I find 2011 projections by analysts a bit funny. Yes, 2011 will have CCME do some contract-framework-renewals but since the *new* contracts are not lower margin than the old ones, why would a old-contract renewal give us lower margin than a *new* contract? Simply doesn't make sense to me that it would cause a huge margin drop unless things change for the company's bidding process (No sign of it happening).
Lets look at where growth will come from (and dilution):
1) 15%ish share increase from earn-out.
9) Rate hike for bus concession fees of 15%
3) 15% ad rate hike in January 2011, this should completely offset #1 and #2 with regards to EPS if margins remain the same (Assumes NO further ad rate hikes all of 2011, unlikely).
4) Current market expansion of at least 20-25% in inter-city segment and airport segments. Safe assumption addition to network-size in previous years.
5) Expansion into tourism buses -- new market (will happen)
6) Skymall -- new business segment
7) Expansion into highspeed trains -- new market (maybe happen)
8) Bus-Stand LCD -- new business segment (Was in Beta in June) -- Not sure how successful it will be or how significant, so I don't expect much until they show me the pudding from this one.
9) Continued move to direct-sales => higher revenues/margins -- Cutting out the middle man is good.
10) Increase in ad-minutes-per-hour available -- No reason to keep it at 10min ad for every 30min content. What if it became 4min ad for every 10min content? Or 7 minute ad for every 15min content? Boom, instant huge ad-inventory increase.
11) Use of 170M+ cash for acquisitions.
So there we go, multiple sources of EPS growth going forward into 2011. How much we see depends on the success of each one of the above points. I can easily see 30%+ EPS growth being built-in simply from conservative network-size expansion expectations and expansions into new markets (ie: Tourism buses). Anything on top of that would be gravy and everybody is free to predict how much each initiative could contribute to EPS in 2011.
-Fernando
