Red China? How about Green China? The so-called communist country is undergoing an IPO craze, amid blowout offerings from Alibaba.com, Giant Interactive
AirMedia operates an extensive media network, with more than 2,000 digital TV screens in airports and more than 16,000 digital screens in airplanes. Its content is a mixture of news, weather, sports, and of course, advertising, from 240 sponsors including China Mobile
While still a fairly small operation, AirMedia is posting sizzling growth rates. For the first half of this year, revenue doubled to $15.9 million, while net income came to $4 million.
Despite competitors such as JC Decaux, AirMedia remains the dominant player in its market. The company operates 95% of the digital TV screens in 15 of China's largest airports.
The macro trends also look promising. ZenithOptimedia projects that China's advertising market will grow 18.1% per year from 2005 to 2009 (to a total of $20.6 billion). What's more, the number of China's air travelers has been growing 15.5% per year, according to the China Statistical Abstract 2007. And since AirMedia has one of the few national ad networks in China, the upcoming 2008 Olympics should be a nice boost.
Unfortunately, investors have inflated AirMedia's valuation to roughly $2.4 billion. Even if the company doubles business for 2007, that's still a frothy 64 times revenue. In other words, this is really a stock for those who can take a flier on an early-stage company in a strong growth market -- which usually requires investors with a tough stomach for turbulence. Thus far today, the shares are already down 9%.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. China Mobile is a former Global Gains recommendation. He is currently ranked 7,130 out more than 73,000 in CAPS.