Check on China: VisionChina Media Inc.
Multinational and homegrown corporations haven awakened to the potential of the Chinese economy to impact their bottom lines. That's why companies large and small are investing in China, seeking to tap one of the most lucrative consumer markets in the world.
China's growing middle class and emerging affluent urbanites are more brand-conscious than most of their counterparts in the West, and advertisers are aggressively pushing their products and services to try to build brand equity and capitalize on new growth opportunities.
This is apparent not only in the flood of Western-style advertising messages on television and in magazines and newspapers, but in public spaces as well. Almost anywhere you go in China — from public transportation to bars to office buildings and hotel lobbies and elevators to airports — there are state-of-the-art video screens, from small LCD displays in taxi cabs to huge billboards on street corners, pushing everything from Procter & Gamble's (NYSE: PG) Crest toothpaste to General Motors Corp.'s (NYSE: GM) Cadillac Escalade SUVs.
One company responsible for bombarding the Chinese with these images is VisionChina Media Inc. (Nasdaq: VISN), which runs one of China's largest mass transportation mobile TV advertising networks. Through its subsidiary, China Digital Mobile Television Co., Ltd., VisionChina's network uses real-time mobile digital TV broadcasts to deliver advertising and content to would-be consumers in the People's Republic of China. The company's "out-of-home" network consists of 41,400 video displays on public transit buses and subway systems that reach some 26 million viewers each day in 15 of China's most prosperous cities. Founded in 2004, VisionChina debuted on the Nasdaq in December 2007 with an IPO that raised $108 million. It plans to use the proceeds to strengthen its existing network, to expand beyond the realm of public transport and to make strategic acquisitions.
On Feb. 13, VisionChina announced a deal with Shanxi Da Zhong Mobile Television Co., Ltd. that gives the company the exclusive right to operate mobile television advertising on all public buses in Shanxi Da Zhong's network in the city of Taiyuan (pop. 3.4 million), the capital city of Shanxi province, for the next eight years. VisionChina calls entering the Taiyuan market "an important strategic milestone," since the city is a favored target of blue-chip advertisers in China.
"Our sales network's successful track record of attracting nationwide advertisers to second-tier cities, combined with our leading operational capabilities enabled us to win this important contract over our competition," Dina Liu, VisionChina Media's chief financial officer, said of the agreement. "The addition of Taiyuan significantly increases our revenue capacities in northern China."
In an effort to lure new advertisers and grab more market share from competitors like Focus Media Holding Limited (Nasdaq: FMCN), China's leading digital signage network, VisionChina on Monday announced the hiring of high-powered industry executive Albert Tong as its chief marketing officer. Tong, who in his most recent role served as marketing director, headed up media and marketing operations in China for PepsiCo, Inc. (NYSE: PEP).
Commenting on the appointment, VisionChina chairman and CEO Limin Li said: "Albert has a long track record in the 4A media and advertising world and he has spent many years working with the type of top-tier advertisers that VisionChina seeks to partner with. We are confident that Albert is the right man for this job and we welcome him to our team."
The media firm is also continuing to work with its partner TV stations and bus and subway operators to quickly expand its network in preparation for the 2008 Beijing Olympic Games, which will bring an estimated 1.5 million visitors from around the country and the world to Beijing, the most important city in VisionChina's advertising network.
Susquehanna Financial Group initiated coverage on VisionChina with a "positive" rating on Jan. 23. The analysts believe that the company has a strong business model that takes advantage of the joint benefits of both traditional TV and outdoor advertising, capturing consumers' interest in a closed environment in which they spend a longer time than other digital signage platforms, making them more likely viewers. While Susquehana has concerns about the company's city operations not yet being up to speed, it feels VisionChina shares are too attractively priced to pass on.
After the close Wednesday, VisionChina said revenues in the fiscal year ended Dec. 31 soared a whopping 658.7% from 2006 to $29.4 million. Net income in 2007 totaled $9.4 million, compared with a loss of $4.1 million in 2006. Fully diluted net income per share and fully diluted proforma net income per share for 2007 were $0.11 and $0.19, respectively. Before the earnings release Wednesday, shares closed at $9.24, amid a range since the December IPO of $5.27 to $10.27.
Digital advertising in China is transforming the domestic advertising landscape as the fast-growing segment of a nascent Chinese media market. Companies are increasingly using eye-catching flat panel digital displays to capture viewers’ attention, with the ultimate goal of better competing in the country's supercharged economy. This bodes well for VisionChina (VISN), which has successfully grabbed the attention of scores of Chinese consumers on behalf of its clients.
It now hopes to catch the eye of Wall Street and American investors. Are you watching?
