Tag Archives: VISN

VisionChina Media revenue up 31.2%

VisionChina Media Inc (VISN, quote), one of China’s largest digital television ad networks for mass transport, announced March 13 that 2011 revenue had increased 31.2% to $181.2 million. The company also reported a net loss of $12.5 million, improving from 2010′s loss of $151.3 million.

China

VisionChina: a window on China

VisionChina reported a surprisingly strong second quarter in the Chinese advertising market, but the company’s client list may be one of the most interesting details for Western investors.

The company substantially improved its bottom line in the second quarter, burning a relatively small $2.3 million versus an $8.1 million net loss in the previous three months. Management attributed the improvement to a 36% upturn in revenue from corporate clients booking time on its digital subway, bus and public media screens.

The results were unexpectedly good, sending VisionChina (VISN, quote) shares higher earlier today.

VISN is confident with expectations that the Chinese ad market will remain strong into the current quarter and beyond. In any event, the company has amassed a cash hoard of $65 million, and so is not lacking for operating capital.

The emerging/developed story

However, buried in the conference call was the surprising information that VISN’s top customers are a mix of global names and some local companies.

Out of the 10 primary clients that account for about 38% of the company’s revenue, Amway, Procter & Gamble (PNG, quote), Unilever (UL, quote) GlaxoSmithKline (GSK, quote), YUM Brands (YUM, quote) and McDonalds (MCD, quote) are all familiar global personal products, pharma and fast food brands.

China’s middle class is real and hungry for burgers, painkillers and cleansers. And China is a huge business for these companies. If you are looking for a decent play on Chinese consumers, you would not do too far wrong picking up one or more of these stocks.

They are also making a huge impact in the marketplace. Beyond the top 10 clients that accounted for 38% of VISN’s revenue in the quarter, about 600 other names collectively made the rest of the company’s ad buys. That is a vast gap between the emerging giants and “everyone else.”

China Picks

Baidu beats the Street

The online advertising market appears to be alive and well in China. Baidu says its profits practically doubled in the second quarter and is comfortable with forecasts of more growth ahead.

Baidu (BIDU, quote), which is far and away China’s leading Web portal, is up after hours after reporting that its 2Q earnings soared 119% to 35 cents per share on a year-over-year basis.

Analysts had priced in spectacular growth, but the final number came in even above their expectations.

Even more impressive was the fact that the company’s profit margin widened about 11 percentage points over the last year. Assuming that new level of efficiency prevails — and BIDU’s guidance of around $329 million in revenue holds up — we could see profits nearly double again next quarter.

Naturally, results like this speak well for the perseverance of the Chinese consumer in a quarter characterized by economic dread.

If Chinese companies are still advertising on this scale, then we could see similar upside surprises from ad names like Airmedia (AMCN, quote) Charm Communications (CHRM, quote), China Mass Media (CMM, quote), Focus Media (FMCN, quote) and VisionChina (VISN, quote). Needless to say, these stocks will not all move together, but on the whole BIDU’s news is good for the basket.

On the Web side, SINA quote and SOHU quote are much smaller players. Right now, it looks like BIDU is eating all the contracts — both stocks are down a bit tonight.

China Technology

China definitely slowing

Both of the big industrial surveys on China reveal that the country’s manufacturing sector is not only slowing but getting close to the edge of outright contraction.

The official purchasing managers index (PMI) slipped to 52.1 last month, from a level of 53.9 in May. Since a reading under 50 means that manufacturing activity is actually declining, many — including us — had been braced to see the data reveal the start of an outright industrial recession for China.

Although the final number came in above this more bearish “whisper” threshold, it was still worse than consensus forecasts for a drop to 53.1. As a result, stocks throughout the Pac Rim are down overnight and adding to the skittish tone in other global markets.

Another bearish sign is that HSBC’s version of the PMI survey, which is not run by the government and so is usually seen as a little more reliable, came in at 50.4, which might be too close to the edge for comfort.

The Chinese economy is braking sharply thanks to a combination of more aggressive internal tightening measures and more aggressive competition from Europe’s exporters.

Although these numbers are a little ominous, they are still early — China is not in a full-fledged recession yet, and there is still time for the government to step in with stimulus if next month’s reading is worse.

The good news is that inflation is dropping fast as the factories slow down. This is exactly what Beijing wants. Right now, inflation in China is running at a rate of around 6.5%.

What to do

Right now, while Chinese manufacturing sector growth is slowing, the domestic middle class is here to stay. Stocks that cater to them are likely to hold up better than their more export-driven counterparts, and may even squeeze out some upside here and there.

VISN, CYOU, SINA and CHL — maybe along with a competitor here and there — are a good basket of ADRs for the middle class story.

These stocks may not climb much in the immediate future, but in the long term are the next big thing for China as its economy decouples from manufacturing.

For now, avoid broad portfolios like FXI, which are stuffed with the industrial giants that now seem to be due for a rest.

China

You want growth? China still provides

Drilling down into the latest Chinese economic numbers reveals that while inflation is alive and well, the domestic market is still powering along. Growth is good.

If you want a counter to talk of a global slowdown, you can find it in these numbers. Retail sales were excellent, and when you add them to the spectacular exports numbers, you start to build a case for global growth — and the burgeoning Chinese consumer — being far from dead.

The clarity is welcome as investors try to shrug off fears that China is heading for a period of stagflation.

If you believe in the China story, broad Chinese ETFs like FXI are an obvious candidate for core exposure:

Of course, these are “hot” numbers in the sense that the growth is throwing off inflation of around 3% a year. This may motivate further action from the People’s Bank of China to cool things off — the PBOC hates inflation because it might destabilize the entire society — but the scare of recent weeks means any new moves will be gradual and relatively precise.

Ultimately, a stronger Chinese economy means there may be room for the yuan to float after all. Greece squelched speculation that the yuan would strengthen, but now, revaluation may be back on the table.

A stronger yuan would be great for investors holding yuan in currency futures or ETF portfolios like CYB (quote, headlines). According to some observers, the yuan is now about 40% undervalued in dollar terms, so a free float would eventually translate that discount into real appreciation.

A stronger yuan would also be great for stocks that serve the Chinese domestic market — both Chinese companies like CHL (quote, headlines), SINA (quote, headlines) and VISN (quote, headlines) and the global companies like Daimler (DAI: quote, headlines) that sell to them.

Analysis China Yuan

Geithner brings it back to the yuan

Treasury Secretary Tim Geithner is ramping back up on his campaign to get China to revalue the yuan, but he is doing it in a smart way.

People like Senator Grassley of Iowa are lobbying to officially condemn China as a “currency manipulator,” which would feed the fires of trade sanctions and, ultimately, erode the close economic relationship between China and the United States.

Senator Schumer is already pushing for a bill that would “punish” China for failing to let the yuan strengthen, a move that would benefit U.S. exporters while making China’s own companies less competitive in the global marketplace.

Naturally, U.S. politicians are focused on saving American jobs, but they are not going to get anywhere by trying to force or shame China to do anything.

Geithner has the right idea. He has consistently framed the yuan argument in terms of how it benefits China — and how China can benefit the world economy — to let its currency climb to a more natural level against other global units.

He does not talk about “manipulation.” He talks about the yuan causing “distortions” and “impediments” to natural balances of trade. Far from making threats about trade war, he notes that a stronger currency will give China more room to fight commodity inflation and keep costs down for its own burgeoning consumer class.

This is smart. When it comes to dealing with China, talk softly and let them make the first move.

If it works, it will be great for investors holding yuan in currency futures or ETF portfolios like CYB (quote, headlines). According to some observers, the yuan is now about 40% undervalued in dollar terms, so a free float would eventually translate that discount into real appreciation.

A stronger yuan would also be great for stocks that serve the Chinese domestic market — both Chinese companies like CHL (quote, headlines), SINA (quote, headlines) and VISN (quote, headlines) and the global companies like Daimler (DAI: quote, headlines) that sell to them.

China Yuan