The first-quarter results of Focus Media Holdings Ltd on the
Nasdaq outperformed NetEase.com Inc, making it the best Chinese concept share on
the US exchange market.
Focus Media CEO Jiang Nanchun's personal wealth shot up to US$700 million on
his 25 per cent stake in the company.
The financial statement, released last Friday, showed that Focus Media's
pre-tax revenue for the first quarter was US$33.1 million, a 246 per cent surge
over the same period last year.
The company reported a net profit of US$9.4 million, more than 2.5 times that
of the first quarter of 2005.
The release sparked a quick response from the stock market, pushing Focus
Media's share price up 12 per cent to close at US$69.18 last Friday.
Based on 41.55 million shares released, Focus Media's overall stock value
reached US$2.87 billion, exceeding the US$2.79 billion record from NetEase.
Focus Media's first-quarter statement combined for the first time the
performances of Framedia and Target Media, the company's two recent
acquisitions.
In November last year, Focus Media purchased 100 per cent of Infoachieve Ltd
to take over Framedia, a Shanghai-based advertising company which owned the
largest elevator advertising network in China.
In January this year, Focus Media acquired competitor Target Media at a price
of US$325 million.
The two acquisitions consolidated Focus Media's unrivalled position in
China's fast-growing out-of-home advertising market, mainly advertisements seen
in offices and retail stores.
According to the statement, the office liquid crystal display (LCD)
advertising network more than doubled its contribution over last year to reach
US$21.5 million in the first quarter.
Advertisements on the LCDs of retail stores were sold for US$5.3 million and
poster advertisements US$6.1 million during the period.
After it merged with Target Media, Focus Media cut down the costs of
developing and operating office LCD advertisements throughout the country, Jiang
Nanchun was quoted by the Oriental Morning Post as saying.
He was also happy to see the rental costs of the LCD locations in offices had
dropped.
All this means the synergistic effect of the acquisitions is taking
shape.
Jiang said his company will capture more offices and phase out the discounts
on LCD advertisements offered in the past to fight the competition.
Prior to Focus Media's financial statement, other Chinese concept shares on
the Nasdaq also released their first-quarter statements.
NetEase posted a net profit of US$36.6 million while Sina.com saw net profits
drop by 30 per cent to US$7 million.
In terms of price-to-profit ratio, measuring a listed company's
profitability, Focus Media came top at 82.36, followed by Sina.com at 38.88 and
NetEase at 21.98.
In the three business models represented by the three listed companies,
Sina.com, known as a "news supermarket," gained 44 per cent of its income from
advertising while NetEase made 81 per cent of its income from online games.
Jiang made Focus Media known by initiating the brand-new concept of
out-of-home LCD advertisements in the China market.
The Shanghai-based group boasts the country's largest out-of-home
audio-visual advertisement network, which covers 100 cities and 100,000
terminals and has about 100 million viewers.
"Our expanding network enables us to achieve further media segmentation and
provides advertisers with more targeted channels so as to improve their
investment return," Jiang told the China Daily Shanghai & Delta edition in
an earlier interview.
Audio-visual advertising on LCDs has mushroomed in Chinese offices, grocery
stores, outdoor signs and posters in the past three years.
China's out-of-home advertisement spending was about US$1.4 billion in 2004,
equivalent to one-third of the country's TV advertisement expenditure and half
of newspaper advertising.
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