Stock Alert for China MediaExpress Holdings Inc. (CCME)
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    Stock Alert for China MediaExpress Holdings Inc. (CCME)

    China MediaExpress Holdings Inc. (CCME), founded in 2003, is China’s largest television advertising operator on inter-city and airport express buses. The Company generates revenue by selling advertisements on its network of television displays installed on over 27,200 express buses originating in eighteen of China’s most prosperous regions, including the four municipalities of Beijing, Shanghai, Tianjin and Chongqing and 14 economically prosperous regions, namely Guangdong, Jiangsu, Jiangxi, Fujian, Sichuan, Hebei, Anhui, Hubei, Shandong, Shanxi, Inner Mongolia, Zhejiang, Hunan and Henan.

    Share Statistics (11-Mar-11) FY

    2008

    FY

    2009

    %

    Chg

    Q3

    2009

    Q3

    2010

    %

    Chg

    Symbol CCME Revenue, $Mn 63.00 95.93 52.3% 26.12 56.96 118.1%
    Current price $11.88 Gross marg. 60.2% 65.7% 9.1% 67.0% 76.8% 14.6%
    52wk Range: $7.58-$23.97 Oper. margin 59.0% 72.4%
    Avg Vol (3m): 2,988,970 Net margin 41.9% 43.5% 3.8% 44.6% 54.7% 22.6%
    Market Cap. 438.39M
    Shares Outstanding 34.29M EPS, $ 1.26 1.81 43.7% 0.56 0.81 44.6%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of CCME were halted for trading on the Nasdaq Stock Market Friday pending a news release from the Chinese advertising company. CCME fell 53 cents, or 4.3%, to $11.88 before the trading halt was called.

    Bloomberg today pointed to a daily publication from Nasdaq in which CCME has been listed as a threshold security, as sellers failed to deliver 10,000 shares or more in the past five trading days and the level of “fails” is a minimum of 0.5% of the shares outstanding.

    Saxena White P.A. recently announced that a securities fraud class action has been filed against CCME, with the complaint alleging that the Company and certain of its officers and directors violated the federal securities laws by failing to disclose material information, including misrepresentation of the number of buses in its advertising network, as well as the nature and extent of its business relationships.  Investors alleged that the Company overstated its financial results at all relevant times.  The case has been filed in the U.S. District Court for the Southern District of New York on behalf of investors who purchased the company shares between the period of November 8, 2010, through February 3, 2011, inclusive

    Last month, research firm Muddy Waters Research released a report alleging that the Company inflated revenue and profit in order to enrich management through earn-outs and stock sales. The firm stated in its report: “In light of the nature of the evidence, we believe that a de-listing from NASDAQ is not improbable; further, we believe that management stands to lose additional credibility.” The firm has reduced its estimated value by one-third to $3.54.  CCME plummeted on the report.

    Prior to the release of Muddy Waters’ research report, another firm called Citron Research disputed CCME’s claim to be the fastest growing U.S.-listed Chinese media company. According to the firm’s report, “China Media misrepresented the scope of the Company’s operations, its financial performance, and the extent of the Company’s claimed strategic partnership with a government-affiliated entity.”

    CCME, in February responded to what it calls “factual inaccuracies and misleading innuendo employed by bloggers for their self-benefit.”

    CCEM CEO Zheng Cheng, in a letter to shareholders last month, defended the Company against what he said was an attack by short-sellers. “The manner in which the short sellers seem to have timed and coordinated their efforts plays into their ultimate strategy, ” the letter stated.  “By using the anonymity of the Internet and publicizing as many unfounded allegations as they can craft, they can make it look as if there is a ground swell of criticism against the Company when in reality all the claims emerge from a small group of self-interested parties.”

    Visit CCME at www.ccme.tv

    Financial Summary

    For the quarter ended September 30, 2010, CCME reported revenue of $57.0 million, up 118% from 26.1 million in the same period a year ago.  During this period, the Company reported gross margin of 76%, compared to 67.0% in the same period of 2009.  Income from operations was $41.2 million, up 166% from $15.5 million in the third quarter of 2009.  Net income came in at $31.1 million, or $0.81 per diluted share, up 167% from $11.7 million, or $0.56 per diluted share, in the same quarter in 2009.

    For the nine-months period, the Company reported revenue of $155.0 million, up 142% from $64.0 million in the same period of 2009. Gross margin was 72.6% as compared to 64.1% in the year-ago period.  Income from operations was $103.8 million, up 179% from $37.2 million in the same period last year. Net income came in at $77.8 million, or $1.86 per diluted share, up 184% from $27.4 million, or $1.31 per diluted share, in the same period a year ago.  As of September 30, 2010, the Company had approximately $170 million in cash.

    Source: www.ccme.tv


    Financial Strength (11-Mar-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.34 0.52 0.66
    Current Ratio (MRQ) 6.85 1.58 0.66 0.97
    LT Debt to Equity (MRQ) 0.00 18.20 17.51 116.69
    Total Debt to Equity (MRQ) 0.00 21.27 31.45 166.96
    Interest Coverage (TTM) 0.19 0.18 16.06

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Analyst Recommendations and Revisions

    1-5 Linear Scale Current 1 Month
    Ago
    2 Month
    Ago
    3 Month
    Ago
    (1) Buy 2 2 2 2
    (2) Outperform 0 0 0 0
    (3) Hold 0 0 0 0
    (4) Underperform 0 0 0 0
    (5) Sell 0 0 0 0
    No Opinion 0 0 0 0
    Mean Rating 1.00 1.00 1.00 1.00

    Source: http://www.reuters.com/finance/stocks/analyst?symbol=CCME.O

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Mar-11 1 63.50 63.50 63.50
    Quarter Ending Jun-11 1 71.20 71.20 71.20
    Year Ending Dec-11 2 314.47 329.20 299.74
    EARNINGS (per share)
    Quarter Ending Mar-11 1 0.62 0.62 0.62
    Quarter Ending Jun-11 1 0.70 0.70 0.70
    Year Ending Dec-11 2 2.98 3.04 2.93
    LT Growth Rate (%) 1 22.50 22.50 22.50

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=CCME.O

    Technical Analysis

    Source: http://stockcharts.com

    CCME is below its 20-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

    CCME is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    The MACD for CCME currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Mar11-2011 symbol Share, $ $ Mn 2010 2011 2010 2011
    Focus Media Holding Ltd. FMCN 28.80 4.09B 20.87 6.65
    VisionChina Media Inc. VISN 3.95 334.69M 49.38 1.76
    AirMedia Group Inc. AMCN 5.16 338.45M 13.23 1.15
    Advertising Agencies Median n/a n/a n/a n/a
    China MediaExpress Holdings Inc. CCME 11.28 438.39M 4.19 3.77 2.04 1.39

    Source: Thomson Financial

    Source: Yahoo Finance

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