Sunday, July 27, 2008

VISN


In the Comments from last week, someone asked for a China pick. Readers, be careful what you ask for. VisionChina Media popped 22% on Friday due chiefly to great earnings and guidance. The issue is whether that gain is the end of this move, or just the beginning? The weekly chart below says it could be either and this week's action will provide the answer. Below the charts there is an assembly of fundamental facts and opinions that strongly favor continued upside.

TECHNICALS

Below is a daily chart tracing out a Head & Shoulders bottom.



FUNDAMENTAL CONSIDERATIONS

VisionChina Media Announces Second Quarter 2008 Results and Raises Full-Year Guidance


July 24, 2008 5:00 PM EDT

BEIJING, July 24 /Xinhua-PRNewswire/ -- VisionChina Media Inc. (the "Company") (Nasdaq: VISN), one of China's largest out-of-home digital television advertising networks on mass transportation systems, today announced its financial results for the quarter ended June 30, 2008.

Second Quarter 2008 Highlights


-- Total revenues in the second quarter of 2008 grew 332.4% year-over-year and 48.8% quarter-over-quarter to $20.3 million, out of which advertising service revenues grew 405.4% year-over-year and 52.4% quarter-over-quarter to $20.2 million.

--Net income in the second quarter of 2008 was $8.5 million, an increase of 56.7% from $5.4 million in the first quarter of 2008, and a significant increase of 3,039.7% from $0.3 million in the second quarter of 2007.

-- Gross profit in the second quarter of 2008 was $11.9 million, an increase of 64.5% from $7.2 million in the first quarter of 2008 and a significant increase of 775.5% from $1.4 million in the second quarter of 2007.

-- Operating profit in the second quarter of 2008 was $7.8 million, an increase of 71.1% from $4.5 million in the first quarter of 2008, and a significant increase of 3,210.8% from $0.2 million in the second quarter of 2007.
Those are some blow out numbers for VISN. But there is more to the company then last quarter's numbers:

Jim Oberweis' favorite small-cap stocks

“Other names I think being overlooked are companies such as VisionChina Media (NasdaqGM:VISN - News), which is a Beijing-based operator of an advertising network that has 39,000 digital TV displays, which are placed on buses and subway platforms in 16 cities in China.

VisionChina will be a beneficiary of the Olympics primarily because advertising rates are expected to surge as we go through the Olympics. That said, I don’t think that’s a reason to buy the stock. A reason to buy the stock is because it has a great franchise of virtually monopolistic exclusivity that advertises on buses throughout many cities in China.

"There is typically one single license for wireless broadcast that is afforded to every city in China, so in order to secure a long-term contract, [VisionChina is] the only game in town that is permitted to do this.

“With that license it is securing long-term contracts, and some of those contracts are for 10 years, but some are as long as 50 years where essentially the cost to Vision is fixed, but the advertising rates are likely to be variable.

"My guess is that over the next 20 years the advertising rates within China are likely to increase, consistent with the growth in the middle class within the VisionChina market place.


“VisionChina has come down in valuation, but it’s had a terrific year overall so far. The stock is up about 85% so far this year, but it’s down from a high of roughly $23. The stock is down for no particular reason that we can find. I just met with management not long ago. I think it’s probably one of my favorite names right now anywhere in the world.”




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3 comments:

met61 said...

Allan,VISN is on my radar screen also.Where would you place your initial stop?
Thanks,Ron

Allan said...

Ron, this one stopped me out at a 5% earlier today, so we toss it in with the 50% that don't work and get ready for the next one.

Allan said...

"at a 5% loss" is how it should read.