Replies to post #10514 on China MediaExpress Holdings, Inc. (fka CCME)

[martych]

I don't consider it bizarre at all. I don't know how many bus stations that they service. Using 65 which is around how many operators they have signed it would take an investment of $9.7m roughly for wireless rollout. That depreciated over 5 yrs represents $490k per quarter or $370k after tax. Assuming zero incremental revenue and zero cost savings that represent less than 1 cent a share quarterly. That's the "earnings risk" to the investment which everyone would agree is highly improbable. I don't know how much of this investment depr could be recovered from reduced labor costs so I'll ignore that as the real labor benefit is through efficiency and scaling. I can't imagine that changing content/ads manually on so many buses with multiple destinations from numerous points of origin goes off consistently without a hitch.

If they want to generate higher CPM and continue to get advertisers to allocate more spend away from trackable media like print and television they will need a system like this to provide credible reporting to encourage it.

They point out new areas of advertising growth that are enabled by this type of system so the revenue contribution should more than offset this spending. My calculation is that it would take an increase of less than $0.20 per bus per day to offset it. Even if they couldn't get advertisers to commit to it up front, it seems like any progressive management team would be willing to commit to it knowing that it was probable. Once they have it, do you really think a competitor would be at an advantage trying to compete without a wireless system? Sounds pretty ludicrous to me. Once you train advertisers/operators what this means, any competitor would have to respond to attempt to compete.

I'll shut up now. Sorry I turned this into such a rant. It just surprised me to hear they would publicly say one thing and privately dispute it which caused me to examine the pros and cons of the wireless system itself. As you may have gathered from my posts I generally do a lot of analysis of micro cap stocks and part of my analysis has to do with quality of management's vision and building a sustainable long term moat around the business.