You have to read the article again. 2waytraffic's financial performance with the acquisition of WWTBAM and Celador shouldn't effect AAGH's price per share or how WWTBAM in China is performing.
The article just simplyly stated that 2waytraffic's financial performance was related to the acquisition that just took place. In another word, they acquire WWTBAM and Celador (creater of WWTBAM) recently and that 2waytrafic probably paid premium for it. If anything it shows that WWTBAM is in demand that 2waytraffic acquired it. That is a PLUS for WWTBA
I believe that the pps comes down temporary this week instead of going up up up with much higher volume because:
1) All this week in China, it's stock market closes. Most of financial sector/brokerage firms/business closes. Those who wish to buy AAGH via their brokers can't do it. This might explain the low volume considering the post first episode. Unfortunately the exchange will not be reopened for trading until Monday, October 8.
The good news is "Since China's bull market began, the markets have opened higher each time a long holiday ends" This might be good for us.
2) Lots of news about WWTBAM are overshadows with China's national holiday ceremonies and news.
3) Lots of flippers sold and knows that they likely can get back in at the lower price this week because of the holiday in China so they sold at higher price and soon to get back in.
4) Some profit taking
5) MMs shake weak hands while a lot of investors disappointed at the performance of the stock because of price and volume is not there.
Basically, it's a perfect storm on the negative side to push price down. However I believe that PPS will go back up and hit new high by next week after the second episode and more news on expected revenue and advertisers come in.
I, personally, didn't know about this Chinese holiday week. I would had waited to get in instead of Friday and Monday. But I am not worried. Fundamentally if the ad revenue per 30 seconds spot is as I expected and PE of 5 to be used with 109 million shares, this stock should be traded at $1.74 a share. (EPS for the first year alone is already at $0.348 a share.) That number arose from revenue from Sat airing only not include the rerun on Sunday yet.
here the DD on that.
AAGH ‘s DD and some calculations and LINKs It puts us at $1.6 to $3 a share with P/E of 5, expected revenue of $3.5 millions in ads revenue per episode, cost of production is 40% of the revenue.
FACTS: You can find my numbers from articles from links I will be posting below.
We know that 30 second spots in Vietnam costs $3,400. Let say each 60 minutes show have 10 minutes of advertising time (in Vietnam, USA, China).
GDP (ppp) 2006: Vietnam’s: $3,400; China’s: $7,700 (2.26x of Vietnam’s);USA’s: $37,800 (11.11x of Vietnam’s)
Population/Market Size (2006): Vietnam’s: 85 millions; China’s: 1.3 billions (15.3X of Vietnam’s); USA’s 300 millions (3.53x of Vietnam’s)
Vietnam’s Calculation: $3,400 x 2 ads per minute x 10 minutes = $68,000 of ads revenue of 10 minutes per a 60 minutes episode.
USA’s Calculation: If we use Vietnam’s revenue and work backward to see how it compares to that of USA in 2001. $68,000 x 11.11 GDP differences x 3.53 Population differences = $2.66 million in ads revenue of 10 minutes per a 60 minutes episode.
We know that about 6 years ago in the USA, advertising revenue from the show is around $2 million per episode. $1.75 millions at 5% growth in advertising and inflation rate for 6 years = $2.35 millions. Basically, $1.75 million in 2001 equal $2.35 millions in 2007 after adjustment for interest rate.
China’s Calculation: $68,000 x 2.26 GDP differences x 15.29 Population differences = $2.35 millions. BINGO!!!!
I believe that China’s ads revenue will be around $2.35 millions for 10 minutes of ads per 60 minutes episode. But in China we have 90 minutes episode. $2.35 x 1.5 = $3.5 millions in ads revenue per Saturday new episode.
Using the USA’s cost structure (40% of ads revenue 700K/1750K), each episode in China will generate $2.1 million profit per 90 minutes episode.
104 episode x $2.1 = $218 millions in profit = $109 millions in profit for 52 episode (1 year).
What should PPS be? Remember we have other products as well. Let say other products/services generate enough revenue to cover operation and administration expenses. So net profit for 1 year forward is $109 millions.
AAGH owns 60% of CMP. Net profit for AAGH’s shareholders = $65.4 millions per year.
With 109 million shares in O/S = $0.60 a share in net profit (EPS)a year from now. With 200 million shares in O/S = $0.327 a share in net profit (EPS) a year from now.
ALSO, it’s to note that I haven’t even add the advertising revenue from the rerun on Sunday afternoon for this show in China. Maybe it’s worth $1 million extra a week in net income or $ 0.156 - $0.286 in EPS a year (60% of CMP and at 40% cost).
What will you give P/E for a company such as AAGH giving 1) in China super hot market, 2) more shows are to be under the umbrella 2) EPS’ potential of $0.327 - $0.60 a share ending 3rd qtr 2008?
Current share price $0.29 a share. This is ways undervalued. From this calculation I present, I don’t see any reason why AAGH should be traded at $1.635 - $3.00 a share right now (without adding Sunday rerun revenue). That is only P/E of 5.
ADDITIONAL: Olympic is coming and AAGH is A missing link between USA HONG KONG and CHINA.
AAGH should be traded at much higher pps than here. If CMP can retain 70% of ads revenue then, just for a quick math, we just multipier .58 to my pps. [30% + 12% from 40% cost CMP has to carry]
So at 109 million O/S, EPS = 0.348, at 5 P/E = $1.74, at 10 P/E = $3.48 a share.
So at 200 million O/S, EPS = 0.189, at 5 P/E = $0.94, at 10 P/E = $1.89 a share.
We are at .24 a share. You got to be kidding me :)
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