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China New Media (CMDI) Strong Growth in Advertising in China

Outlook Bright for Advertising Firm China New Media on 3Q Earnings Announcement
The future looks promising for China New Media Corporation (OTCBB: CMDI), a fast-growing advertising company operating the largest outdoor media network in Dalian City, China.  The company recently released very positive financial results for the third quarter of fiscal 2010, and management indicated that growth prospects for the near future were also high. 

Two of the most noteworthy figures announced were revenue and earnings growth, which came in at 95.7% and 70.6% year-over-year, respectively. The company attributed the nearly triple-digit top-line growth to the rapid expansion of its advertising network, new attractive advertising locations in Dalian, and its widening customer base.  The final reason deserves highlighting, as the company has nearly tripled its number of customers over the past nine months – it currently has 1,567 clients, up from 562 at the end of fiscal 2009.  The company’s more than 200 high-profile advertising clients include international brands like Pepsi, Mercedes, Sony, KFC, Coca-Cola, Amway, HP, Canon, and HSBC, as well as many popular domestic brands.

China New Media operates in outdoor advertising, an emerging, fast-growing niche of the Chinese advertising market. Total advertising spending in China has maintained double digit annual growth over the last decade, and outdoor advertising has consistently outperformed other advertising venues in terms of growth.  CMDI generates its revenues through three major channels: (1) a network of street fixtures and displays, which includes bus and taxi shelters and makes the largest contribution to total revenue; (2) outdoor billboards and large LED displays along city streets and highways; (3) mobile advertisements displayed throughout Dalian’s city transit system, including wrapped buses and displays throughout Dalian’s metro-train system. 

The Company is also generating growing revenues from City Navigator, its new interactive, multimedia outdoor advertising platform which combines an LED display, Wi-Fi, Bluetooth, the Internet, and printing technologies.  City Navigator is intended to provide a convenient source of on-the-go information to pedestrians, who can either print out or send information about local businesses and attractions to their phone or computer. The response from advertisers and users since the initial July launch of the network in Dalian has been very positive, and the Company plans to both increase the number of units in Dalian and expand City Navigator into Shenyang, Tianjin, Qingdao and Shanghai.

Another factor contributing to short-term growth for China New Media is its “Strait Hundred-Screen Information Display Network” Project, also known as the Hundred Screens Project.  Under an agreement with Beijing Shidai Lianxin Cultural Propagation Co., CMDI will install about 100 large LED screens throughout commercial districts, airports, and other high-visibility areas of Beijing which will be used for advertising and cultural information broadcasting.

Judging by its recent financial performance, China New Media seems to be effectively executing its aggressive growth strategy while avoiding overextending itself and hurting profitability.  With double-digit industry growth and the Company’s plans to expand into other Tier-1 and Tier-2 Chinese cities, China New Media is a great stock to watch over the next few years.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.



Disclosure: We are Long and believe that CMDI will achieve strong long term growth and appreciation in share price