Wednesday, September 26, 2012

Focus Media: what happened to the airports?

The adverts on an LCD screen are worth more in a high-traffic location than a low traffic location. They are worth more when people are predisposed to shop rather than say on the way into their apartment.

They are worth more where rich people congregate.

Airports are top-of-the-pile. At airports people of well above average income sit around and wait. And they are surrounded by shops or about to go to exotic locations where they will spend-up.

So it is worth exploring Focus Media's history in placing LCD advertisements at airports.

The 20-F filing for 2005 described their plan to expand their LCD network:

into new cities and regions in China and diversify into new networks and advertising channels such as airports, hospitals and other possible commercial locations;

And they already had some panels placed in airports as well as airport shuttle buses and on flights as per this disclosure:
our commercial location network, which refers to our network of flat-panel television displays placed in high-traffic areas of commercial buildings, such as in lobbies and near elevators, as well as in beauty parlors, karaoke parlors, golf country clubs, auto shops, banks, pharmacies, hotels, airports, airport shuttle buses and in-air flights. Our commercial location network is also marketed to advertisers as six separate channels targeting different types of consumers: our premier A and B office building channels, our travel channel, our fashion channel, our elite channel and our healthcare channel.
Exactly the same disclosures occur in the 20-F filing for 2006. 

In the 2007 filing the panels placed in airport shuttle buses and flights disappeared, but they still had the panels in airports. The loss of the shuttle buses and in-air flights was never explained. Did they sell the business? Did the owners of the sites kick them out? Simply unexplained.

By the 2008 filing the only airport disclosure remaining was that they planned to expand into new channels such as airports (the exact wording from the 2005 filing remained). They no longer operated in airports.

Was the airport business disposed of? Did they forget they owned it?

The word "airport" does not occur in the 2009 filing or in any of the amended filings that year.

By the 2010 filing they are back in airports as per this disclosure:
The majority of displays on our LCD display network are currently placed in heavy-traffic areas of commercial office buildings. The locations in our LCD display network also include shopping malls, banks, hotels and certain airports. We market our LCD display network to advertisers of consumer products and services, such as automobiles, home electronics, mobile communications devices and services, cosmetics, health products and financial services.
By the 2011 filing the airports had disappeared again.

So I will leave it as a question for the due diligence team. What happened to the business placing screens in airports, airport shuttle buses and in-air flights?

You can of course ask Jason Jiang, the CEO, because all the standard biographies of the man indicate that is how he cut-his-business teeth - installing screens in airport shuttle buses.


PS. Possibly the most spectacular Chinese reverse merger fraud, China Media Express supposedly had screens on airport shuttle buses. Indeed even today you can see Youku videos purporting to count the (non-existent) CCME screens on airport shuttle buses.

I will never look at a video on an airport shuttle bus the same way.


Anonymous said...

John, love your work. But please, please can you fix your Captchas, they are often impossible to read (and take multiple attempts to guess right - here i go...).

John Hempton said...

I apologize about the Captchas-

They are provided by Google - not my option.

I took them off for a while and 299 spams in two days. Not easy for me to deal with.


Nick said...

I have never seen so much work in one stock from you John!

This one isn't just smelly.
It stinks!

The rev/screen data is enough to put on a short - if only!

OK now, is that a lower-case "L", an upper-case "I" or a 1??

Anonymous said...

You can get an easier captcha with the help of the the refresh button next to the text box.

a said...

For the captcha you only have to get one of the two words correct. You can type in for example "English alksdjasd" and it would work because it recognised the bit which is verified [English].

You don't have to get the picture part correct in this case.

Nice post John, I enjoy your monthly reports and am looking forward to your next installment.


Anonymous said...

If FMCN is a legitimate albeit overstated business, i don't seen how the PE consortium's due diligence is going to uncover anything untoward.

After all, you don't expect the DD guys to fan out across China to count the 350,000 LCD screens, do you?

Take the example of the China Water SPAC debacle whereby the DD guys were supposed to validate accounts receivables and yet 50% of the A/R were fictitious and uncollectable after the deal closed.

Anonymous said...

Perhaps they did a "reverse Catchstone" -- sold the airport business for beans and then bought it back later...maybe after it had been re-named "WonderAd"?


Anonymous said...

When is this "deal" supposed to "close"?

Chip said...

Thoughts on the 7 Days announcement and the impact to the probability that the Focus deal will or will not go through?

John Hempton said...

I have no reason to be negative on 7Days.

Moreover it is property based - so I think they can finance it. There is little doubt the properties are there and the revenue is easily confirmable...

All things not true of Focus Media - where businesses appear and disappear and the business margins look silly.

Anonymous said...

"I have no reason to be negative on 7Days.

Moreover it is property based - so I think they can finance it. There is little doubt the properties are there and the revenue is easily confirmable..."

All this was said of SinoForest.


Student said...

Do you have a reading list/advice to college students who are interested in Finance, love your work and want to gain your skill set?

Thank you.

Anonymous said...

i was talking to a friend who used to manage money for jim roger in asia. he told me pe in china is a big ponze scheme.

Anonymous said...

John - have you read Jason Jiang's 13D's and seen the swap transaction (where he goes short FMCN stock). The exhibits (which have the agreements) are signed by the bankers "in" on the fraud.

Anonymous said...

The issue with FMCN is not as much the revenue per screen as the margins. AirMedia has lower margins, as does DEC FP. Have you looked at VisionChina Media. A company in which FMCN bought a 15% stake at $3 per share and the stock is now at 35c. That is also a comparable.

Anonymous said...

Focus media already tried once to take money of the table by selling the company for stock (but without shareholder approval) to SINA.

Anonymous said...

Follower of other notorious blogs or muddy-water like research firm but unfortunately knowing nothing about any business in China. So its safe for John to attack those companies that muddy waters or citron attack however the contents make no sense at all...try harder pls!

David said...

John, have you seen the tv/LCD ads in the Beijing metro? If you look out the window between stations (underground) you can often see a string of 10 or 15 screens fly past - far too quickly to be read, except perhaps in the subconscious. I have often wondered who installed them and how it made sense economically to do so... Just reminded of this by the Focus Media discussion.

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