China Digital Media Corporation (fka CDGT)

[PaperProphet]

That EPS is a bit misleading. The company buys STB's and capitalizes them--while the installation fees go straight to revenues, the STB's get depreciated over time. Earnings are artificially inflated.

Here's the way it works--the company buys each STB for about $60, installs it in a home and retains ownership where it gets depreciated over five years. For the installation, the company gets about $18 for one-time fees from the customer. For each STB, the company books $18 in revenues and records about $3 in depreciation expense for a quarter. The gross contribution to earnings is about $15 even though they're actually down about $40 at this point.

Over time, the company hopes to make that money back with the ongoing subscription revenues/etc.... Right now it looks like they average about $7/quarter from each subscriber.

There are probably some good synergies between the advertising and the digitization project but I don't have a good feel for that yet.