On its 10-K filed in March 2010, it reported holding $30 million in cash at the end of 2008.  With $30 milliion, it could have purchased 30000 video system at the RMB 6000 per system rate stated in the ad.  With $30 million in cash, it could also have easily obtained a bank loan.  
     
    (2)  If CCME still mostly operated in Fujian and Guangdong provinces as described in the ad, could it have had over 15000 buses under contract and earned US$63 million in revenue in 2008?

    The ad describes the company as being dominant in Fujian and Guangdong and has just started to expand elsewhere.  

    Yet CCME reported revenue of US$25 mil in 2007 and US$63 mil in 2008.  (CCME's 2007 and 2008 financials were audited by the 10-person Denver firm of A.J. Robbins (PCOAB's report on AJ Robbins.))  In a Sept 2010 presentation to investors, CCME claimed that it had 15260 buses under contract by 2008.  

    If CCME was still mostly a Fujian and Guangdong operation in 2008, as is described in this ad, these bus and revenue would be implausible.  

    (3) The ad said that CCME had only 500 video systems installed on buses in Fujian and planned for a total of 2000 in Fujian.  How many buses total had CCME's video systems installed in 2008, in Fujian or anywhere else?

    According to CCME's rate card, as of July 2010, it had 2200 buses in Fujian province and 2100 buses in Guangdong province.  
     
    Yet the ad states: "High-speed Channel (China MediaExpress) headquarters plans to develop a total of 2000 high-speed buses within Fujian province within 2 years, in two steps.  As a first step,  we plan to install our systems on 1000 high-speed buses at our base in the city of Fuzhou (currently already installed on 500 buses). "

    (Chinese original: "高速频道总部计划两年内在福建省发展高速大巴汽车总数量为2000部,分两批安装,第一批规划在福州始发地的高速大巴上安装1000部{目前已安装车辆 500多部}").
     
    So how many buses really had the video system installed in 2008?  Where did the revenue of $63 million come from?

     
    Excerpt from the ad:
     

    (二)客运汽车网络资源:在福建省已与福建快运、中旅集团、闽深发、闽 运等福建省所有的著名国有大型运输公司签订‘垄断性’的合作协议,拥有车辆独家经营广告发布权,资源的垄断保证了福建省不会出现第二家企业、类似的项目可 以与高速频道相抗衡。到2008年底,高速频道可实现全面覆盖福建省内所有的高速豪华大巴。同时我司已与其它省份的运输公司进行交流,可望在2010年前 独家运营全国各类高速豪华大巴上的视频媒体播放权。

    五、 回租投资计划

    高 速频道总部计划两年内在福建省发展高速大巴汽车总数量为2000部,分两批安装,第一批规划在福州始发地的高速大巴上安装1000部{目前已安装车辆 500多部},第二批规划在我省其它的市级城市厦门、泉州、漳州等地安装余下的1000部车辆,为了加快安装速度,扩大高速频道覆盖规模,经分众传媒董事 会研究决定,诚邀全国有意投资传媒行业的单位或个人加盟高速频道,回租投资方案如下:

    (一)投资者只需投入资金购买高速频道的车载播放器设备,租赁给分众传媒统一运营高速频道,以收取年租金的方式获得利润,租期时间为五年。

    (二)每位投资者投资高速频道车载播放器最低数量限10部,最高数量限150部;

    (一)高速频道车载播放器设备费为6000元/部(含设备费、硬盘费、调试费、安装费及运营费);

    (二)保证20%的年回报,合作期满后设备可售给分众传媒或继续租赁;

    (三)若投资者中途退出(收回设备款)按年限不同减扣运营费后给予结算,具体见合同;

    (四)高速频道车载播放器设备安装完毕后,由汽车运输公司出示该公司车辆已安装高速频道车载播放器的证明(加盖汽车运输公司章即可生效),分众传媒与投资者签约并提供安装设备所有权证明,以下是最低投资车辆数至最高投资车辆数的的举例说明图:

     

    投资车辆

    投资费用

    年可收租金

    五年可收租金

    五年投资回报款+设备款

    10辆

    6万元

    1.2万元

    6万元

    12万元

    50辆

    30万元

    6万元

    30万元

    60万元

    100辆

    60万元

    12万元

    60万元

    120万元

    150辆

    90万元

    18万元

    90万元

    180万元

     


        
    Full Text of the Advertisement


    福建省高速频道投资合作方案

     

    一、 高速频道项目简介

    高 速频道是由中国二级、福建省一级传媒资质企业福州分众传媒有限公司投资开发、在福建省九地市往返于全国经济发达城市的豪华客运大巴上,安装拥有国家专利的 车载全自动视频播放系统(国家专利号:200520073752.7),该系统与车上电视及立体声音响相连接,按照既定程序,进行精彩节目、广告资讯滚动 播出,形成一种新型稳定的车载电视频道,拥有全省最为庞大的移动受众群体,汇聚了最为集中的商务流动人群。2005年年底与福建电视台6套、7套节目的合 并更为高速频道的飞速发展奠定了坚实的基础。

    高速频道在业内被人们誉为“福建省第一车载电视台”,目前高速频道 已全面覆盖中国东南沿海黄金路线,锁定上万车次开往福、厦、漳、泉、广州、汕头、深圳、港澳等地区的豪华客运大巴,每月都有千万以上的观众在关注高速频道 电视节目及广告,高速频道两小时以上强制性的收看平台成为各类商家发布广告信息的传媒战略平台。开业至今,高速频道已成功为中国劲牌、百事可乐、中国网 通、日立、西门子、麦当劳、湄洲湾景区、蒙牛等近百家国际知名品牌及省市级企业高端客户进行过有效的传播,目前除了烟草企业外,在高速频道优势宣传平台投 放广告的企业囊括了1999-2006年福建省内广告投放的12大排行榜企业,越来越多的品牌企业选择高速频道做为自己的投放媒体,足以证明其适应传媒市 场的发展潮流,具有强大的生命力和良好的市场前景。我们的团队有绝对的信心在2008年前把高速频道发展成为福建省最重要的品牌传播媒体, 全面覆盖奔驰在福建全省高速公路上的豪华大巴,在2010年前发展成为中国第一车载电视频道,成为企业投放广告时必须要投放的媒体。

    二、 项目发展商--分众传媒简介

    福 州分众传媒有限公司(以下简称分众传媒)成立于2002年,是中国二级、福建省一级传媒资质企业、是福建省最早开发楼宇电视的传媒企业, 目前分众传媒电视联播网已遍布福建省数百个写字楼、星级酒店的候梯间、社区物业闭路系统等上千个网点,是福州市公安消防支队指定媒体及合作媒体,5·18 指定媒体及宣传合作媒体,是新浪网、福建电视台、福州日报、福州晚报、海峡都市报、东南快报等媒体的战略合作伙伴,拥有福建省最为庞大的白领群体,汇聚了 最为集中的商务人群,是一家集新媒体开发、企业品牌宣传为一体的全方位、多层次的品牌培育基地,其综合实力位居行业第一。

     

    三、 竞争优势分析

    (一)高科技播放系统:高 速频道独有的全动多媒体视频播放系统(国家专利号:200520073752.7),拥有与众不同的特点:电门控制技术,只要车子一启动,设备就会自动启 动;采用电脑PC播放器,以MP4的模式进行DVD高清版播放,播放程序可靠、稳定、安全,而传统的车载电视采用VCD播放器播放,由于客车在行进中难免 会颠簸和振动,造成画面跳动或卡片现象,所以无论是从画面清晰度还是播放的稳定性来看,毫无疑问传统的车载电视VCD播放器是无法与高速频道采用国家专 利、具有高科技含量的播放系统相比的。

    独特性:①赢利独特性:独创高速公路+高速大巴+电脑网络+手机短信的赢利模式;②管理独特性自行开发的数据管理软件,成功运用在管理上,具有管理上的独特性;③独创

    (二)监播体系独创高速公路线路群组抽查形式,使得该新兴媒体得以实现完美监播,目前高速频道总部已邀请国际权威监播机构—央视CTR做为专业监播机构,确定全国监播方案;④节目实时下载功能:高速频道节目实时下载功能与短信即时发送的技术遥遥领先于国内任何“对手”。

    四、 独有的资源优势分析:

    (一)节目资源优势:全 面解决节目源问题,2005年底福建电视台6套、7套(都市时尚频道、经济生活频道)已并入高速频道,正版、精彩纷呈的节目保证了主动观看的乘客,保证了 广告资讯的100%到达:得到广告客户的认同。福建电视台是福建省历史最长,目前受众最多的电视媒体,是福建省政治、经济、文化、科技发展动态最快捷,最 全面,最权威的信息来源。福建电视台以其精良的节目制作,高质量的播出效果,保证了占绝对优势的高收视率。福建电视台与高速频道的强强联手,保证了高速频 道在几年内品牌知名度的迅速提高,促进高速频道的快速发展;海峡都市报、V2频道等著名媒体已与我司签订了无偿的宣传协议,强力保障了高速频道品牌知名度 迅速提升;现在FETV频道每晚,海峡都市报、福州晚报、福州日报、东南快报等报纸每周都有高速频道的自身形象宣传报道。

    (二)客运汽车网络资源:在 福建省已与福建快运、中旅集团、闽深发、闽运等福建省所有的著名国有大型运输公司签订‘垄断性’的合作协议,拥有车辆独家经营广告发布权,资源的垄断保证 了福建省不会出现第二家企业、类似的项目可以与高速频道相抗衡。到2008年底,高速频道可实现全面覆盖福建省内所有的高速豪华大巴。同时我司已与其它省 份的运输公司进行交流,可望在2010年前独家运营全国各类高速豪华大巴上的视频媒体播放权。

    (三)团队精神:再 好的项目也离不开开创精神、优秀团队的运营,高速频道拥有一批大专以上学历、年轻的精英团队,以良好的高速频道企业文化,聚合于分众,群策群力,保证高速 频道能够成功运营,并且不断发展壮大。分众传媒运营至今已五年,成功运营了福建省楼宇电视联播网后,对新媒体的培育、经营及发展直至上市的过程有着深刻的 了解,也保证了高速频道的长久发展。

    五、 回租投资计划

    高 速频道总部计划两年内在福建省发展高速大巴汽车总数量为2000部,分两批安装,第一批规划在福州始发地的高速大巴上安装1000部{目前已安装车辆 500多部},第二批规划在我省其它的市级城市厦门、泉州、漳州等地安装余下的1000部车辆,为了加快安装速度,扩大高速频道覆盖规模,经分众传媒董事 会研究决定,诚邀全国有意投资传媒行业的单位或个人加盟高速频道,回租投资方案如下:

    (一)投资者只需投入资金购买高速频道的车载播放器设备,租赁给分众传媒统一运营高速频道,以收取年租金的方式获得利润,租期时间为五年。

    (二)每位投资者投资高速频道车载播放器最低数量限10部,最高数量限150部;

    (一)高速频道车载播放器设备费为6000元/部(含设备费、硬盘费、调试费、安装费及运营费);

    (二)保证20%的年回报,合作期满后设备可售给分众传媒或继续租赁;

    (三)若投资者中途退出(收回设备款)按年限不同减扣运营费后给予结算,具体见合同;

    (四)高速频道车载播放器设备安装完毕后,由汽车运输公司出示该公司车辆已安装高速频道车载播放器的证明(加盖汽车运输公司章即可生效),分众传媒与投资者签约并提供安装设备所有权证明,以下是最低投资车辆数至最高投资车辆数的的举例说明图:

     

    投资车辆

    投资费用

    年可收租金

    五年可收租金

    五年投资回报款+设备款

    10辆

    6万元

    1.2万元

    6万元

    12万元

    50辆

    30万元

    6万元

    30万元

    60万元

    100辆

    60万元

    12万元

    60万元

    120万元

    150辆

    90万元

    18万元

    90万元

    180万元

     

    六、合作流程(若您有意向加盟投资高速频道,请按以下合作流程进行)

     

    ⑤正式实施

    ①向分众传媒索取资料

    ④双方签约并按约定汇入设备投资款

    ②走访分众传媒并考察项目

    ③向分众传媒提交申请-获得分众传媒同意-确定合作关系

      

     七、项目发展趋势

    随着品牌广告主对受众群体的细分定位,使得移动视频媒体发展成为广告行业的主流,高速频道所表现出极强的可操作性和丰厚的利润回报,充分说明了该媒体强大的生命力和良好的发展前景。朝阳投资行业,规模化的运作模式,为您创造低投入、高回报的利润空间!

    八、担保及保险

    为 充分保障投资者的利益,保证设备的安全及租赁合同的安全实施,分众传媒特别邀请中国平安保险股份有限公司做为设备的保证单位,保证设备的安全,一旦设备发 生丢失或损坏,由中国平安保险股份有限公司负责赔偿责任(具体另行详谈),并由福州玖玖担保有限公司及福州寿山瀑谷风景区做为本租赁合约的担保单位,承担 连带责任。 

     

    高速频道(福建)总部

    福州分众传媒有限公司




    详细参数
    • 公司名称:
      福州分众传媒有限公司
    • 发布日期:
      2008年07月07日
    联系方式
    • 联系人:
      蔡婉玲 女士 (经理)
    • 地址:
      中国福建福州市福州市东大路8号花开富贵A座20层
    • 邮编:
      350003
    • 传真:
      86059187610415
    • 电话:
      86059138111877
    • 移动电话:
      13067461460
    给我们留言

    Stocks: CCME
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  • veritas.ccme
    , contributor
    Comments (2) | Send Message
     
    Just another poorly "researched" hit piece.
    I find it comical that "putop.com" sounds like "put option"....what a funny coincidence....
    Did you even try to answer any of your own questions? I'm so tired of this. Nothing but questions from the shorts. Day after day after day.
    You've done a VERY poor job of dissecting the advertisement in detail. Any explanation for the last column in the table in the ad? I would have thought that if you had these questions, you'd at least put forward some real research showing the number of buses they claimed in the ad. The way I read the ad, I can't actually tell how many buses they claim. I don't see it anywhere.

     

    "If CCME had still been mostly a Fujian and Guangdong operation in 2008, as is described in this ad, these numbers would be implausible." Can you point to the text where they claimed they were mostly in Fujian & Guangdong? - Please provide some evidence to back up this "implausible" claim. Hard numbers, please.

     

    Maybe since you speak Chinese you can help out with this translation: "High-speed channel in the industry was hailed as "the first car station in Fujian Province", the current high-speed channel has a comprehensive coverage of the southeast coast of China, the gold line, lock bound blessing thousands of trips, Xiamen, Zhangzhou, Quanzhou and Guangzhou, Shantou, Shenzhen, Hong Kong and Macao other regions of the luxury passenger bus, more than a million visitors a month in interest channel TV programs and advertising high-speed, high-speed channel over two hours to become mandatory viewing platform for information on various types of advertising media business strategy platform."

     

    This is gibberish to me. I don't even know what the translation is talking about.... I'm sure it was more clear in Mandarin. Let me know.

     

    This 2 and a half year old ad seems fairly irrelevant today. Why are you posting it again? I can see why you were hesitant?
    1 Mar 2011, 03:29 AM Reply Like
  • gunnar
    , contributor
    Comments (66) | Send Message
     
    This ad appears to have been composed much earlier than July 2008, not sure why the 'posted' date is what it is, but the content of the ad indicates it came earlier.

     

    - It doesn't mention the Oct. 2007 TTAVC tongzhi

     

    - It describes operations as still being within Fujian province, by mid-2008 CCME had already begun aggressively expanding nationally

     

    - It states there are "currently" "more than 500 vehicles" in Fuzhou, with the goal to expand to 2000 buses by the end of 2008. By the end of 2007, however, CCME had over 10,000 buses in operation.

     

    This looks like its from late 2005, 2006, or possibly early 2007 but unlikely. It's certainly before the TTAVC endorsement, which is not mentioned. CCME was well beyond this point in its development and funding when it began to expand nationally in the runup to the 2008 Beijing Olympics, and by this 'posted date' the Olympics had nearly begun.

     

    It's interesting history, albeit ancient history.
    1 Mar 2011, 01:10 PM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » The ad says that the company was working with CTR. CTR issued its report in 2008.
    1 Mar 2011, 08:20 PM Reply Like
  • gunnar
    , contributor
    Comments (66) | Send Message
     
    No, you're just guessing about that. It looks like the report says they have "invited" CTR, so this looks to be before an engagement was begun. And anyway the big report CTR did for CCME in 2008 is not the monthly monitoring that CTR does for CCME, FMCN, etc. CCME began doing outdoor advertising back in 2003, they had to have some kind of ad monitoring in place between that time and 2008, and CTR is the likely vendor for that work.

     

    Everything in this ad lines up with the 2006 time period - CCME's business was still limited to Fujian province, they had fewer than 1000 buses. In the ad there is mention of the equipment patent from 2005, but no mention of the TTAVC endorsement in 2007. Surely they would have appealed to potential investors by pointing out the TTAVC tongzhi. And conversely the TTAVC would not have endorsed CCME to nationalize the intercity bus ad network if CCME had no funding and had to rely on this individual investor approach.

     

    No question this comes from earlier in CCME's history. The 'posted' date isn't part of the document, that's a date that comes from the putop.com website, so that could be wrong or someone just posted this then for whatever reason. But everything IN the ad points to ~2006. And there is no dispute that in 2008 CCME was well-funded and had 10-15000 buses in many provinces outside of Fujian, so your theory makes no sense on multiple levels.

     

    You shorts and your soft-headed conclusions... along with Muddy Waters you are just publishing pseudo-facts for their desired effect. As a lawyer you know none of your conclusions hold up, you're just speculating for the purposes of self-enrichment. And doing so while hiding behind anonymity - what a class act.
    1 Mar 2011, 09:19 PM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    No, it says the company were inviting CTR to be their monitor, (the company have not work with CTR yet), also, says the company plan to cover all Fujian's bus before the beginning of 2008, and when it lists the company use the ad, it says all these company are big corp from 1999 to 2006.

     

    Have you read company's cash flow at end of 2007?

     

    It reads more like an ad on early or middle of 2007, someone just updated the contact information at 2008 July without made any change in the ad.

     

    In the description to the figure, the #2 is the investor at end of 5 year can select to sell the equipment back to the company or select to continue lease to company. In #3 it says if investor wants to stop the relation before year 5, it can get the equipment fee deduce certain operation cost and will be in much detail in the contract, in the figure, it lists at year 5, the investor will expect to receive total from 5 year's interest plus equipment fee. In that calculation the equipment fee is 100% returned. Unless the contract states differently, the investor will get 100% back.

     

    You really should ask your Chinese friend read you through the whole article.
    1 Mar 2011, 09:25 PM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » The CTR reference indicates that the ad was written in 2008. Unless you have other evidence to contradict that and the date posted in the ad, you are just speculating.

     

    But even assuming the ad was written in 2007, the information in the ad is not consistent with CCME's reported net income of US$7 million on revenue of US$25.8 million in 2007.

     

    A very important point is that the ad makes a distinction between the number of buses they have under contract and the number of video systems they had installed.

     

    The ad says that they only had 500 video systems installed on buses in Fujian and was planning a total installation of 2000 video systems.

     

    Ask yourself if they only had 500 video systems installed in Fujian (their home base), was revenue of US$25.8 million possible in 2007?
    2 Mar 2011, 12:51 AM Reply Like
  • gunnar
    , contributor
    Comments (66) | Send Message
     
    "Ask yourself if they only had 500 video systems installed in Fujian (their home base), was revenue of US$25.8 million possible in 2007?"

     

    That's exactly right, now you're catching on.

     

    Here are the numbers of buses over those years:

     

    2005: 600 - Fujian only
    2006: 1100 - Fujian only
    2007: 10100 - TTAVC tongzhi in October, national expansion
    2008: 15300 - continued national expansion, Beijing Olympics

     

    In 2007 they received the TTAVC endorsement, with the mandate to cleanup copyright violations nationwide in anticipation of the 2008 Beijing Olympics. As you can see, they expanded rapidly in 2007-08.

     

    Clearly the ad was written in 2006. The ad states they are only in Fujian province and have ~500 buses. That fits exactly with the company in 2006, and it answers your question.

     

    Re CTR, you don't know when the company first engaged CTR. I'm not sure anyone knows, I haven't seen that information.

     

    How about you write to the CFO and ask him when they first had CTR start monitoring their bus ads in Fujian province. Just remind him you were the guy that played the dirty trick on him about L'Oreal - I'm sure he'll remember you.
    2 Mar 2011, 01:32 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » "Clearly the ad was written in 2006. The ad states they are only in Fujian province and have ~500 buses. That fits exactly with the company in 2006, and it answers your question."

     

    "Clearly" only because you are changing the ad to fit your own assumptions.
    2 Mar 2011, 01:40 AM Reply Like
  • gunnar
    , contributor
    Comments (66) | Send Message
     
    No, that's incorrect. The ad states they have ~500 buses. The ad states they are in Fujian province. What is your problem?
    2 Mar 2011, 01:44 AM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    You are the one that find this html page not as "black or white". Shouldn't you first tell me if you think this 500 buses reliable or not?

     

    Have you verify the page is really CCME's page? Just to make sure it is not some scam put up to try to get some easy money like though eMail pretend from some big bank and claim your bank account has been used and ask you to login to a site very close to the really company site to give your password to them? If you don't trust a company that has to file 10k to audit and SEC, how can you try any page you pull from internet and claim its number are real?

     

    If you verify the source, shouldn't you already verify which year the bus number is refer to?

     

    You seems so confuse and can not tell.

     

    Your html page has one day July 2008.

     

    Yet, based on this paragraph you post as the sec 5 that explain the return of investment,
    五、 回租投资计划

     

    高 速频道总部计划两年内在福建省发展高速大巴汽车... 500多部},第二批规划在我省其它的市级城市厦门、泉州、漳州等地安装余下的1000部车辆,为了加快安装速度,扩大高速频道覆盖规模,经分众传媒董事 会研究决定,诚邀全国有意投资传媒行业的单位或...

     

    that clearly state they plan to spend 2 year to install 2000 buses on Fujiang. The 1st stage they will install on all the buses based on FuZhou (1000, and of that 500 has been installed). The 2nd stages they will install on all the buses based on other FuJiang Cities which will be another 1000 and than plan to explore on other area, and the other one that mention they intend to work with CTR as their monitor, we know 1) they already get support at Oct 2007 to allow them start to install equipment on buses across nation, yet they did not mention it. 2) they already has CTR doing some study for them in 2008 and has some CTR reports and CTR people prove they did it in 2008. So the content can not be July 2008's. we can conclude that although the date says it is July 2008, the content apprently is updated the most close in early 2007. So you show us a page that has information at least from 2 different days and could be more. And there is no telling when they say they want to spend 2 years, when is the starting point? Just know at the monet they write that content, they already have 500 units.

     

    Unfortuantely, the document you found prove it is so mess up in its data, its bus number can not be rely on.

     

    So, they started the whole business model at 2005 based on your other link, that in 2 years meaning start at 2005 or 2006? So at this moment, we have 500 units could be 2005 figure, could be 2006 figure, could be 2007 figure.

     

    Since they started at 2005, I will believe it means 2005 figure, and 2 year plan bring them about 2000 units at sometimes in 2007. It does match their SEC reports.

     

    What is reasonable rev at end of 2007?

     

    Well, they could just spend all the money install the equipment, just so they could perform somesort scam in 2009. That will give them 0 rev. And each unit is 6000 RMB (which based on 2 of the competitor that operates inter-city buses, looks can easily achieved assume there is no special discounts), they claim to have 10,000 bus at end of year, so that could mean they have put about 11M US to set up a shelling company that push out and collect 500M US dollar, nice.

     

    Or, based on some of the figure I saw in some other bus companies apprently not in the same area they have their network, each bus could easily get over 6000 RMB per month.

     

    Assume they have 2000 buses at beginning of the year (we know it is not true). Start work on national at buttom half of the year, at end add 9000 more buses, but only show ad at last 1 month, it could be 2 M US dollar per month for 2000 buses, plus 8000 extra buses in 1 month or 8 M extra for that month, we could see rev 32M. Which probably is the best case situation.

     

    So any number between 32M to 0 is possible. The actual number need to go through detail book to tell. Depends on how important you believe that number should be in your decision to purchase or short it, you will need to get more information. But certainly, generate 24M is possible. You can discount any bus, discount and ad, you will get rev in this range. Unless you and I do a full audit on their book assume they let us, you will not believe their number.

     

    You checked their 10K, and say it is 24M REV at 2007 but only 7M actually left for them.

     

    Now you ask at end of 2008, it says it has 30M cash left, and why they still looking for money in the middle of 2008 when they look at they need to install a lot of machines on each buses?
    3 Mar 2011, 02:40 PM Reply Like
  • veritas.ccme
    , contributor
    Comments (2) | Send Message
     
    Reread your "article", I understand the last column table in the ad now, of course the Google translate cut off the title of that column..but the rest of my questions still stand.
    1 Mar 2011, 03:35 AM Reply Like
  • wctbills
    , contributor
    Comments (11) | Send Message
     
    Lame. Plus you betray Chinese illiteracy. The deal is good. At the end of 5 years, you receive 5 years of payment *plus* the original principle.

     

    You sure you have a Chinese friend at L'Oreal? You should have called her up and verify the Google translation.
    1 Mar 2011, 04:06 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » The ad does not clearly say that CCME would pay the investor the 6000 yuan per system. Rather, it says that at the end of the 5 years, the investor could either sell the system to CCME or renew the lease ("合作期满后设备可售给分众传媒或继续租赁).

     

    If you can sell the system for 6000 yuan to CCME then, then, yes, you would get the principal of 6000 yuan back. But that's a big IF. It's at least an ambiguity in the ad.

     

    What's your answer to this:
    "(1) Why would CCME resort to this kind of fundraising scheme? On its 10-K filed in March 2010, it reported holding $30 million in cash at the end of 2008. With $30 milliion, it could have purchased 30000 video system at the RMB 6000 per system rate stated in the ad. With $30 million in cash, it could also have easily obtained a bank loan. "

     

    (BTW: I've heard your Chinese in the videos. I don't think you are in a position to criticize anyone else's Chinese, yet.)
    1 Mar 2011, 04:22 AM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    You do know you are talking about an ad the best is at the middle of 2008 right If July is the correct time frame? China was in recession at 2007, at early of 2008, its stock index shrink from 6000 to 3000, the bank is tight the credit very much. The index continue dropped to 2000 in a few months.

     

    US company face the same at end of 2008 and beginning of 2009. A lot of company accumulate a lot of cashes, but still perfer to keep the short term borrowing loans.

     

    While they were installing the equipment for free, and facing situation that many company might cut the cost or out on bankruptcy. So the ad income is unknow, the expense, payment to bus, the operation running, the installed equipment is pretty much know and day to day. I can see opportunity there for company willing to sign contract to a lot of big bus companies to expand its business from 2 provinces to install on 15,000. I also can see why company want to make sure it does not have any cash flow problem when it expand. Once it pass that stage (2008 economic shutdown), it now has a really large bus count. And by saying 30 M rev at the end of 2008, you really ignore what is the picture at early 2008. If the company get enough big investment, it can become more agreesively and expand quicker. If not, the company based on its cash and what it can believe it can do to give any estimate at a time people claim it could be the biggest recession since 1929, the expansion plan looks decent.

     

    By the way, the 2nd line of the ad says at end of 5 years, the investor can sell back the equipment to company or continue lease it to the company, and then immediately at the end it says please see the figure for the result, and the last column of that figure says 5 years rent return plus the return of equipment cost. So if the investor sell back to company, it will get exact amount back, regardless what the equipment cost after 5 years. Don't know how many people did that, but I am pretty sure if I want to do that, I will make sure the contract will clear say the sale back will get 6,000 per equipment. Although in that type of time, I doubt they find enough small investors to do that. I think they find enough big investors to push the money, that is one of the reason they eventually listing.

     

    In their 10k, and 10Q, it has some simple cash flow show.
    1 Mar 2011, 11:41 AM Reply Like
  • Heikki Laitala
    , contributor
    Comments (11) | Send Message
     
    I do not understand what you mean with this?

     

    "... (CCME's 2007 and 2008 financials were audited by the 10-person Denver firm of A.J. Robbins (PCOAB's report on AJ Robbins.)) .."

     

    Are you saying that there is something shady in A.J Robbins? What i have understand is that PCOAB inspects firms which make less then 100 issues in year generally at least once every three years.

     

    So link what you provided is then just normal inspection for year 2010 (before that PCOAB inspected A.J Robbins 2008). If PCOAB founds somekind mistakes firm quality controls they will address it and company will respond those. If respond is not good enough PCOAB will remove "certificated account" status and they have not done that to A.J Robbins. So there is nothing shady in A.J Robbins.

     

    I am not native English speaker so there might be some language mistakes in my comment but i think that you got point.
    1 Mar 2011, 04:45 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » The point about AJ Robbin is whether a 10-person accounting firm with one office in Denver was capable of auditing CCME. It's the same question that people raised about Frazer Frost., another accounting firm that got into trouble auditing Chinese backdoor listed companies. See here: www.chinaaccountingblo...
    1 Mar 2011, 05:04 AM Reply Like
  • Heikki Laitala
    , contributor
    Comments (11) | Send Message
     
    CCME decide to move to Deloitte, so there is no more this kind "capability" problem?
    1 Mar 2011, 06:07 AM Reply Like
  • china_small_caps
    , contributor
    Comments (11) | Send Message
     
    DISCLOSURE: I am long ccme and have been for a while, so let's get that out of the way.

     

    Reader 10-Q does bring-up an interesting point that should be asked of management. Is the ad real? If so, what was the business rational? There is nothing wrong with CCME trying to leverage its business with outside capital. Is the ad further demonstration of management's financial acumen? There are many companies that have both cash and debt.

     

    Every issue brought up by shorts seems to have a reasonable explanation.

     

    Reader - You diluted your point by bringing-up the auditor and other irrelevant information. I particularly enjoyed how Chinese your remarks to wct were.

     

    WCT - i applaud your dedication.

     

    Other general comments

     

    I don't think there are any small cap Chinese companies (neither public nor private) that are 100% guifan, or 100% by the book. It just doesn't happen and the local governments allow a certain leeway to companies so that companies can get bigger and create more gdp, jobs, thereby creating the harmonious society.

     

    So I do recognize and accept a certain level of shuifen (exaggeration or fluff) in these companies. The key is to make sure they are well capitalized so that their cash flows don't break. CCME doesn't have that problem.

     

    If Deloitte signs-off on the audit........that's everything. We will have a conclusion to this mess in the near future. I have bought my popcorn and am ready for the climax.
    1 Mar 2011, 06:34 AM Reply Like
  • stocktradersblog2
    , contributor
    Comments (3) | Send Message
     
    Reader10Q is analyzing some 鸡毛蒜皮小事.
    Man, you are really desperate. Look at what CCME is now and look at its great potential. Forget those 鸡毛蒜皮. It happened long time go. It doesn't matter even you are right.
    1 Mar 2011, 06:46 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » Please read the three questions I raised again. Can you honestly say that they are no big deal? .
    1 Mar 2011, 07:22 AM Reply Like
  • nero2000
    , contributor
    Comments (23) | Send Message
     
    The basis for this instablog is a 2008 ad on a small Chinese B2B website. I don't see this ad on the puTop website. I only have your word that the ad was there in 2008. If CCME did have an ad on this website, I don't know if you have changed the contents. I assume that you are a CCME short-seller. You have every incentive to lie about the ad and/or easily change its content.

     

    So, unless you can prove that this an unadulterated ad that originated from CCME three years ago, I assume that your entire argument is another desperate, whole-cloth fabrication transparently designed to manipulate the stock price of CCME.
    1 Mar 2011, 08:31 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » It is on putop.com. You just have to be patient. It's a very slow site.

     

    No, I cannot prove that that the ad was there in 2008. Maybe putop.com can. You can write them. I only wrote this blog because the crazy ericman accused me of hiding of "secret Chinese proof". If you want to dismiss it, that's fine. I'm waiting for Deloitte myself. I'm done with doing research on this company.
    1 Mar 2011, 08:52 AM Reply Like
  • wctbills
    , contributor
    Comments (11) | Send Message
     
    I can honestly say "THEY ARE NO BIG DEAL!" =)

     

    Most startup companies, even in the US, have done "questionable" things... I can think of Mr. Zuckerberg at Facebook, for example... Or Mr. Parker at Napster.

     

    If you have FB stock back in 2004, you are now the shit!

     

    But if you had Napster stock in 2001, you are still blogging at SA.

     

    So the question is, is CCME a FB or a Napster? CCME is making a ton of money right now. It's a good stock to own. Period.
    1 Mar 2011, 08:39 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » I know you are saying that sins of past is no big deal. But the ad here suggests that it was unlikely that the company had US$30 million in cash in 2008, which it reported on its 10-K, so it tried to raise money from the public 60K yuan at a time. Still no big deal?
    1 Mar 2011, 09:05 AM Reply Like
  • johnny inca
    , contributor
    Comments (419) | Send Message
     
    This is the SA Hit Piece equivalent of "Dr. Koop.com"
    1 Mar 2011, 08:49 AM Reply Like
  • BlueSkiesLP
    , contributor
    Comments (11) | Send Message
     
    Hilarious. And amazing. We should see a green day for CCME today. Thanks, ReaderQ.
    1 Mar 2011, 09:05 AM Reply Like
  • admiral99999
    , contributor
    Comments (6) | Send Message
     
    One huge question. How does a 2008 ad refer to China Media Express?

     

    ..."Yet the ad states: "High-speed Channel (China MediaExpress) headquarters plans....."

     

    When China Media Express didn't exist until 2009 when it was created during the reverse merger????????????????...
    1 Mar 2011, 09:14 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » Cheng Zheng started using the "High-Speed Channel" name in 2005.

     

    See the China Trademark Registry Database entry for “高速频道" (High-Speed Channel) here:
    either sbcx.saic.gov.cn/trade...
    or sbcx.saic.gov.cn/trade-e/ (to search for yourself)
    The application was made on July 11, 2005.

     

    You can also try to read this 2007 article below by a local Fujian paper about how Cheng Zheng's office building ad business was failing and how he got into the bus ad business (Google Translate might give you the gist). He was already using the "High Speed Channel" in 2005.
    www.hxcjdb.com/portal....
    (Google Translate: translate.google.com/t...)
    程征:做“ 第一”, 更要做“ 唯一”
    2007-4-16 17:24| 作者: 本报记者 杜静
      两年前,福州楼宇广告市场就像一个硝烟弥漫...
      这个角色使程征前进的步伐慢了许多,“每当...
      另一方面,广告客户的步步紧逼也让程征“透...
      客户抱怨的最直接结果便是不再续签合同。颇...
      “靠交情来做生意,是不会长久的。”涉足商...

     

      经过一段时间的准备,2005年3月,福建...
      在与一位大学教授的交谈中,程征坦率地道出...
    1 Mar 2011, 09:43 AM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    You misread.

     

    He still get 33% of market share in that province. His base is smaller than Shanghai base. Also, the other 2 eventually merger to Focus Media and remove Shanghai out from the name.

     

    He did not satisfied just to be restricted in local, and wanted to get to become leading one.

     

    He also didn't like the outdoor media, because it does not really be great on selling. He feel he can not sell that to customers why it is effective. So he looked for other area of ad. Than he decided to go to inter-city bus, and understand you have to be able to control how it is show, so he get into the equipment and make sure the bus driver can not stop it or change it.
    1 Mar 2011, 11:49 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » You are leaving out the part of the article where it says out of 100 advertisers from the beginning of year, only 7 renewed their contracts (the 7 were friends who were doing him a favor). The business was failing, which is why he moved on to buses....

     

     客户抱怨的最直接结果便是不再续签合同。颇感...
    1 Mar 2011, 12:03 PM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    You mean you did not even read the 1st paragraph of whatever you post?

     

    The 1st paragraph (which the news said is on 2007), state that he is listening to people watching the ad provided by his company that mound on business building, and there were time people predicted he will not be able to get more than 50 building mount the monitor for showing his company's ad, now he already pass it.

     

    And the paragraph you use marked the decision was at 2005, where he has 100 customers but at end, only 7 renew their contracts because they trust him as friend, and he believe if just based on that, it will not last long, he is willing to try on different things to bring value to his customers.

     

    But apprently, 2 years after his decision points he still has certain market share in the old business.

     

    Be a local company in that old business model, most customers will be local companies, and they may be gone even after few years. US start up company will be closed out 80% in 10 years. You don't know how many new customers actually signed at 2005.

     

    The business was failing, and under big pressure because of the outside companies, and he does learned a lot from that experience, and he is very brave to start a new model, and he still be able to make old business model survive. And he apprently gain few trust here and there from his customers.

     

    Or maybe you just think what you used is pure garbage?
    1 Mar 2011, 01:07 PM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    Actually, based on this article, it says that he started at 2005 March on inter-city bus, than designed new equipment, than add to the bus, at that moment, the bus count is 1000. So the ad you post is using data even before 2007 since it claims that the number is 1000 as the 1st step (which already pass). I think you can blame it on the inconsistence of people.
    1 Mar 2011, 01:29 PM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    I looked at the google translate page. It is really something. You should ask your friends read this article to you, instead of rely on google.

     

    Please notice the timeline

     

    It says at earlier than 2005, he is decided to just hold his market share and turn to find a new market. The article is at 2007 April, which say 3 years (2004) ago, some industial expert figure the best he can do is have 50 business buildings as his ad network, but he already pass that count. Yet, at 2005, he figure it is very hard on this type of media because, 1) it is very hard to find good business building, usually he started the negotiate, end up his competitor signed the contract. 2) the effect of the ad on this type of media is not very clear, so he only get 7 renew customers at year end and he believe most of them are because they trust him, not because it is an effective way of ad. But at 2007, the old buiness is still live and survive in local market.

     

    After he decide to find a new way of ad, he started ad on inter-city bus, than start to try to figure out a way to make sure the ad get shown and shown exact the time slot. So when he get pattern, (at that moment, it said that he has already set up in about 1,000 bus), he is for sure the unique one. And he got content at 2005 with some local channel.

     

    I believe he got pattern at 2005-2006. So at that moment, he already has it installed on 1,000 buses. And based on the ad, it says it has about 500 buses installed, so it means the data and business pospective is based on 2005 data. Which could be how they started to expand themselves. And you are question how many buses they actually have at 2008, and claim it is 1000?

     

    From my understanding, at 2006-2007, China government decided to make sure its bus is clean, show only programs that is not piraite (actually, not just buses). But at that moment, there is no law or institute actully deal in that area. One of the government agent that belongs to the main agency that controls the buses give this company full support as partner, and he started to put all the equipments for bus company for free as a way to gain market share.

     

    The ad looks like is from 2005 - 2006 period, and has not changed most of its data from than. After July 2008, you did not find any new internet page about that kind of ad, so it means it no longer use it to attract investors. They no longer use that kind of way to pay for installing their bus equipments. And you are asking people to explain why they did what they did in 2006 (just start), 2007 (get support and start to do installation on a lot other bus company's buses that across like 30 times at 2008 more than they have at 2006), middle of 2008 (Economic downtuen) if you assume that page is active in that period or a real page.

     

    You sure look at their 2007's financial statement, right? Maybe they misstate in 2007.

     

    Apprent based on that post, if a failing business model under his management can still pass over expert prediction and when the business head (him) really trying is to hold the ground instead of agressive expand on that old business model, you can tell me what you think the bus count will be more likely in 2008 if 2005-2006 they already has 1000 buses.

     

    Of course, the post could be set up to trick people at 2007. So he could fake the whole business and fraud everyone and become rich at 2013. Has to give him the award of patient. On the other hand, it does take more work to fake on a lot of buses, not to mention a lot of 3rd parties, and require a lot of big bus company willing to help him to set up that kind of fraud.
    1 Mar 2011, 03:00 PM Reply Like
  • admiral99999
    , contributor
    Comments (6) | Send Message
     
    The ad is fake it even uses the wrong company name Fuzhou Focus Media Co., Ltd. it was called Fujian Fenzhong Media Co., Ltd at that point in time
    1 Mar 2011, 09:36 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » The company was using Fujian and Fuzhou names interchangeably. See this press release in July 2008 from Fujian Education TV (FETV) on signing an agreement with Fuzhou Fenzhong Media.

     

    www.xhjcn.com/news_det...
    FETV与福州分众传媒结为媒体战略合作伙伴
    发表与: 2008-07-08 来源于: 点击次数: 967
    2008年7月8日新恒基集团旗下的传媒产业F...
    1 Mar 2011, 10:07 AM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    Yes and wrong, the company originally stated as Fuzhou, in 2007, it changes its name to Fujian. So in the following official link, it should all goes to Fujian. In some of the old ad, it may still have Fuzhou's name there since people are careless and did not change it.

     

    Basically, this ad if true, it means it is running from 2007, and most of the content probably is not even changed.
    1 Mar 2011, 11:54 AM Reply Like
  • Marty Chilberg
    , contributor
    Comments (394) | Send Message
     
    This entire article appears to relate to Focus Media (FMCN) rather than CCME. Focus Media is all over the add which is hard to miss. Also note this reference from Peking Universary in 2007
    www.ici.pku.edu.cn/en/...
    Half way down the page noting those honored guests in attendance:
    Jiang Nanchun (CEO of Fen Zhong Media Holding Ltd.)

     

    Look up the name of CEO of Focus Media if you are still confused.

     

    Note also that no one cares who the auditor was in 2008. They changed prior to filing the first 10k with SEC to show their interest in getting above the issue of 2nd tier auditors.
    1 Mar 2011, 02:33 PM Reply Like
  • jwangatusa
    , contributor
    Comments (14) | Send Message
     
    Actually, FETV one look like is CCME's sub company.

     

    Since this one is signed on 2008 July, and it says that company is bigest Fujiang Building media (old business), High Speed Frequency Network Media, and Airport Express bus Media. And the agreement is to distribute on all three media.

     

    So apprently his old business model is still there at least around 2008. If it is the right company.

     

    And since this is the news from the other party which known them a while ago, it is very likely they mistaken and use the old name instead of the new name that more reflect a bigger area.
    1 Mar 2011, 04:35 PM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » There are indeed two Focus Medias. The one headquartered in Shanghai (Shanghai Focus Media) was founded by Jiang Nanchun. The one headquartered in Fuzhou (Fuzhou Focus Media) was founded by Cheng Zheng. They are not related.

     

    The Shanghai one was established earlier, renamed as Shanghai Focus Media in May 2003 and IPOed in the US in 2005. The Fuzhou one was renamed from Fuzhou Mandefu Food in November 2003. Mandefu is the name of a McDonald's-like chain that Cheng Zheng also founded: www.mdf.com.cn/company...

     

    There was even a trademark dispute between Shanghai Focus Media and Fuzhou Focus Media. See this article below from 2006.

     

    translate.google.com/t...

     

    www.cnad.com/html/Arti...
    两“分众”闹到国家商标局
    日 期:2006-2-8 13:35:23

     

     常被误解为上海分众的分公司,福州分众欲求“...

     

      在面对客户时,福州分众常被误解成是上海分...
    1 Mar 2011, 07:13 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (394) | Send Message
     
    Better be careful here. You've now contradicted dozens of other basher posts claiming Focus Media has never heard of CCME. Now you say they worked together in 2008 on this ad which states that Focus media was engaged in this financing scheme you try to misdirect toward CCME. Also stating they had a trademark dispute seem to infer you are saying they might know each other. That won't sit well with you buddies
    2 Mar 2011, 10:43 PM Reply Like
  • otatais
    , contributor
    Comments (18) | Send Message
     
    If this article is the reason for the $1 drop of the share price at today's open, then the market is not only emotional but stupid.
    1 Mar 2011, 09:58 AM Reply Like
  • Michael Anderson
    , contributor
    Comments (319) | Send Message
     
    has zero to do with this blog. It would be lucky to get a couple of hundred views.
    1 Mar 2011, 10:14 AM Reply Like
  • gunnar
    , contributor
    Comments (66) | Send Message
     
    In July 2008 CCME was expanding very rapidly, they received the government backing in October 2007 during the rush to cleanup copyright infringent before the Beijing Olympics. So if real, this is interesting history, but clearly they found other funding.

     

    Re the auditor, CCME upgraded it's auditor to Deloitte for the 2009 10k, and Deloitte verified everything from the Robbins audits. So having two separate auditors in agreement, with the company voluntarily moving up to a more expensive and robust auditor - sounds good to me.
    1 Mar 2011, 10:05 AM Reply Like
  • The Skeptical Investor
    , contributor
    Comments (65) | Send Message
     
    Author’s reply » Here is Deloitte's opinion from the 10-K. They did not "audit" or "review" the 2007 and 2008 financials except to make some small adjustments needed to make them comparable to the 2009 financials.

     

    "However, we were not engaged to audit, review, or apply any procedures to the 2007 and 2008 consolidated financial statements of the Company other than with respect to the retrospective adjustments and, accordingly, we do not express an opinion on any other form of assurance on the 2007 and 2008 consolidated financial statements taken as a whole.

     

    DELOITTE TOUCHE TOHMATSU
    Certified Public Accountants
    Hong Kong
    March 30, 2010"
    1 Mar 2011, 12:11 PM Reply Like
  • gunnar
    , contributor
    Comments (66) | Send Message
     
    Come on, reader10Q. Deloitte was brought in privately by Starr to verify CCME's financials in the fall of 2009, and obviously that review checked out and found no contradictions with the Robbins-audited statements. Then Deloitte became CCME's auditor, did a full audit and signed the 2009 10K. So that's three reviews by two different auditors that all arrived at the same conclusions. Exactly how are you trying to spin that into a negative?
    1 Mar 2011, 12:46 PM Reply Like
  • zorrba
    , contributor
    Comments (418) | Send Message
     
    Copied from a blog:Friday, February 11, 2011
    Research
    (Anonymous) Letter sent to Deloitte:
    Respected Employees of Deloitte Touche Tohmatsu Limited:
    Jim Quigley, Global CEO Deloitte
    Chris Lu, CEO Deloitte China
    Joseph Lo, Chairman Deloitte China

     

    From your website we learn that Deloitte’s corporate motto is “no stones left unturned”. The US capital markets are now waiting to see if indeed Deloitte will give meaning to the phrase.

     

    The US stock market is in turmoil over the chaos caused by a raft of publicly traded companies created by reverse mergers into US shell corporations. Many of these companies are posting the most astounding financial results ever seen in public disclosures; yet at the same time, are riddled with inconsistencies in their public disclosures, and/or utter lack of transparency in their business models.

     

    A case in point is an audit client of Deloitte, China MediaExpress Holdings (NASDAQ:CCME), a 700 million dollar market cap (fully diluted) company, claiming a run rate of revenues in excess of $250 million, $170 million in the bank, and the highest growth rate and profitability of any publicly traded media company in the world. Yet founders have sold their stock holdings at prices far below current market values.

     

    From a transparency standpoint, it is nearly impenetrable. There are gross inconsistencies between its financial and tax filings in the China, and the financial disclosures it makes to the SEC. It claims enormous profits and growth rates, with a relatively tiny number of paid staff. It doesn’t disclose its major counterparties on either side of its advertising transactions.

     

    The company’s financial credibility is inextricably linked to the integrity of its auditor. For the sake of the integrity of the US capital markets, you are implored to carefully consider SAS 99, the Consideration of Fraud in a Financial Statement Audit. This statement requires you to gather information necessary to identify risks of material misstatement, consider fraud risk factors, and evaluate at the completion of the audit whether the accumulated results of auditing procedures and other observations affect the assessment.

     

    In particular, a degree of professional skepticism is required to protect the shareholders and the investing public, on whose behalf you are actually engaged. In detail, SAS 99 requires pro-active “brainstorming” to identify areas where the entity’s financial statements might be susceptible to material misstatement due to fraud.

     

    By virtue of this letter, you are placed on notice of your need to consider the following warning signs within the corporate framework of China MediaExpress:

     

    1. COMPETITORS

     

    Your firm audits Focus Media, VisionChina Media and AirMedia Group, three of the premiere outdoor media advertising companies in China. From those engagements, your firm should be uniquely aware of industry-specific competitive factors impacting gross margins, returns on capital, growth rates, profitability, and revenue per screen. As well, you should be intimately aware of the cyclicality of the advertising business, as reflected in the severe downturn of 2008 in the industry.

     

    All of these companies disclose one another as major competitors in their filings, yet none disclose ChinaMedia as a significant competitor. Yet, ChinaMedia has consistently reported financial results outperforming these firms by orders of magnitude.

     

    China Media Express now reports quarterly and TTM operating income far higher than Focus Media, making it the most profitable advertising company in all of China. The unexplained divergence from industry baselines should provide you the basis for a thorough SAS 99 inquiry.

     

    This table below was pulled from China MediaExpress's investor presentation. Would your other clients in the space agree that this table is a fair representation of the outdoor advertising business climate in 2010 China?

     

    CCME investor presentation
    2. CASH

     

    Many stock frauds, such as those implicated in the S-Chip and P-Chip scandals, falsified cash balances as a basis for fabricating prior years’ profitability. The most common method of doing this was to “show cash” in accounts that was actually not the company’s own cash, but in effect “borrowed” -- arranged to be deposited in the company’s accounts utilizing a variety of undisclosed contingent liability arrangements.

     

    As a further concern, China Media’s huge reported free cash balances only earn .2%, far less than the income that would customarily be available to such a cash-rich entity.

     

    Given the lack of transparency of China Media’s historic disclosures, can you verify that all its cash balances as now reported are free of any such undisclosed contingent liabilities?
    3. CREDIBILITY OF AGENCY COUNTERPARTIES

     

    Shanghai Apollo has been the only counterparty agency disclosed by CCME, appearing both at investor day presentations and referenced in analyst reports. Yet, it appears that this company is far too small to be support the 50 million RMB revenue booked by the company in 2010, with similar levels projected for 2011.

     

    Can you verify sufficient arms-length transactions with Shanghai Apollo to support its key role in China Media’s reported revenues? Can you verify other agencies engaging in arms-length non-related-party transactions sufficient to verify materially all of China Media’s revenues?

     

    [ www.scribd.com/doc/480... ]
    4. ACCOUNTING FOR BUSES UNDER CONTRACT

     

    China Media states in recent Press Releases that it operates its advertising network on 27,700 buses, which is the company’s sole stated source of revenue. Yet, most of these buses are run by very small operators, whose own statements about fleet size diverge materially from China Media’s. Additionally, many of these bus operators are a blend of company-owned and owner-operator buses. The owner-operator units would not be bound by advertising contracts of their company.

     

    Independent verification of the accuracy of the company’s stated numbers of buses in its contracted advertising network should be a critical factor in your audit.
    5. FREE CONTENT

     

    The company reports in its last 10-K that it receives content for free from Fujian SouthEastern Television Channel and Hunan Satellite Television. Are there firm and verifiable contracts that would show there is not cost of content from Hunan to China MediaExpress?
    6. LARGE NATIONAL AND INTERNATIONAL ADVERTISER CLIENTS

     

    China MediaExpress claims to advertise for large global brands including names such as Coca-Cola, Pepsi, China Mobile, China Telecom and Master Kong as stated in their investor presentation.

     

    Verification of payment streams deriving from invoices to Coca-Cola, Pepsi-Cola, China Mobile, China Telecom and the other top-10 advertisers publicly disclosed by ChinaMedia, are vital components of your audit work. [Ref.CCME investor presentation, page 6, here: ccme.tv/eng/ir/events/... ]
    7. MISMATCH BETWEEN SAIC AND SAT DOCUMENTS AND SEC FILINGS

     

    The Company’s SAIC documents show gross mismatches to its SEC reported financials in revenues, assets and liabilities. SAT tax filings of the company also appear grossly discrepant to the company’s reported financial filings with the SEC.

     

    Any discrepancies between SAIC SAT and SEC filings for ChinaMedia should be considered material issues of your audit and should be reconciled. Verification of taxes actually paid to government authorities should be a basic reference point of your audit.
    8. GOVERNMENT LICENSING CLAIMS

     

    China MediaExpress claims to have an exclusive license from an agency of the Chinese government to operate screens on inter-city buses. [ Ref.: ccme.tv/eng/ir/events/... page 27 ]

     

    However, the document presented by China MediaExpress does not appear to have any binding administrative power as there is no reference number. Meanwhile, plenty of other advertising companies operating in the inter-city bus screen advertising market can be found online.

     

    Independent verification of any exclusive agreement with government entities for inter-city bus advertising is a material issue of your audit, and should be verified and documented.
    9. UNUSUAL INSIDER TRANSACTIONS

     

    Ou Wen Lin sold over 1 million shares at absurdly low valuation. On Dec 9th, 2010, CFO Jacky Lam purchased 100,000 shares at 15 USD per share; on the same date, insider vehicle Bright Elite Management also sold 100,000 shares at 15 USD.

     

    Were these fully disclosed arms-length, non-related-party transactions? Who was the counterparty to Ou Wen Lin’s sale? What other information regarding these transaction is the public entitled to know?

     

    Deloitte can provide a great service to the capital markets by delivering a full and fair audit, guided by its obligation to bring to the task a full measure of “professional skepticism” as mandated by SAS 99. The easiest way to do this would just speak to the “competition” of China MediaExpress who are also Deloitte clients.

     

    Thank you in advance for looking out for the investors.
    Copies To:

     

    Tom Kwok - Lead Partner of China MediaExpress
    Vince Niblett - Global Head of Audit
    Chaly Mah - Asian Pacific CEO & Regional Managing Partner
    Pamela Brown - AP Regional Audit Leader
    Uantchern Loh - AERS Enterprise Risk Services
    Charles Lip - Head of Audit China
    Pe
    1 Mar 2011, 10:24 AM Reply Like
  • Heikki Laitala
    , contributor
    Comments (11) | Send Message
     
    These allegations sounds quite familiar? Did you copy them from deloittewatch.com? If i remember correctly did this website disappear from Internet?
    1 Mar 2011, 01:13 PM Reply Like
  • zorrba
    , contributor
    Comments (418) | Send Message
     
    I think the audit results may be leaking. CCME IS DOWN 10% as I write this. Bye Bye birdie. Bye Bye pumpers.
    1 Mar 2011, 10:25 AM Reply Like
  • m2010
    , contributor
    Comments (2) | Send Message
     
    And I think the gray matter from your brain may be leaking. Everyone has an opinion. Yours makes as much sense as mine.
    1 Mar 2011, 11:40 AM Reply Like
  • TacticalTrader
    , contributor
    Comments (38) | Send Message
     
    Breaking news: Through my internet research I have discovered the ORIGINAL internet diary of Zhang Cheng, discussing the fraud he has perpetrated. My source will not let me reveal the URL from which I located this treasure, but it finally puts to rest all the arguments concerning this company's legitimacy. No need to look to Deloitte, Starr, Global Hunter Securities, Northland, WCTBills, Eading, Switow, Cash, etc. All you need to know is in this perfectly unadulterated internet posting I located from Zhang Cheng, dated some time in the past.

     

    张互联网日记
    我今天很开心,因为我跟白人商业欺诈伎俩
    我骗白人。我赚钱。我笑他。
    哈哈
    他们认为我有一个公交车广告,但实际上只
    终身电影频道和购物频道

     

    Translation:
    Zhang into Internet Diary
    I am very happy today, because i make fraud business to trick white fool
    White fool me money, I laughed at him.
    Haha
    They think I have a bus advertising, but really only have
    Lifetime movie channels and shopping channels
    1 Mar 2011, 11:55 AM Reply Like
  • wyf
    , contributor
    Comments (93) | Send Message
     
    TacticalTrader,

     

    I am a Chinese and the Chinese you put on the blog is obvious translated by google translator since no Chinese will write Chinese like this!

     

    You actually write this stuff in English, have it translated by google translator and put it on SA and tells everyone that this should be written by CEO Chen Zheng. No, it is written by youself!

     

    If this is by Chen Zheng, why do not you tell this to SEC?
    1 Mar 2011, 04:42 PM Reply Like
  • TacticalTrader
    , contributor
    Comments (38) | Send Message
     
    Ha! Chill, my brother. It was supposed to be an obvious joke making fun of short attacks.
    1 Mar 2011, 05:17 PM Reply Like
  • wyf
    , contributor
    Comments (93) | Send Message
     
    TacticalTrader,

     

    this might be a typical example of misunderstanding based on cultural difference. You are probably from American culture and I am from Chinese culture.
    4 Mar 2011, 04:13 PM Reply Like
  • theericman
    , contributor
    Comments (10) | Send Message
     
    Funny, dude.
    "Second, the project developer - About Focus Media

     

    福州分众传媒有限公司(以下简称分众传媒)成立... 目前分众传媒电视联播网已遍布福建省数百个写字楼、星级酒店的候梯间、社区物业闭路系统等上千个网点,是福州市公安消防支队指定媒体及合作媒体,5·18 指定媒体及宣传合作媒体,是新浪网、福建电视台... Fuzhou Focus Media Co., Ltd. (hereinafter referred to as Focus Media) was founded in 2002, is the second, Fujian Province, a media intelligence company, is developing the first buildings in Fujian Province, television media company, Focus Media now TV network has been hundreds of offices around the Fujian Province, the candidate star hotel staircase, community property system, thousands of closed-circuit outlets, Fuzhou City public security fire brigade official media and co-media, media and publicity co 5.18 designated media, Sina , Fujian TV, Fuzhou Daily, Fuzhou Evening News, Strait News, Southeast Express and other media, strategic partners, with the most massive white-collar groups in Fujian Province, brought together the largest concentration of business people, is a collection of new media development, brand publicity as one of the all-round, multi-level brand development base, its comprehensive strength among the industry first.

     

    This description of the sponsor does not sound like CCME - it sounds more like Fuzhou Focus Media which was acquired by Focus Media" Chimmin screwed up again.
    1 Mar 2011, 01:25 PM Reply Like
  • BullMarket
    , contributor
    Comments (67) | Send Message
     
    Anyone interested in CCME should visit the Friends of CCME Facebook Page.

     

    www.facebook.com/pages...

     

    -Andrew
    1 Mar 2011, 01:32 PM Reply Like
  • wyf
    , contributor
    Comments (93) | Send Message
     
    Hello everybody,

     

    since 03.02.11, I noticed that the institutional ownership has increased from less than 20% to 31%. Everyone can see this development on the page of googlefinance.com

     

    www.google.com/finance...

     

    This means that institutions are aggressively buying, while private investors are aggressively selling! I hold my 35446 shares in ccme until the publication of year end results, even if the share price is down to 0,01 $ before the publication!
    1 Mar 2011, 03:45 PM Reply Like
  • ccme_santa
    , contributor
    Comments (12) | Send Message
     
    I don't know man... IBM just issued debt... they have $10B+ in cash... I think IBM wants to spend $20B in acquisitions. Maybe CCME was keeping cash reserves for acquisitions.
    2 Mar 2011, 12:10 AM Reply Like
  • wyf
    , contributor
    Comments (93) | Send Message
     
    Hello everyone,

     

    Muddy waters defames once again ccme of fraud.

     

    I am a Chinese and let me tell you what the conversation is about on the video provided by Muddy waters on 03.03.11

     

    www.youtube.com/watch?...

     

    Accusation of Muddy Waters:
    According to Muddy Waters, specifically Carson Block, ccme should only have half of the number of buses under contracts compared to number reported by ccme to the public.

     

    The content of the conversation:
    The lady said: If a new contract with a bus operator is signed, the number of the buses under contract is announced to the public e.g. 1000 new buses are under contract on e.g. 03.03.11.

     

    To the customers of ccme: ccme provides a new number, let us say, 500. Why? Because many buses of these 1000 buses have not yet been installed with a LCD screen on the date e.g. 03.04.11 when a deal is sealed with the customer of ccme.

     

    Now it is up to you to decide whether ccme inflated the number of buses under its contract or Muddy Waters tried desperately to smear ccme!
    2 Mar 2011, 11:38 AM Reply Like
  • phinance101
    , contributor
    Comments (475) | Send Message
     
    Nice spin. Explain why the caller is so distressed that the auditors are snooping around. If there was nothing wrong, then she wouldn't be in a big panic. You are in deep trouble if you are really dumb enough to hold onto this stock. The game is over. MW has fed Deloitte leads that will uncover fraud and shamed them into action. Deloitte will not provide a cover-up for this POS company, this time. Get this dummy: Deloitte will NOT provide a clean audit on this fraud. This will be over within weeks. Delisted. Defunct. Case Closed.
    2 Mar 2011, 11:56 AM Reply Like
  • ChineseNewYar
    , contributor
    Comments (2) | Send Message
     
    The caller is distressed because she gave out the smaller, "installed" number to a non-customer who wasn't bound by an NDA, against company policy, and it was used as fuel in a bear raid. The auditors snooping around are investigating this. She is in deep trouble. You think her panic means her employer is a fraud? She isn't an executive, that panic isn't for her. She's panicked because she personally screwed up, disclosed confidential information, and shareholders got creamed in part because of her mistake. Lord knows what is in store for her, and she's desperately trying to cover up her tracks.
    2 Mar 2011, 01:30 PM Reply Like
  • phinance101
    , contributor
    Comments (475) | Send Message
     
    More lame spin. The sales rep is in trouble, because the smaller "installed" number given to prospective customers is the truth, and the number that is inflated by 100% and given to the SEC is a lie. That is fraud. The company that she works for is a fraud. Deloitte has been publicly embarrassed by MW and is crawling up the company's butt, and that is why she is in a panic.

     

    Why would the company be changing hard drives and trying to deny the proposal, unless they are a fraud? Why did the sales rep say this:

     

    "I'm afraid that the auditors might know some people from your company. They're very good. They'll keep on asking questions until they get to the point."

     

    And the point is, if you are reporting to the SEC that you are selling advertising on 27,000 buses, when you actually only have half that many, then you are a big fraud and all the other numbers you include in your SEC filings are also fraudulent.

     

    Deloitte is essentially working for Muddy Waters now. They will not give CCME a clean audit. If you are holding this POS when the word comes out, you will lose your behind. CCME will be PINK, within the next 6 weeks. All the SeekingAlpha CCME pumpers will fall silent. Nuff said.
    2 Mar 2011, 02:31 PM Reply Like
  • theericman
    , contributor
    Comments (10) | Send Message
     
    Dude good luck!
    3 Mar 2011, 01:39 AM Reply Like
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