FMCN - Focus Media

Focus Media (Nasdaq: FMCN)
Sector: Services
Industry: Advertising Agencies

Business Profile (source: Yahoo! Finance)
Focus Media Holding Limited operates out-of-home advertising network using audiovisual television displays in the People's Republic of China. Its out-of-home advertising network consists of commercial location network, in-store network, poster frame network, mobile handset advertising network, outdoor LED network, and movie theater network.

LOB:

The commercial location network includes flat-panel television displays placed in high-traffic areas of commercial buildings, such as in lobbies and near elevators, as well as in beauty parlors, karaoke parlors, golf country clubs, auto shops, banks, pharmacies, hotels, airports, airport shuttle buses, and in-air flights.

The in-store network consists of flat-panel television displays placed in the personal care, food, and beverage sections, as well as in hypermarkets, supermarkets, and convenience stores.

The poster frame network comprises advertising poster frames placed primarily in the elevators and public areas of residential complexes, which are marketed under the brand name Framedia.

The mobile handset advertising network offers WAP-based mobile handset advertising services on the mobile telecommunications networks.

The outdoor LED network consists of leased 5' x 5' LED digital billboards installed on the street-sides in shopping districts and other locations with pedestrian traffic in Shanghai.

The movie theater network consists of movie theaters, which the company leased approximately three minutes of screen-time prior to each showing of a movie in the People's Republic of China.

As of March 31, 2007, Focus Media had approximately 90,000 display units in its commercial location network; 40,700 display units in its in-store network; 124,500 advertising poster frames installed throughout China; and 200 outdoor LED displays in Shanghai. The company was founded in 1997 and is headquartered in Shanghai, the People's Republic of China.

Competitive Advantage:
80% of the in-store network. Near-monopoly in this market in Beijing and Shanghai.

Customers:
Consumer brands: Mercedes, Buick, Proctor & Gamble. Companies spending about 10% of their budget in advertising.

Financials:
China ad market: $13 billion vs. US ad market: $155 billion.
Shares outstanding: 128 million
Earnings:
2007: $1.42 per share
2008: $2-2.50 per share
2009: $3.25 per share

Earnings growth: 30% per annum.
Current stock price (Jan 20, 2008): $47.82
YTD Performance: -16% (down $9.31)

Key Statistics (Source: Yahoo! Finance)
Market Cap: $5.85 B
Debt: $0

Profit margin: 33.52%
Operating margin: 32.86%

ROA: 6.53%
ROE: 11.67%

Reason for buying:
Increased interest in advertising buoyed by 2008 Beijing Olympics.

S&P500 Rating: 3 stars (Hold)