Red China? How about Green China? The so-called communist country is undergoing an IPO craze, amid blowout offerings from, Giant Interactive (NYSE:GA), and China Digital TV (NYSE:STV). Now it's AirMedia Group's (NASDAQ:AMCN) turn. Following its debut yesterday, the stock surged past its initial $15 share price.

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 (NYSE:CHL), China Unicom (NYSE:CHU), and Nokia (NYSE:NOK).

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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