Global Hunter Securities, LLC

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Institutional Sales & Trading: (949) 274-8050
Research: (949) 274-8052
www.ghsecurities.com

August 16, 2010
Company Update
China
Senior Analyst: Ping Luo, CFA
pluo@ghsecurities.com
Direct: (212) 644-8913
Associate Analyst: Jodi Dai
jdai@ghsecurities.com
Direct: (212) 644-8913

Rating:
Price Target:

Buy
$21.00

China MediaExpress Holdings, Inc.
(Nasdaq: CCME)

Price Target M etrics: 9x P/E (2010)

Event: Strong Q2 results. Raising estimates and price target; Reiterate Buy.

Current Price:
Diluted Shares:
Float:
Short Interest:
Average Daily Volume:

$10.68
35.8MM
27%
1.9MM
340k

52-w eek Range:

$7.51-$14.82

Market Cap:
Cash & Investments:
Debt:
Enterprise Value:
Net Cash/Sh:
Tangible Book Value/Sh:

$383MM
$139MM
$0MM
$243MM
$3.89
$4.21

Summary: China MediaExpress (CCME) reported strong Q2 results which highlighted an
impressive gross margin improvement due to greater contribution from higher-margin airport
express buses. The company continued to expand its network by adding new buses and
operators into its system. The company also generated strong operating cash flow of $25MM in
the quarter and further strengthened its balance sheet. With $139MM in net cash, management
expressed the consideration of various options to improve shareholder’s value. We expect
continued growth as the company further expands its inter-city and airport bus network and
explores value-added services. Despite a strong 1H, CCME reiterated its prior FY10 net income
guidance, which we view as conservative. We are raising our ’10 and ’11 EPS estimates. We
believe shares are considerably undervalued, trading at just 4.5x our ’10 EPS estimate. Thus,
we reiterate our Buy rating and raise our 12-month price target from $18 to $21, representing
9x our new ’10 EPS estimate.

PR IC E C HA R T
$16

4,000

$14

3,500

$12

3,000

$10

2,500

$8

2,000

$6

1,500

$4

1,000
500

$2
$0

Highlights

09/
01

09/
11

09/
21

0
1
/
1

0
1
/
2

0
1
/
3

0
1
/
4

0
1
/
5

0
1
/
6

0

0
1
/
7

EST IM A T ES - U S $ ( M M s excep t mult ip les & EPS)
FY 0 9

F Y 10

F Y 10

F Y 11

F Y 11

Pr io r

N ew

Pr io r

N ew

R evenues
Q1

M ar

$ 18.8

A

$ 44.5 A

$ 59.0

$

Q2

Jun

$ 19.1

A $

$ 44.5
55.1

$ 53.5 A

$ 67.0

$ 67.6

Q3
Q4

Sep
Dec

$ 26.1
$ 32.0

A $ 55.6
A $ 56.3

$ 55.7 E
$ 57.3 E

$ 78.0
$ 84.0

$ 77.7 E
$ 82.7 E

FY

$ 95.9

A $ 211.5

$ 211.0 E

$ 288.0

$ 288.1 E

EV / Sales

2 .5x

1.2 x

60.1 E
E

0 .8 x

EPS, D ilut ed
Q1

M ar

$ 0.36

A

$ 0.54

$ 0.54 A

$ 0.49

$

Q2

Jun

$ 0.40

A

$ 0.53

$ 0.80 A

$ 0.55

$ 0.62

Q3
Q4

Sep
Dec

$ 0.56
$ 0.49

A $ 0.51
A $ 0.46

$ 0.59 E
$ 0.48 E

$ 0.65
$ 0.61

$ 0.71 E
$ 0.66 E

FY

$ 1.81

A $ 2.03

$ 2.38 E

$ 2.30

$

P/ E

5.9 x

4 .5x

0.55 E
E

2.55 E
4 .2 x

EB IT D A ( A d just ed ; see mo d el)
Q1

M ar

$ 11.3

A

$ 25.2

$ 25.3 A

$ 31.9

$

Q2

Jun

$ 11.9

A

$ 29.5

$ 39.2 A

$ 36.1

$ 40.2

Q3
Q4

Sep
Dec

$ 16.3
$ 20.4

A $ 29.8
A $ 30.2

$ 30.8 E
$ 31.5 E

$ 41.9
$ 45.0

$ 46.1 E
$ 49.0 E

FY

$ 59.9

A $ 114.7

$ 126.9 E

$ 154.9

$ 171.0

EV / EB IT D A

4 .1x

1.9 x

35.7 E

1.4 x

E

E

Strong Q2 results. Q2 revenue of $53.5MM was roughly in line with our $55.1MM estimate and represented
over 180% YoY growth and 20% QoQ growth, driven mainly by expansion in network coverage. Net income
of $28.5MM or $0.80 per share (based on 35.8MM diluted shares) was far ahead of our estimate of
$21.5MM or $0.53 per share (based on 40.5MM diluted shares). In Q2, the company continued to expand its
network. It increased the number of bus operators and number of buses from 46 and 20,422 at the end of Q1
to 59 and 22,775 at the end of Q2, respectively. At present, the company has its programs running on over
23,200 express buses with 61 bus operators. Airport express buses that CCME just started reporting in Q1
contributed $13.1MM or 24% to total revenue, representing an 87% QoQ growth. CCME currently covers the
airports in Guangzhou, Fuzhou, Beijing, and Qingdao.
Gross margin shines. The EPS outperformance in Q2 was largely due to an impressive gross margin of
79%, representing a significant improvement from 62% in 2Q09 and 60% in Q1, and compared to our
estimate of 64%. We believe the higher than expected gross margin was primarily attributed to increased
weight of airport express buses (24% of Q2 revenue versus 16% in Q1) which carries much higher margins
(over 80% versus ~60% for inter-city express buses). Management expects gross margin to stay at
approximately 70% in 2H.
Strong balance sheet and cash flow. The company generated strong operating cash flow of $25MM for Q2
and $38MM for 1H. As of the end of Q2, CCME had $139MM in cash and no debt, up from $114MM net
cash at the end of Q1. In regards to the use of cash, management plans to deploy $10MM for equipment
upgrades and repairment, $10MM-$20MM to acquire operating rights from other media companies, and
$10MM-$20MM to implement a new value-added service project (on-bus brochures). With plenty of cash on
its balance sheet, management mentioned that the board is considering various options to maximize
shareholder’s value, weighing alternatives such as a share buyback, dividend distribution, and investment
into future expansion.
FY10 guidance appears conservative. Management expressed confidence in continuing to expand its
network while keeping concession fees stable. However, management also cited uncertainty in China’s
economic outlook in 2H and potential increases in costs of new projects as a basis for prudence. Therefore,
despite an impressive Q2, the company reaffirmed its prior FY10 guidance of $82MM-$85MM in adjusted net
income (excluding acquisitions and non-cash charges), which we view as conservative.
Raising estimates. We maintained our ’10 and ’11 revenue projection at $211MM (120% YoY) and
$288MM (36% YoY), respectively. We increased our gross margin assumption from 59% to approximately
64%-65% for the next six quarters, on increased revenue from higher margin airport buses. This is below the
roughly 70% gross margin management is projecting. We remain conservative considering potential cost
increases associated with new concession rights contracts with new bus operators, lump sum payments for
acquisitions, and renewal of existing contracts when they start to expire in ’11. Our ‘10 net income estimate
was increased from $83MM to $92MM based on the upside in Q2 and a higher gross margin, and our ’10
EPS estimate was raised from $2.03 to $2.38. We also increased our ’11 net income estimate from $113MM
to $126MM, and our ’11 EPS estimate from $2.30 to $2.55.
Reiterate Buy rating and increasing price target to $21. We expect CCME’s impressive growth
momentum to continue in 2H10 and 2011, as the company expands its network and explores value added
services and new strategic initiatives. Shares are trading at just 4.5x our updated ‘10 EPS estimate, which
we believe is considerably undervalued given an average forward P/E of 20x and median P/E of 10x in the
peer group. We reiterate our Buy rating and raise our price target from $18 to $21, which reflects a 9x P/E
multiple based on our updated ‘10 EPS estimate of $2.38.
Company Description: China MediaExpress provides TV advertising network on inter-city express buses
and airport buses in China.

SEE ANALYST CERTIFICATION AND OTHER IMPORTANT DISCLOSURES AT THE END OF THIS REPORT

Global Hunter Securities, LLC
Research Department: 949-274-8052
Fiscal period
Period ends
Income Statement (U.S.$000s)
Total revenue from inter-city buses
Revenue from airport buses

FY'06 (A)
Dec '06
4,035
-

FY'07(A)
Dec '07
25,837
-

FY '08(A)
Dec '08

Q1 '09(A)
Mar '09

Q2 '09(A)
Jun '09

Q3 '09(A)
Sep '09

Q4 '09(A)
Dec '09

FY '09(A)
Dec '09

62,999
-

18,769
-

19,092
-

26,122
-

31,951
-

95,934
-

Q1 '10(A)
Mar '10
37,525
7,000

Q2 '10(A)
Jun '10

Q3 '10(E)
Sep '10

Q4 '10(E)
Dec '10

40,411
13,100

42,200
13,500

43,600
13,700

FY '10(E)
Dec '10

Q1 '11(E)
Mar '11

Q2 '11(E)
Jun '11

Q3 '11(E)
Sep '11

Q4 '11(E)
Dec '11

FY '11(E)
Dec '11

163,736
47,300

45,900
14,200

54,700
15,200

61,220
16,500

65,200
17,500

227,020
63,400

Total revenue
Revenue
Cost Of Goods Sold

4,035
1,446

25,837
12,427

62,999
23,002

18,769
7,133

19,092
7,229

26,122
8,630

31,951
6,736

95,934
29,728

44,525
44,525
17,931

53511
53,511
11,398

55,700
55,700
20,331

57,300
57,300
20,628

211,036
211,036
70,288

60,100
60,100
21,035

67,600
67,600
23,660

77,720
77,720
27,202

82,700
82,700
28,945

288,120
288,120
100,842

Gross Profit
Selling General & Admin Exp.
Other Operating Expense/(Income)

2,589
916
87

13,410
1,657
737

39,997
2,813
2,063

11,636
1,101
-

11,863
778
-

17,492
1,959
-

25,215
2,516
3,209

66,206
6,354
3,209

26,594
2,353
-

42,113
3,815
-

35,370
5,500
-

36,672
6,100
-

140,749
17,768
-

39,065
4,300
-

43,940
4,732
-

50,518
5,440
-

53,755
5,789
-

187,278
20,261
-

Operating Expenses

1,003

2,394

4,876

1,101

778

1,959

5,725

9,563

2,353

3,815

5,500

6,100

17,768

4,300

4,732

5,440

5,789

20,261

Operating Income
Interest Expense
Interest and Invest. Income

1,586
8

11,016
24

35,121
100

10,535
22

11,085
21

15,533
27

19,490
43

56,643
113

24,241
61

38,298
84

29,870
90

30,572
90

122,981
325

34,765
100

39,208
100

45,078
100

47,966
100

167,017

Net Interest Income (Exp)

8

24

100

22

21

27

43

113

61

100

100

100

361

100

100

100

100

1,594

11,040

35,221

10,557

11,106

15,560

19,533

56,756

24,302

38,398

29,970

30,672

123,342

EBT
Income Tax Expense

34,865

39,308

45,178

48,066

400
400
167,417

4,073

8,854

3,102

2,825

3,896

5,222

15,045

6,160

9,878

7,492

7,668

31,198

8,716

9,827

11,294

12,017

41,854

905
43.2%

6,967
36.9%

26,367
25.1%

7,455
29.4%

8,281
25.4%

11,664
25.0%

14,311
26.7%

41,711
26.5%

18,142
25.3%

28,520
25.7%

22,477
25.0%

23,004
25.0%

92,143
25.3%

26,149
25.0%

29,481
25.0%

33,883
25.0%

36,050
25.0%

125,562
25.0%

Basic EPS
Diluted EPS

NA
NA

0.33
0.33

1.26
1.26

0.36
0.36

0.40
0.40

0.56
0.56

0.61
0.49

1.93
1.81

0.58
0.54

0.86
0.80

0.64
0.59

0.48
0.48

2.50
2.38

0.55
0.55

0.62
0.62

0.71
0.71

0.66
0.66

2.55
2.55

Weighted Avg. Basic Shares Out.
Weighted Avg. Diluted Shares Out.

NA
NA

20,915
20,915

20,915
20,915

20,915
20,915

20,915
20,915

20,915
20,915

23,542
29,137

21,588
22,998

31,275
33,500

33,290
35,831

Margins
GAAP gross margin
Sales, General and Administrative
GAAP operating margin
Net income margin
Adjusted EBITDA margin

64.2%
22.7%
39.3%
22.4%
42.6%

51.9%
6.4%
42.6%
27.0%
46.9%

63.5%
4.5%
55.7%
41.9%
60.3%

62.0%
5.9%
56.1%
39.7%
60.2%

62.1%
4.1%
58.1%
43.4%
62.2%

67.0%
7.5%
59.5%
44.7%
62.6%

78.9%
7.9%
61.0%
44.8%
63.7%

69.0%
6.6%
59.0%
43.5%
62.4%

59.7%
5.3%
54.4%
40.7%
56.9%

78.7%
7.1%
71.6%
53.3%
73.3%

63.5%
9.9%
53.6%
40.4%
55.3%

64.0%
10.6%
53.4%
40.1%
55.0%

66.7%
8.4%
58.3%
43.7%
60.1%

65.0%
7.2%
57.8%
43.5%
59.5%

65.0%
7.0%
58.0%
43.6%
59.4%

65.0%
7.0%
58.0%
43.6%
59.3%

65.0%
7.0%
58.0%
43.6%
59.2%

65.0%
7.0%
58.0%
43.6%
59.3%

N/A
N/A
N/A
N/A
N/A
N/A

540.3%
418.0%
594.6%
669.8%
547.7%
N/A

143.8%
198.3%
218.8%
278.5%
200.7%
278.5%

24.3%
25.8%
23.3%
15.9%
N/A
N/A

24.3%
27.6%
29.4%
29.4%
N/A
N/A

65.5%
87.6%
83.0%
83.3%
76.7%
N/A

90.6%
108.0%
104.7%
99.6%
102.2%
43.3%

52.3%
65.5%
61.3%
58.2%
57.6%
43.9%

137.2%
128.5%
130.1%
143.4%
124.1%
51.9%

180.3%
255.0%
245.5%
244.4%
230.6%
100.9%

113.2%
102.2%
92.3%
92.7%
88.6%
6.5%

79.3%
45.4%
56.9%
60.7%
54.8%
-1.5%

120.0%
112.6%
117.1%
120.9%
112.0%
31.3%

35.0%
46.9%
43.4%
44.1%
41.2%
1.4%

26.3%
4.3%
2.4%
3.4%
2.4%
-22.1%

39.5%
42.8%
50.9%
50.7%
49.5%
19.9%

44.3%
46.6%
56.9%
56.7%
55.3%
36.7%

36.5%
33.1%
35.8%
36.3%
34.7%
6.9%

11.9%
-4.0%
10.6%
4.0%
12.1%
4.0%

1.7%
2.0%
5.2%
11.1%
5.1%
N/A

36.8%
47.5%
40.1%
40.9%
37.7%
N/A

22.3%
44.2%
25.5%
22.7%
24.6%
N/A

39.4%
5.5%
24.4%
26.8%
24.3%
10.3%

20.2%
58.4%
58.0%
57.2%
55.0%
46.9%

4.1%
-16.0%
-22.0%
-21.2%
-21.5%
-25.3%

2.9%
3.7%
2.4%
2.3%
2.3%
-18.6%

4.9%
6.5%
13.7%
13.7%
13.3%
13.6%

12.5%
12.5%
12.8%
12.7%
12.5%
12.7%

15.0%
15.0%
15.0%
14.9%
14.6%
14.9%

6.4%
6.4%
6.4%
6.4%
6.3%
-7.2%

Growth Y/Y
Revenue
Gross profit
Operating income
Net income
Adjusted EBITDA
EPS
Growth Q/Q (sequential)
Revenue
Gross profit
Operating income
Net income
Adjusted EBITDA
EPS

35,288
37,828

47,545
47,545

36,850
38,676

47,600
47,600

47,600
47,600

47,600
47,600

54,545
54,545

49,336
49,336

Company Update

Equity Research

689

Net Income
Tax rate

China MediaExpress Holdings, Inc. (CCME)

Global Hunter Securities, LLC

China MediaExpress Holdings, Inc. (Nasdaq:CCME) Financial Model

August 16, 2010

Page 2

Fiscal period
Period ends
Selected Cash Flow Items
EBIT (GAAP)
Depreciation and amortization
Adjusted EBITDA
Cash flow from operation (CFFO)
Capital expenditures
FCF (CFFO - capital expenditure)

FY'06 (A)
Dec '06

FY'07(A)
Dec '07

FY '08(A)
Dec '08

Q1 '09(A)
Mar '09

Q2 '09(A)
Jun '09

Q3 '09(A)
Sep '09

Q4 '09(A)
Dec '09

FY '09(A)
Dec '09

Q1 '10(A)
Mar '10

29,870
950
30,820
19,077
(5,000)
14,077

Q4 '10(E)
Dec '10
30,572
960
31,532
19,654
(5,000)
14,654

FY '10(E)
Dec '10
122,981
3,922
126,903
76,941
(12,520)
64,421

Q1 '11(E)
Mar '11
34,765
970
35,735
22,829
(3,750)
19,079

Q2 '11(E)
Jun '11
39,208
980
40,188
26,181
(3,750)
22,431

Q3 '11(E)
Sep '11
45,078
990
46,068
30,633
(3,750)
26,883

Q4 '11(E)
Dec '11
47,966
1,000
48,966
32,850
(3,750)
29,100

FY '11(E)
Dec '11

35,121
2,875
37,996
27,396
(4,200)
23,196

10,535
760
11,295
8,495
(500)
7,995

11,085
783
11,868
9,197
(200)
8,997

15,533
808
16,341
12,172
(800)
11,372

19,490
875
20,365
16,380
(500)
15,880

56,643
3,226
59,869
46,244
(1,900)
44,344

167,017
3,940
170,957
112,492
(15,000)
97,492

1,485
186
3
1,674
3,269
4,943
87
248
341
2,654
3,330
1,613
1,613
4,943

6,364
2,716
13
9,093
8,848
18,707
769
714
1,854
4,690
8,027
7,617
7,617
18,707

29,997
6,065
59
36,121
11,417
49,116
1,565
1,230
3,072
1,941
7,808
34,996
34,996
49,116

20,416
7,288
35
27,739
10,910
40,309
1,782
1,380
3,700
1,974
8,836
24,831
24,831
40,309

29,437
7,412
36
36,885
10,137
48,775
1,800
1,378
3,426
2,043
8,647
33,115
33,115
48,775

40,855
11,293
26
52,174
10,864
64,948
2,030
2,672
4,567
3,336
12,605
44,805
44,805
64,948

57,151
12,569
251
69,971
11,065
82,979
2,179
4,573
10,000
5,765
6,091
28,608
47,732
47,732
82,979

57,151
12,569
251
69,971
11,065
82,979
2,179
4,573
10,000
5,765
6,091
28,608
47,732
47,732
82,979

114,396
18,805
1,929
135,130
11,525
157,311
2,571
6,801
8,333
4,943
22,648
22,095
99,958
122,053
157,311

139,321
20,664
3,372
163,357
12,018
188,655
2,839
6,505
9,980
7,989
27,313
22,095
128,855
150,950
188,655

155,560
24,484
3,541
183,584
15,233
212,761
4,468
6,505
9,980
7,989
28,942
22,095
151,332
173,427
212,761

173,012
25,187
3,718
201,916
19,273
235,830
4,534
6,505
9,980
7,989
29,008
22,095
174,336
196,431
235,830

173,012
25,187
3,718
201,916
19,273
235,830
4,534
6,505
9,980
7,989
29,008
22,095
174,336
196,431
235,830

194,321
26,418
3,904
224,642
22,053
262,068
4,623
6,505
9,980
7,989
29,097
22,095
200,484
222,579
262,068

216,378
29,714
4,099
250,191
25,793
292,126
5,200
6,505
9,980
7,989
29,674
22,095
229,965
252,060
292,126

242,810
34,163
4,304
281,276
28,563
326,788
5,978
6,505
9,980
7,989
30,452
22,095
263,849
285,944
326,788

272,261
36,352
4,519
313,131
32,293
363,221
6,362
6,505
9,980
7,989
30,836
22,095
299,898
321,993
363,221

272,261
36,352
4,519
313,131
32,293
363,221
6,362
6,505
9,980
7,989
30,836
22,095
299,898
321,993
363,221

17
22

38
23

35
25

35
23

35
23

39
21

36
29

48
27

38
13

35
23

40
20

40
20

40
20

40
20

40
20

40
20

40
20

40
20

Net cash per share
Tangible book value per share
Price/Tangible book

N/A
N/A
N/A

N/A
0.3
32.6

N/A
1.6
6.7

N/A
1.1
9.6

N/A
N/A
N/A

N/A
N/A
N/A

1.6
1.6
6.5

2.1
2.1
5.1

3.4
3.6
2.9

3.9
4.2
2.5

4.1
4.6
2.3

3.6
4.1
2.6

4.5
5.1
2.1

4.1
4.7
2.3

4.5
5.3
2.0

5.1
6.0
1.8

5.0
5.9
1.8

5.5
6.5
1.6

EV/sales (LTM)
EV/EBITDA (LTM adjusted)
EV/unlevered earnings (LTM)

N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

2.8
4.4
N/A

2.1
3.3
4.8

2.0
3.3
N/A

1.6
2.4
N/A

1.3
2.1
2.7

1.6
2.6
2.9

1.1
1.9
2.6

1.4
2.3
2.7

1.2
2.1
2.7

1.0
1.7
2.4

1.1
1.8
2.2

0.9
1.5
2.0

Price/earnings (LTM)

N/A

N/A

8.5

N/A

0.0

6.5

5.9

5.9

5.4

4.5

4.4

4.4

4.5

4.4

4.8

4.5

4.2

4.2

Company Update

Equity Research

11,016
1,621
12,637
12,105
(6,600)
5,505

Valuation & Other Financial Information
DSOs
Days payables outstanding

38,298
940
39,238
25,264
(645)
24,619

Q3 '10(E)
Sep '10

1,586
365
1,951
1,717
(800)
917

Selected Balance Sheet Items
Cash and equivalent
Accounts receivable
Restricted cash
Total current assets
Property plant and equipement (Net)
Total assets
Accounts payables
Accrued expenses
Short term borrowings
Tax payables
Other current liabilities
Total current liabilities
Convertible perferred stock
Total common equity
Total Equity
Total Liabilities And Equity

24,241
1,072
25,313
12,946
(1,875)
11,071

Q2 '10(A)
Jun '10

China MediaExpress Holdings, Inc. (CCME)

Global Hunter Securities, LLC

China MediaExpress Holdings, Inc. (Nasdaq:CCME) Financial Model
Global Hunter Securities, LLC
Research Department: 949-274-8052

August 16, 2010

Page 3

China MediaExpress Holdings, Inc. (CCME)

Company Update

August 16, 2010

China MediaExpress Holdings, Inc. (CCME) Disclosures
Analyst Certification
I, Ping Luo, certify that the views expressed in this report accurately reflect my personal beliefs about this company and that I have
not and will not receive compensation directly or indirectly in connection with my specific recommendations or views contained in this
report.
I, Jodi Dai, certify that the views expressed in this report accurately reflect my personal beliefs about this company and that I have
not and will not receive compensation directly or indirectly in connection with my specific recommendations or views contained in this
report.
Important Disclosures

 GHS does and seeks to do business with the company covered in this research report.
 As with all employees of GHS, a portion of this analyst’s compensation is based on investment banking revenues.
Risks & Considerations
Increase in concession fees. CCME’s core strategy is expanding its network within inter-city express buses. Successful execution relies to
a large extent on its partnership with bus operators. The company signed concession rights contracts with bus operators to display
advertising programs on its buses. These contracts usually have a term of 5-8 years and allow concession fees to increase 10%-30% every
year. CCME’s future growth is dependent upon its ability to renew these contracts with existing partners or to obtain new contracts with new
operator partners. Although a majority of the contracts expire after 2015, some of these contracts start to expire at the end of 2011. The
company may not be able to renew the contracts with the bus operators or they may encounter significant increases in concession fees,
which will have a severe negative impact on the operation and profitability of the company’s business. The bus operators may set up a
bidding system which invites competition and results in significant increases in costs for CCME.
Increase in entertainment content fees. The company currently receives free entertainment content mainly from Fujian Southeastern TV
and Hunan Satellite TV. The agreement with Hunan Satellite TV expires in August 2010, and the agreement with Fujian Southeastern TV
expires in 2015. If CCME could not renew the agreements or the two TV stations decide to charge CCME for the content, the profitability of
the company could be negatively impacted or the company may have to look for alternative ways to obtain entertainment content.
Increased competition. CCME does not currently have significant competition for inter-city express buses, however, as mentioned, if bus
operators open up a bidding system, it could attract domestic and foreign media companies with strong financial resources and better
technologies to compete. Cost controls and technology improvement are essential to CCME’s business. CCME also faces indirect
competition from more traditional advertising channels, such as TV and newspaper advertising, and other out-of-home advertising platforms
such as airports and public mass transit systems. CCME’s clients typically advertise through many different platforms in order to reach a
broad range of consumers. The company competes for its clients’ advertising dollars with other media platforms.
Technology obsolete. The company currently operates its advertising program with digital TV screens and hard disk drives and changes
the programs manually once or twice a month. Continued technology improvement is important to retaining current advertisers and bus
operator relationships. If a competitor presents more sophisticated technologies which increase the effectiveness of advertising and better
enhance passengers’ travel experience, advertisers and bus operators may opt to work with that competitor.
Execution risks. The company plans to expand to new geographic regions and introduce new services to its advertiser clients such as
publishing on-bus magazines to promote its clients’ products and services and setting up call centers to take orders on behalf of advertisers.
The company may incur unexpected challenges in these new regions as well as new business initiatives.
Regulatory risks. CCME is subject to a series of advertising regulations to ensure that the content of the advertisements is fair, accurate
and in full compliance with applicable laws. Violation of these regulations may result in penalties including fines and orders to cease
business. In addition, China has been deregulating its advertising market, allowing foreign companies to operate in China’s advertising
industry. Continued deregulation may expose CCME to competition with more multi-national advertising companies with significantly greater
resources.
A VIE structure. CCME does not have equity ownership but relies on contractual arrangements to control its key operating subsidiary
Fujian Fenzhong Media, which operates as a variable interest entity (VIE). Though the possibility is remote, if Chinese government changes
its policies on VIE structures, CCME may lose control of its key operating entity.

See the Company’s most recent SEC filings, including 10-Ks, 10-Qs, 8-Ks and proxy filings, for additional risks and
considerations.
Other Companies Mentioned In This Report

None

Global Hunter Securities, LLC

Equity Research

Page 4

China MediaExpress Holdings, Inc. (CCME)

Company Update

August 16, 2010

China MediaExpress Holdings, Inc. (CCME) Disclosures (Continued)
Historical Recommendations
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
10/15/09
10/22/09
10/29/09
11/5/09
11/12/09
11/19/09
11/26/09
12/3/09
12/10/09
12/17/09
12/24/09
12/31/09
1/7/10
1/14/10
1/21/10
1/28/10
2/4/10
2/11/10
2/18/10
2/25/10
3/4/10
3/11/10
3/18/10
3/25/10
4/1/10
4/8/10
4/15/10
4/22/10
4/29/10
5/6/10
5/13/10
5/20/10
5/27/10
6/3/10
6/10/10
6/17/10
6/24/10

$0.00

Initiated coverage on 7/1/2010 with a Buy rating and price target of $18

1.
2.

Date
7/1/2010
8/15/2010

Rating
Buy
Buy

Price Target
$18.00
$21.00

Closing Price
$8.77
$10.68

Explanation of Ratings
Buy: We expect the stock to outperform the average total return of the stocks in the analyst’s industry (or industry team’s) coverage
universe over the next six to twelve months.
Neutral: We expect the stock to perform in line with the average total return of the stocks in the analyst’s industry (or industry
team’s) coverage universe over the next six to twelve months.
Sell: We expect the stock to underperform the average total return of the stocks in the analyst’s industry (or industry team’s)
coverage universe over the next six to twelve months.
Ratings Distribution

 

Rating
Buy
Neutral
Sell
Total

Research Coverage
Count
% of Total
75
66.4%
31
27.4%
7
6.2%
113
100.0%

Count
8
2
0
10

Investment Banking Clients*
% of Total % of Rating Category
80.0%
10.7%
20.0%
6.5%
0.0%
0.0%
100.0%
8.8%

*Investment banking clients are companies from whom GHS or an affiliate received compensation from investment banking services provided in the
last 12 months.

Note: Ratings Distribution as of June 30, 2010

Disclaimer & Other Disclosures
This material has been prepared by Global Hunter Securities, LLC ("Global Hunter") a registered broker-dealer, employing
appropriate expertise, and in the belief that it is fair and not misleading. Information, opinions or recommendations contained in the
reports and updates are submitted solely for advisory and information purposes. The information upon which this material is based
was obtained from sources believed to be reliable, but has not been independently verified. Therefore except for any obligations
under law, we do not guarantee its accuracy. Additional and supporting information is available upon request. This is not an offer or
solicitation of an offer to buy or sell any security or investment. Any opinion or estimates constitute our best judgment as of this date,
and is subject to change without notice. Global Hunter and our affiliates and their respective directors, officers and employees may
buy or sell securities mentioned herein as agent or principal for their own account. Not all products and services are available
outside of the US or in all US states. Copyright 2010.

Global Hunter Securities, LLC

Equity Research

Page 5

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