HKI

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

Rosezee, I did the same analysis you did but got different numbers. The DSO excluding CGEN is 127 days which is similar. But I have 111 days for Q4 07, 102 days for Q3 07 and it does look to be up. The one thing missing in this analysis is seasonality as Q1 DSO has always been highest as you have the weakest quarter in revenue.

To adjust for this, I looked at DSO based on revenue in last 2 quarters and last 4 quarters. Here are the results for the last 5 quarters:

DSO based on current Q: 149, 96, 102, 111, 127
DSO based on 2Q: 145, 145, 159, 153, 132
DSO based on 4Q: 136, 127, 117, 118, 121

After adjusting for seasonality, the DSO looks to be flat or down. And Wu actually said on the call that Q1 is a seasonally weak quarter so he was spot on. This also refutes George's original comment that DSO is trending up. I do agree with the criticism that the absolute level of DSO is high though.

On the subject of AR, the other topic worth pointing out is that the US$40 mil of receivables for CGEN seems extremely high. A revenue in Q1 of US$10 mil but US$40 mil in AR? No collections for a year?

I am long FMCN