Focus Media Earnings, The Envy of Lamar (FMCN, LAMR)

Chinese advertising giant Focus Media Holding Ltd.(NASDAQ:FMCN), is set to report earnings after the close.  First Call has a limited range of from only a few analysts, but this quarter is expected to show $0.44 EPS on $129.4 million in revenues.  Next quarter is expected to show 0.49 EPS on revenues of $142.6 million.  If the company offers any long-term projections, it is expected to show $1.93 EPS and revenues of $635 million for fiscal Dec-2008.

For whatever it’s worth, Focus Media just sold 13.72 million ADR’s in a secondary offering, of which 5 million came from the company and 8.72 million were from existing shareholders.  Shares are down over 1% at $58.55 today ahead of earnings, and the 52-week trading range is $29.32 to $66.30.

Lamar Advertising (NASDAQ:LAMR) is the U.S. counterpart, although Lamar has been a serial underperformer over the last year.  Also, Focus is thought of more as audiovisual television displays in China, while Lamar offers billboards, posters, bulletins, buses, digital boards, and more.  If you want to compare Focus to Lamar, here is how it compares on simple forward valuations based on estimates:

Stock    MKTCAP  08P/E    09REV$
FMCN    $7.5B    30.31    $635M
LAMR    $4.75B    89.9    $1.29B

We used to have Focus Media as a more strategic acquisition candidate for a hypothetical Special Situation Investing Newsletter play, but three things were and are in the way:

• it grew too fast,
• Chinese companies are for all practical purposes not really able to be acquired in the same manner as a traditional company, and…
• valuations. 

But if this trend continues with Focus Media outperforming and the woes at Lamar continuing, it would not be a stretch to think of Focus making the cross-Pacific jump and making a play for Lamar.  Stranger things have happened, and even a highly skeptical regulatory environment would have a hard time saying that a deal of that sort was a risk to national security.

Jon C. Ogg
November 19, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.