AI
Sunday, April 24, 2011 8:00:07 PM
CCME VALUATION
The question in my mind: What is the 'fair' price when the trade resumes? One extreme suggesting <$2 while the other extreme as high as $100 due to short squeeze. The last thing I want to do is emotion-driven trade.
Absent of real information at this point, I created different scenarios of CCME valuation. The scenarios are based on:
1. % of the company is real. I used a range from 25% real to 100% real. I scaled total Net Income for the last 4 known quarters of $92M accordingly.
2. P/E Valuation. I used 37M outstanding shares as the basis of EPS in this calculation. P/E multiples range from 5x to 17.5x. As comparison, current P/E of FMCN: 27.4x.
3. P/E Valuation excluding cash. Given the large cash balance relative to total market cap, I tried to find P/E from the enterprise portion only. I scaled cash balance (basis is $170M as of last 10Q3 report) the same way as #1 above.
Looking at the scenarios above, share prices of less than $5 seems way too oversold, unless CCME is close to shell only company. A lot of data (recent CTR report, many previous DD’s) does not support that at all. At P/E (excl. cash) = 10x and only 50% company is real, the price should be ~$15; so sub- $10 seems quite a bit stretch IMO. In fact, given the robust growth of Chinese economy I won’t be surprised that the general ad market is booming even faster. My conclusion is: it seems at the current halted price, the risk is on the upside.
The tables above obviously do not comprehend neither the fear factor nor the short-squeeze factor nor any huge surprises from the management.
For you enjoying data overload, pls PM me if you want me to run different scenarios.
The question in my mind: What is the 'fair' price when the trade resumes? One extreme suggesting <$2 while the other extreme as high as $100 due to short squeeze. The last thing I want to do is emotion-driven trade.
Absent of real information at this point, I created different scenarios of CCME valuation. The scenarios are based on:
1. % of the company is real. I used a range from 25% real to 100% real. I scaled total Net Income for the last 4 known quarters of $92M accordingly.
2. P/E Valuation. I used 37M outstanding shares as the basis of EPS in this calculation. P/E multiples range from 5x to 17.5x. As comparison, current P/E of FMCN: 27.4x.
3. P/E Valuation excluding cash. Given the large cash balance relative to total market cap, I tried to find P/E from the enterprise portion only. I scaled cash balance (basis is $170M as of last 10Q3 report) the same way as #1 above.
Looking at the scenarios above, share prices of less than $5 seems way too oversold, unless CCME is close to shell only company. A lot of data (recent CTR report, many previous DD’s) does not support that at all. At P/E (excl. cash) = 10x and only 50% company is real, the price should be ~$15; so sub- $10 seems quite a bit stretch IMO. In fact, given the robust growth of Chinese economy I won’t be surprised that the general ad market is booming even faster. My conclusion is: it seems at the current halted price, the risk is on the upside.
The tables above obviously do not comprehend neither the fear factor nor the short-squeeze factor nor any huge surprises from the management.
For you enjoying data overload, pls PM me if you want me to run different scenarios.
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