A 'Buy' or 'Shrinking Violet'? Analysts Debate Growth Prospects
Shares of Focus Media Holding are flagging, raising questions about whether the Chinese advertising company can sustain its rapid growth.
The American depositary receipts have dropped about 8% on the Nasdaq Stock Market since late September, compared with a 5% rise in the Nasdaq Composite Index. Several developments contributed to the decline, including concerns about rising competition and a large stock sale by Jason Jiang, the company's founder and chief executive. Investors also were spooked by retailer Wal-Mart Stores' agreement to acquire Trust-Mart, a Taiwan hypermarket chain with operations on mainland China. Trust-Mart is a Focus Media client, and some investors worry that Wal-Mart might not continue that arrangement.
Expansion Plans
Some analysts are calling the weaker shares a buying opportunity. But others, including Vivek Couto, with Media Partners Asia in Hong Kong, say the central issue for Focus Media is whether the company is expanding its business sufficiently to justify the $75 to $77 share price some analysts are expecting over the next 12 months. Focus Media ADRs traded at $56.12 at 4 p.m. Friday. The company's initial public offering in July 2005 was priced at $17 a share, and the stock traded as high as $69.95 in May.
Focus Media executives declined to comment on the company's prospects, citing a regulatory quiet period before the announcement of third-quarter earnings.
Shanghai-based Focus Media's primary business is to run advertising that targets affluent professionals in China by broadcasting 30-minute loops on television screens in elevator lobbies. The company has a monopoly in many of its markets, including Beijing and Shanghai. A string of acquisitions over the past 12 months has enabled Focus Media to expand the model to supermarkets, mobile phones and movie theaters.
This year, the company acquired Framedia, which installs ads in elevators of residential properties. One month later came the purchase of Target Media, the company's biggest rival in its core business of screen-based advertising in commercial buildings. In March, Focus Media swallowed Dotad Media, a mobile-phone advertiser, renaming it Focus Media Wireless. Most recently, it acquired Appreciate Capital, which operates a movie-theater advertising network.
These acquisitions are fueling much of the company's earnings growth. For the second quarter, Focus Media reported total revenue of $50.6 million. The company's filing emphasized a 53% rise in revenue from the previous quarter.
Much of the new revenue was generated from the acquired businesses. For instance, about $24 million of the revenue came from the company's core business, not including the Target Media acquisition. That same core business generated $19.6 million in revenue for the first quarter, meaning revenue from the core business rose a more modest 22% from the first quarter.
'A Simple Story'
On the theory that the price is cheap, some of its fans are encouraging investors to buy ahead of the third-quarter results, which are due out in two weeks. In a Nov. 1 report titled "No Shrinking Violets Here," Citigroup analyst Jason Brueschke rates the company a "buy," explaining, "We believe that the company's 'out-of-home' advertising business is a simple story with significant intuitive appeal for advertisers. This medium is an emerging, and we believe superior, alternative to TV and possibly Internet brand advertising."
The Citigroup report followed one by Goldman Sachs a few weeks earlier. Goldman's private-equity arm was one of the early investors in Focus Media and managed the IPO. Goldman analyst Kit Low also is bullish on the shares, writing, "Despite recent news flow on competition, we do not see any material change to the out-of-home TV landscape that could threaten Focus's dominant market share." Worries that China's state-owned media company might try to compete with Focus Media's city networks remain unfounded so far, Mr.Low says. His target price for Focus Media stock is $75.
Since the IPO, shares of Focus Media, which has a market capitalization of $2.9cbillion, have more than tripled, turning Mr. Jiang into a celebrity in China. More than $500cmillion of his personal wealth remains tied up in Focus Media shares.
Mr. Jiang's stamp on the company is so pronounced that his possible departure is listed in Focus Media prospectuses as a "risk factor" for investors to consider before purchasing shares.
Investors got the jitters when Mr. Jiang disclosed in late September that he planned to sell 22.5% of his own shares in the company. One hedge-fund manager, who doesn't own shares in Focus Media, says he interpreted the sale as a sign that the company's prospects had dimmed.
Moreover, advertisers in China's so-called second-tier cities, such as Chengdu and Changsha, have resisted paying higher ad rates. Early on, Focus Media investors had voiced concerns about whether the company can sustain its growth pace by increasing rates and expanding its commercial-advertising networks to new cities. In the first year after the IPO, the stock climbed on assumptions that both trends would continue. Those assumptions are now in question.
分众传媒增长势头减慢
分众传媒控股有限公司(Focus Media Holdings)的股价不断走低，使人们质疑这家高速发展的中国广告公司能否维持强劲增长的势头。
相关报导
? 分众传媒将收购中国国内最大竞争对手
? 沃尔玛将收购中国连锁超市好又多
该公司在那斯达克股票市场上市的美国存托凭证自9月底以来已下跌约8%，而那斯达克综合指数同期内上涨了5%。多项因素变化导致了该股的下跌，其中包括市场对竞争加剧和该公司创始人、首席执行长江南春(Jason Jiang)大量卖出股票的担忧。美国零售商沃尔玛连锁公司(Wal-Mart Stores)收购台湾超市连锁店好又多(Trust-Mart)也令投资者感到惊慌。好又多在中国大陆开展业务，是分众传媒的客户，部分投资者担心沃尔玛可能不会再同分众传媒保持广告业务。
部分分析师认为目前股价走低是一个买进机会。但包括Media Partners Asia驻香港分析师维韦克?库托(Vivek Couto)在内的一些人则表示，分众传媒的核心问题是公司的业务增长能否支撑部分分析师给该股设定的75至77美元的12个月目标价。
上周五，分众传媒收于56.12美元。该公司2005年7月时的首次公开募股价为每股17美元，今年5月份创出了69.95美元的高点。
分众传媒的管理人员对公司的前景不予置评，称目前处于公布第三季度业绩前的监管沉默期。
分众传媒的总部位于上海，主要业务是面向中国富裕的白领阶层，在电梯中的电视屏幕上以30分钟为周期循环播出广告内容。该公司在北京和上海等许多市场上都占有垄断地位。过去12个月中进行的一连串收购使其将这种模式扩大到超市、手机和影院中。
分众传媒今年收购了在居民区的电梯中安装框架广告的上海框架广告发展有限公司(Framedia)。一个月后，又收购了在写字楼屏幕广告这一核心业务中的最大竞争对手聚众传媒(Target Media Network)。今年3月，分众传媒收购了手机广告公司北京凯威点告网络技术有限公司(Dotad Media)，并更名为分众无线传媒(Focus Media Wireless)。不久前，分众传媒又收购了经营影剧院广告网络的Appreciate Capital。
这些收购推动了该公司的收益增长。第二季度，分众传媒的总收入达到5,060万美元。该公司提交的报告中强调，收入比前一季度增长了53%。
新增收入主要来自于被收购的业务。比如，总收入中约有2,400万美元来自于该公司的核心业务，其中不包括被收购的聚众传媒。第一季度此项业务的收入为1,960万美元。这项数据显示，不包括公司进行的收购，第二季度分众传媒的核心业务收入比第一季度增长了22%。
从理论上讲，目前的股价偏低，部分看好该股的分析师鼓励投资者在公布第三季度业绩前买进该股。两周后分众传媒将公布业绩。花旗集团(Citigroup)分析师詹森?布鲁思克(Jason Brueschke)在11月1日的研究报告中对该股评级为买进，他说，相信该公司的户外广告业务将对广告客户产生巨大的吸引力。这是一个新兴的广告媒介，相信这将是对广告，甚至互联网品牌广告一个很好的补充。
几周前，高盛集团(Goldman Sachs)也发布了一份研究报告。高盛集团的私人资本运营子公司是分众传媒的早期投资者之一，曾担任该公司IPO的经办人。高盛分析师基特?罗(Kit Low)也建议投资者持有该股。他写道，尽管最近有关竞争加剧的消息不少，但我们认为户外电视广告行业并没有出现可能危及分众传媒市场垄断地位的变化。他说，迄今为止，对中国国有媒体公司可能同分众传媒竞争城市广告网络的担忧还不成立。他预计分众传媒的目标价位为75美元。
该公司预计，第三季度收入将在5,800万美元至6,000万美元之间。
自IPO以来，分众传媒的股价已经上涨了两倍多，市值达到29亿美元，江南春也一跃成为中国的知名企业家。他的5亿多美元的个人财富仍同分众传媒的股价密切相关。
江南春对该公司举足轻重的作用使其可能离任也被列为招股说明书中的风险因素，供投资者在购买股票前参考。
当江南春9月底披露计划出售他所持22.5%的公司股份时，不少投资者感到担忧。一位不持有分众传媒股票的对冲基金经理称，他认为这是该公司前景黯淡的一个迹象。
而且，在中国的成都和长沙等二线城市，广告客户不愿支付更高的广告价格。早些时候，分众传媒的投资者曾对公司能否通过提高广告价格和将广告网络扩展到新的城市来维持增长速度表示了担忧。在IPO之后的一年里，该股大幅上扬是基于这两个趋势会延续下去的假设。但这种假设目前受到了质疑。
Laura Santini
