Replies to post #16503 on China MediaExpress Holdings, Inc. (fka CCME)

[Charlieyou]

He should separate airport bus from inter-city bus. Ad rate for airport bus is much much higher than inter-city bus.

[Drexion2004]

The simple answer to the increase in revenue-per-equipment-dollar is pretty clear and it can be explained in three words: "Airport Express Buses".

If those buses make 16x-17x the CPM (which they do), you'll get a major upward shift in revenue-per-equipment-dollar from the new segment.

Thats one factor. Another is the cost of LCD screens, that cost seems to go down every year from what i've seen. That would also increase the revenue $ per equipment $ ratio.

Third point -- here I assume that by "gross of depreciation" he means taking depreciation into account, if that is incorrect ignore the point below --

Thirdly, talking about the efficiency ratio *gross of depreciation* is unfair. A 2 year old LCD screen will make as much revenue as a 4 year old LCD screen, yet the "asset value" on the balance sheet will be much lower due to depreciation. This alone would cause the "Equipment Efficiency Ratio" metric he caused to balloon higher as the average age of the equipment in the network increased (ie: more and more of the equipment $ was depreciated out of the equation).

The points above can easily debunk his argument in my opinion. Let me know if you disagree and why you disagree please.

I didn't raise any of these issues in the comments section of his article because i'm too lazy (chuckle) and because I did not find his argument compelling (given the points above). I guess that was hasty, so if someone believes it worthwhile your welcome to post the thoughts above as a comment on his SA article. Feel free to edit and expand on what i've said if you wish...Bedtime for me!

-Fernando

[Sharkasaurus Rex]

Fernando (Drexion2004) answered it better than I could. You can't just assume there's a direct, linear correlation between number of buses and revenue when clearly there is not. This is a very deceptive, sleight of hand calculation that tries to show a discrepancy where it doesn't exist.

[GorillaGorilla]

Also remember in 2008 they didn't have embedded adverts. Introduced embedded adverts August 2009 and did 12.9M revenues. If they had introduced that at the start of the year it would have netted them 31M.

Pretending that they did have embedded at the start of the year that would be an additional 31M revenue. The costs are trivial $1.5M in 2009 which pro-rata is $3.6M. So that's $27.4M flowing to the bottom line that would have come from a completely new stream which would use exactly the same equipment.

That compares to $26.4 net income in 2008 - so in 2010 the embedded advertising will result in a 100% increase over the net income of 2008 by itself.

If this guy would have allowed for embedded and Airport revenues I would have had more respect. Either he didn't know or he hid it - either way he's not giving CCME an even break.

rich

[martych]

I used a revenue per bus/day approach split between airport and inter-city in my model. Tracking this on a quarterly basis show a consistent trend. Don't have trends pre 2010 on line so looked at Dec-09 and it was $17.31 compared the 2010 quarters that are between $20-20.74. I attributed the 2010 increase to more embedded ads. Might have been a rate increase as well but within a margin of error given the assumption set.

Airport buses are much higher at over $300 per day for 2009. They weren't material in 2009 nor were they broken out separately.
Another potential fly in the equip efficiency argument is it doesn't look at passenger loads, # trips per day, or demographic attraction of tourist targetting (airport) vs inter-city.

If you reveiw the model and see any flaws in approach let me know at [e-mail]