China Growth Stocks

[GorillaGorilla]

CCME Estimated Net Income vs Actual Net Income

I'm looking at CCME's Net Incomes estimates vs the actual results.

Looking at the 3 FY Net Income estimates given with each quarters results. The first column is the actual aggregated NI (AggNI) to that point in the year. The second column is what management estimated for the rest of the year (EstNI). The third column is simply find the average estimated NI for the rest of the year(AVGEstNI). Fourth Column is the remaining quarters (RQ).

When..AggNI(M)..EstNI(M)......AvgEstNI(M).....RQ
Q1......18.........71-75................73.................3
Q2......47.........82-85................84.................2
Q3......78........100-104..............102.................1

Now, if we take the AvgEstNI and subtract the AggNI and divide all this by the remaining quarters in the year (RQ) we can get an idea of how much Net Income they are expecting in each of the remaing quarters (EstPerQNI). However, the actual average quarterly NI in Q2 and Q3 has been 30M.

When...EstPerQNI.........
Q1......18..((73-18)/3)..
Q2......19..((84-47)/2)..
Q3......24..((102-78)/1).

So, while the company has been estimating between 18 - 19M they have been averaging 30M - so they have beaten management estimates by approximately 60%. It goes without saying that this is conservative to the point of irrelevance.

The business is not particularly cyclical - a bit less in Q1 and a bit more in Q4. The business is a monopoly - so no competitors cramping the margins and the buses are contracted and will increase in Q4. In other words I find it difficult to see why then won't be getting 30M and perhaps more.

The company is cheap under any metric even if they only do 24M in Q4 but recent history suggests that CCME's management are shooting low. I feel like I'm stating the obvious here but sometimes I feel compelled to state it.

rich