Some Companies Are Getting it Right
Thursday, March 20th, 2008
By Mitchell Clark, B.Comm. for Profit Confidential
It doesn’t happen very often, but every once in a while, I find a company that gets just about everything right.
One such company is called Focus Media Holding Limited (NASDAQ/FMCN) and it was one of the first major China stocks to generate significant interest from domestic investors.
I first wrote about this company in this column in January 2006 when the stock was trading around $22.00 per share (split adjusted). It then proceeded to appreciate to just over $65.00 per share, and has now settled in the current correction around $40.00 per share.
Focus Media, founded in 2003, operates the largest “out-of-home” audiovisual advertising network in China. The company installs super-thin, flat-panel displays in high-traffic areas, such as elevator banks of commercial office buildings and in the aisles at large retail chain stores. The company provides an advertising platform to a high concentration of consumers with higher-than-average disposable incomes.
Focus Media’s commercial operation is the largest office building audiovisual advertising network in China, targeting white-collar business professionals. As of the end of December 31, 2007, the company was operating 112,298 LCD displays in its commercial location network, approximately 49,452 LCD displays in its in- store network and 179,649 advertising in-elevator poster frames, installed in over 90 cities throughout China.
Business is booming for Focus Media. In its latest fourth quarter, company revenues grew 171% to over one hundred and eighty- four million dollars, up from sixty-eight million dollars in the fourth quarter of 2006, and up 22% from the third quarter of 2007.
Net income for the fourth quarter of 2007 was almost forty-four million dollars, representing an increase of 46% over net income of just over thirty million dollars generated in the fourth quarter of 2006.
For all of 2007, total revenues grew 139% to over five hundred and six million dollars. Full-year net income was an impressive one hundred and forty-four million dollars, representing growth of some 74% over 2006.
Clearly, the LCD advertising business in China is booming and not only that — it’s extremely profitable. One hundred and forty-four million dollars in profit on sales of just over five hundred million dollars is an outstanding accomplishment.
Focus Media is a company that I think has a very bright future. The company expects its 2008 revenues to grow to over nine hundred million dollars, representing estimated growth of approximately 80%. What a great business to be in.
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Tags: china, chinese stocks
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
