China MediaExpress Holdings, Inc. (fka CCME)

[Shengli]

China MediaExpress Soon to Be a Must-Own for All China Investors


China MediaExpress (CCME) announced its FY2009 results Tuesday, and it is very clear from market action that investors are liking what they see. The earnings highlights are as follows:
Revenue increased 52.3% to $95.9 million
Gross margin was 65.7% for the year and an excellent 68.9% for Q4
Net income increased by 58.2% to $41.7 million
Cash position at the end of 2009 was $57.2 million
In addition, the company is expecting a very strong FY2010. Net Income is expected to come in between $71 million and $75 million, and this excludes the impact of "any possible acquisitions, addition of new buses and new investments in other media projects in 2010".

If this projection holds, we're talking about a 2010 fully-diluted EPS of $1.75 to $1.85, representing a net income growth of 70%-80% YOY. My previous estimates of CCME's 2010 EPS was $1.73, so this is very much in line with my expectations. Still, bearing in mind possible accretive acquisitions, this estimate could well be on the low end.

And yet, we haven't even factored in the most interesting aspect of this. While its year-end cash position was $57.2 million, the company currently has more than $100 million in the bank, given an investment earlier this year by Starr International, exercise of all its outstanding warrants, and settlement of a promissory note. If one adjusts the company's market capitalization for this cash amount, and divides it by the conservative end of the net income estimate ($71 million), we get a 2010 P/E of only 6.9x. That's pretty low.

I think the stock is now pretty much unstoppable, barring any negativity in overall market sentiments. CCME was up by more than 18% Tuesday, and judging by the momentum, there should be enough steam left for further gains.

The closing price Tuesday was $14.54, and while this may not have been the all-time high (the intraday high of $14.82 from 1/19 still holds), this is the first time the stock has closed above $14.00. In any case, its day high of $14.57 is a mere whisker from the all-time high, so this is a matter of splitting hairs.

I think a target price of $20 for CCME is now very much in sight. If the company uses its cash wisely, and does not dilute its shares too much going forward, this stock will become a must-own stock for all China investors going forward.


http://seekingalpha.com/article/195259-china-mediaexpress-soon-to-be-a-must-own-for-all-china-investors?source=yahoo