punter888

Focus Media: May Be Growing Fast But What About The Cash?

Word on the street is that the real reason is regulatory problems. I sat in a meeting where the CFO noted that "Focus didnt' have the economies of scale to install an automated screen updating system. But, other industry partcipants I speak to say that apparently they do have the scale, and they do have such a system installed, and this requires a broadcasting license that they don't have. The hearsay/theory goes that they are being forced to turn off screens as a result of this, and talk of snowstorms/earthquakes... etc, is smoke and mirrors. Against this backdrop, George's comments resonate.....if they are having real problems on the revenue front, then the temptation of managers will be to fake revenues and worry about the bad debt provisions later. Although I haven't studied the A/R patterns of FOCUS, I take heed of Georges comments in that we shouldn't always be fooled into believing in "cheap PE's" etc when the E on which the PE is built isnt robust. Short positions in these situations, lookin beneath the surface and questioning the consensus, is where real fortunes are built.