China MediaExpress Holdings, Inc. (NASDAQ GS: CCME) (“CME” or “Company”), China’s largest television advertising operator on inter-city and airport express buses, today announced that it has signed two new long-term agreements, which will add a total of 2,067 inter-city buses to its network. Specifically, CME signed the following contracts:
•A long-term agreement with a media company to purchase the exclusive right to operate television screens and supply entertainment programming along with paid advertising on 635 inter-city express buses originating from the province of Henan, for a period of five years commencing on December 1, 2010. In accordance with the framework agreement, CME will pay the media company a one-time fee for the acquisition of the operating rights, in addition to a fixed monthly concession fee over the term of the contract, with an annual increment of 15%. •A long-term agreement with another media company to purchase the exclusive right to operate television screens and supply entertainment programming along with paid advertising on 1,432 inter-city express buses originating from the province of Hunan, for a period of five years commencing January 1, 2011. In accordance with the framework agreement, CME will pay the media company a one-time fee for the acquisition of the operating rights in addition to a fixed monthly concession fee over the term of the contract, with an annual increment of 20%. Mr. Zheng Cheng, CME’s Chairman and Chief Executive Officer, noted, “With the signing of these new contracts, we have further increased our presence in two of China’s most highly populated and economically strong provinces. Our entry into these markets commenced only two months ago with similar agreements for 986 inter-city buses operating in the province of Henan, and 45 airport express buses originating from the Hunan Changsha Huanghua International Airport. As we continue to work to grow our network and expand our geographic coverage, we remain confident that our advertising clients will continue to utilize our cost-effective advertising platform to promote their products and services.”
CME, through contractual arrangements with Fujian Fenzhong, an entity majority owned by CME’s former majority shareholder, operates the largest television advertising network on inter-city and airport express buses in China. While CME has no direct equity ownership in Fujian Fenzhong, through the contractual agreements CME receives the economic benefits of Fujian Fenzhong’s operations. Fujian Fenzhong generates revenue by selling advertisements on its network of television displays installed on over 26,400 express buses originating in eighteen of China’s most prosperous regions, including the four municipalities of Beijing, Shanghai, Tianjin and Chongqing and fourteen economically prosperous regions, namely Guangdong, Jiangsu, Jiangxi, Fujian, Sichuan, Hebei, Anhui, Hubei, Shandong, Shanxi, Inner Mongolia, Zhejiang, Hunan and Henan.
2,067 buses is a significant addition and I always love reading about 5 year contracts. That's 2,067 buses that will be providing guaranteed revenue until the end of 2015.
Excellent news, I keep on getting more and more confident about CCME hitting $4 EPS for 2011. My rule of thumb will be to tack on $1.50 to whatever conservative estimate they give us for 2011, and of course that won't account for any aquisitions done next year.
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