Focus Media Holding $48.11 Business Sector Advertising

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Focus Media Holding48.11Business
SectorAdvertising

• FMCN
• Bethany Branciforte
• 20 February 2008

2
About FMCN

• Chinas leading multi-platform digital media
  company
• Largest out of home advertising network
• Audio visual digital displays
• Leading provider of internet marketing solutions
  in China

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Media Formats

• Audiovisual television displays
• Advertising poster frames
• 161,455
• Outdoor LED digital billboards
• 89,687 (commercial)
• 41,322 (in-store)
• Mobil handset advertising
• Theater advertising

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Commercial Location Network

• 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. (finance.yahoo.com)

5
In-Store Location Network

• consists of flat-panel television displays placed
  in the personal care, food, and beverage
  sections, as well as in hypermarkets,
  supermarkets, and convenience stores.
  (finance.yahoo.com)

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Poster Frame Network

• comprises advertising poster frames placed
  primarily in the elevators and public areas of
  residential complexes, which are marketed under
  the brand name Framedia. (finance.yahoo.com)

7
Mobil Handset Advertising NetworkOutdoor LED
Network

• consists of leased 5' x 5' LED digital billboards
  installed on the street-sides in shopping
  districts and other locations with pedestrian
  traffic in Shanghai.

• offers WAP-based mobile handset advertising
  services on the mobile telecommunications
  networks

8
Movie Theater Network

• consists of movie theaters, which the company
  leased approximately three minutes of screen-time
  prior to each showing of a movie in the People's
  Republic of China

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Valuations (reuters.com)
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Time Series (morningstar.com)
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(No Transcript)
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Valuations47.36

• MorningStar
• 65.00
• Above Average Risk
• Yahoo!
• 71.02
• FCFE
• 58.04

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2006 Annual Report

• Total revenue 211.9 million
• 211 increase
• Operating profit 80.4 million
• 253 increase
• Net income 83.2 million
• Record high
• Expansions
• Threats

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3rd Quarter11/19/2007

• Revenue 149 increase (year-to-year)
• Net income 72.6 increase
• Opportunity split mobile entity and enter Hong
  Kong or USA
• Outlook revenue increase to 160-170 million
  (12 quarterly increase)

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Acquisitions

• Oct 05 Framedia in-elevator poster frame
• March 06 Dotad mobile handset provider
• Renamed Focus Media Wireless
• May 06 Launch of outdoor LED ad-network
• July 06 ACL leases screen time prior to
  movies
• Focus 70 of equity
• Feb 07 Alleys Information Tech internet ad
  service

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Acquisitions

• May 07 Launch of Digital Frame 2.0
• Jan 08 CGEN Tech
• Jan 08 Yanhuang Health Media LCD ad-operator
• Focus 20 of equity
• Jan 08 Dentsu Internet advertisment
• Focus 33 of equity
• Finished toward end of March
• Targeted 1st year sales 47 million

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Recommendation

• Strong Buy
• 75 shares at 47.00 3525 4.96 of portfolio
• 50 shares at 47.00 2350 3.33 of portfolio
• Considerations
• Large cap stock 5.79B
• High beta 3.12
• Acquisition growth vs. organic growth

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Reasons for purchasing

• Strong growth both past and future
• Expected 34 growth throughout next year
• 3rd quarter 2007 (see presentation)
• 2006 Annual Report (see presentation)
• Attracts highly respectable and worldwide
  companies
• Adapts well to change
• Internet user growth expected 50 annually
• Market expects to triple by 2010

• Numerous successful acquisitions (see
  presentaions)
• Chinese GDP growth still expected to have double
  digits